Pricing In Distribution Agreements

To put it in perspective, if $10 million of competitive equipment were available, the claimant would have a $460,000 cost advantage over the average performer and a $610,000 advantage over the below-average performer. As a result, maximizing the use of special prices in competing auction situations is important and is likely to grow, as e-commerce provides the buyer with many sources of real-time pricing and availability. A selective distribution system is a system by which the supplier: (i) refers only to companies that meet certain selection criteria as traders; (ii) contractual products for resale are only supplied to selected distributors; and (iii) prevents selected distributors from selling the products in question to resellers who are not members of the selective distribution system. There are also state laws that limit price discrimination. Some are general in application and are governed by the Robinson Patman Act, but apply to domestic sales instead of or in addition to intergovernmental sales. Others limit “local discrimination” and impose different prices in different parts of a state. Some states, such as California, have unfair competition laws that prohibit price under-pricing (which, in some circumstances, may also violate federal law) and the provision of secret and undeserving rebates only to a few competing buyers. Other national laws apply to certain sectors, such as motor vehicles or alcoholic beverages, and prohibit pricing discrimination for dealers. If you feel that some of your customers are most concerned about economic factors and want to save money, you can create low quality offers at low prices. If you want to enter (saturate) the market in a short time, you can succeed by producing high quality products, but touting them at low prices.

If you sell at a premium, you know you have sales customers who have nothing against paying the best dollars for a very high quality product. Another way is to calculate a high price for a fairly low quality product if the item is in high demand, but this “skimming” strategy is generally not a smart or sustainable strategy. Make your final decision based on your goals as a business owner. When specific price agreements are negotiated, management can analyze trends in market success. These include the nature of the competitive situation, the size of the order, the customer segment, the competitors and a host of other market variables that, when analyzed, can help management control their use for greater commercial success. Do the antitrust or competition laws in your jurisdiction otherwise limit the relationship between suppliers and their distributors? How are these laws enforced and by which agencies? Can private parties sue for cartel or competition? What remedial measures are available? However, passive sales restrictions may be permitted within a selective distribution network in which a supplier may prevent passive sales from a licensed distributor to an unlicensed distributor. Within a selective distribution system, a supplier may also refuse to deliver “pure” online resellers and require the merchant to have at least one physical store.