Distribution, Competition, and Antitrust / IP Law

Archives for May 2011

If you’re going to defend a manufactuer’s charge that you’ve materially breached a dealership agreement . . . .

Make sure you haven’t seriously underperformed your peers and your prior distributors, according to the express terms of your dealership agreement.

34th Annual Forum on Franchising

34th Annual Forum on Franchising
October 19-21, 2011
Baltimore Marriott Waterfront
Baltimore, MD

Here’s the link.

If you want to rely upon a forum selection clause in a franchise agreement . . .

It’s a good idea to make sure that it’s exclusive.  Otherwise, this can happen.  (Van Buren Lodging, LLC v. Wingate Inns, Int’l, Inc., D.S.D. Mar. 11, 2011.)

WestlawNext for iPad

It’s on the iTunes store.  As of the time of this writing, it has 151 ratings, but only 3 out of 5 stars.  Worthwhile?  Good implementation?  Or clunky?  Can’t quite tell.  Hard to get this sort of implementation right.  Interesting idea, though.



Don’t Forget About State Fair Dealership Laws

Many states have “fair dealership laws.”  These laws can trigger special duties for suppliers or manufacturers and can support claims by dealers.

But it’s not always easy for a dealer to establish that one of these laws applies.  In a recent decision, the court dismissed a claim under the Wisconsin Fair Dealership Law.  See Stucchi USA, Inc. v. Hyquip, Inc., Case No. 09-CV-732 (E.D. Wis. Apr. 20, 2011).

This decision is also interesting in its dismissal of a breach of contract claim (alleged breach of an oral agreement to appoint a distributor as an exclusive distributor).  “Unfortunately for [the distributor], the June 18, 2009 termination did not constitute a breach of contract on the part of the Stucchi companies because the right to terminate at will was inherent in the nature of the contract, due to the contract’s indefinite duration.”  Distributors wanting to avoid the same fate will want to point to a definite term.


What’s better in technology markets: market volume, revenue, or profit share?

You decide.

OmniFocus for iPad 1.3

Amazingly great.  Need to plan to dos, manage projects, juggle schedules?  Almost perfect.  No you can see your iPad calendar right along side your to dos timeline.  Very useful for attorneys or anyone with a number of projects or issues to track.

See this brief review on MacSparky.

Are Minimum Advertised Price Programs Good or Bad? (Continued)

Sorry for the delay in posting.

Returning to the article linked below, I’ll briefly address some more criticisms of Minimum Advertised Price (MAP) programs.

6. MAP pricing hurts customers, because it makes it harder for an end user to compare prices among a variety of dealers.  There may be a cost to consumers from MAP programs, but it has to be weighed against the manufacturer’s avoided costs.  MAP programs can, at least in theory, address the problem of free-riding.  For example, an Internet-only dealer might be able to offer slightly lower pricing because it has no brick-and-mortar costs.  But it might also be able to do so because it is not making an investment in the brand or product and is relying upon the investment of other dealers, who might not make such investments if they fear low advertised prices.  In that case, the manufacturer’s business may be hurt.

7. MAP pricing makes purchasing more time-consuming for end users.  The idea here is that MAP programs prohibit prominently displayed website pricing, but allow “shopping cart” pricing.  To see the true price, a consumer has to jump through a few hoops.  This is generally true, but how much effort does it really take to click the mouse a few times?

8. MAP pricing may hurt a manufacturer’s sales.  Here, Mr. Pierce mentions implementation costs and enforcement costs, but these are likely to be small.  He also  argues that MAP programs can tip competitors off and allow them to undercut pricing.  But if MAP programs truly were not in the economic interests of manufacturers, why would manufacturers ever want to use them?  Additionally, whether MAP programs really make pricing more transparent to competitors is not entirely clear.  In any event, lower pricing is generally good for consumers.

9. Browsing in a store is no different than advertising online.  In a brick-and-mortar store, consumers can just browse various competing items and see their prices.  Why shouldn’t they be allowed to do that online?  The answer is that a properly structured MAP program does not interfere with actual online “shopping cart” pricing.  It may impose certain restrictions on site-wide price advertising.  It is not clear whether or not this restraint is more significant than a restraint prohibiting brick-and-mortar stores from advertising prices below $X on street signs or in a newspaper but allowing independent store pricing inside the store.

10. MAP pricing can be circumvented.  Dealers can use instant rebates, coupons, and other incentives to offer special deals that may avoid the precise terms of a MAP program.  This is also true — and is a factor to be weighed by a manufacturer when considering whether it is worthwhile to institute a MAP program.  However, it is not an indictment of MAP programs per se.

Obscure New York Law Does Not Render Resale Price Maintenance Illegal

This is from a few months back, but I haven’t mentioned it yet on this blog.

Resale Price Maintenance (RPM) is no longer per se unlawful under federal law.  Nor is it per se lawful.  Since Leegin, 551 U.S. 877 (2007), some states have been stepping up their own RPM enforcement efforts.  New York, for one, had been advocating that New York law automatically barred RPM agreements.

In making this argument, The New York Attorney General did not rely upon the Donnelly Act, New York’s version of the Sherman Act, but rather upon Section 369-a of the N.Y. General Business Law and Section 63(12) of the N.Y. Executive Law.  The AG’s arguments were rejected in New York v. Tempur-Pedic Int’l, No. 0400837 (N.Y. Super. Ct., Jan. 14, 2011).  The court held that Section 369-A makes contracts for resale price maintenance unenforceable and not actionable, but not illegal.  The court also held that Tempur-Pedic’s minimum advertised pricing program was not a retail price agreement.  This despite the fact that the program was part of a contract with retailers, and n0t a unilateral policy.

Tempur-Pedic aside, it remains generally advisable to structure MAP programs as unilateral policies, rather than agreements, precisely to avoid debates about whether or not RPM agreements are involved.

Are Minimum Advertised Price Programs Good or Bad?

In a previous post, I linked to an article laying out a number of criticisms of Minimum Advertised Price (MAP) programs.

I won’t address each and every one of the numerous critcisms, but starting in this post I will briefly address some of them.

1. MAP programs discriminate against the online sales channel: it’s not obvious what Mr. Pierce means by this criticism.  Perhaps he is referring to the difficulties of determining whether or not an online price is “advertised” or not (see my previous post).  In any event, generally speaking, cooperative advertising incentives need to be reasonably available to all distributors or dealers.

2. Successful online dealers have significant costs: Undoubtedly true.  And if a MAP program were justified on the grounds that e-commerce is cheap and therefore needs price controls, it might be objectionable.  But MAP programs rarely are so justified.

3. Manufacturers should not protect inefficient dealers: All things being equal, cheaper distribution is better distribution.  But MAP programs do not necessarily prevent cheaper distribution.  They prevent the advertising of prices below a certain threshold — or, more precisely, in most cases, present such advertising if the dealer wants to receive some advertising coop monies.  Would manufacturers really want to keep distribution costs up?

4. MAP pricing is not automatically legal: The author appears to be conflating MAP pricing and resale price maintenance (RPM).  It is certainly true, however, that RPM is not per se lawful.

5. MAP pricing may facilitate unlawful collusion: This is a potential danger, and requires that MAP programs be structured appropriately.  Usually, however, this potential danger can be mitigated adequately.

I’ll address more of the criticisms in an upcoming post.

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