This document discusses various legal constraints on marketing channel policies, including market coverage policies, pricing policies, and product policies. It examines issues like territorial restrictions, price maintenance, tying arrangements, exclusive dealing, and full-line forcing. The key considerations for whether these policies violate antitrust laws are if they substantially lessen competition or foreclose access to the market for competitors.
A marketing channel is a set of practices or activities necessary to transfer the ownership of goods, from the point of production to the point of consumption.
Channel leadership award 2014: CtRlS data centers Ltd.VARINDIA
Channel leadership award 2014 : CtRlS data centers Ltd. receives as the Best data Center in India being honored by Prof. Shriram Hegde, Department of Applied Mechanics, IIT-Delhi and Mrs. S Mohini Ratna, editor-VAR INDIA
Modeling a well stimulation process using the meor techniqueeSAT Journals
Abstract Microbial enhanced oil recovery remains the most environmental friendly, cost effective recovery technique in oil production, particularly for wellbore stimulation. This research investigates the effects of microbial growth rate, microbial and nutrient concentrations for well stimulation purposes. A representative model incorporating microbial concentration, its growth rate and skin factor is developed, validated and discussed. An explicit formulation which poses a solution to the equation for the model is used to describe the reservoir pressure responses. It is observed through plots of reservoir pressure against reference distances that flow and production rates improved as a result of an improved BHP when the microbial parameters were incorporated to the fluid transport equation at same injection rates and same reservoir parameters. The trend followed by the pressure profile plots correlates with that expected of a well stimulation pressure profile. Keywords: Well Stimulation, MEOR, Permeability, MEOR stimulation
A marketing channel is a set of practices or activities necessary to transfer the ownership of goods, from the point of production to the point of consumption.
Channel leadership award 2014: CtRlS data centers Ltd.VARINDIA
Channel leadership award 2014 : CtRlS data centers Ltd. receives as the Best data Center in India being honored by Prof. Shriram Hegde, Department of Applied Mechanics, IIT-Delhi and Mrs. S Mohini Ratna, editor-VAR INDIA
Modeling a well stimulation process using the meor techniqueeSAT Journals
Abstract Microbial enhanced oil recovery remains the most environmental friendly, cost effective recovery technique in oil production, particularly for wellbore stimulation. This research investigates the effects of microbial growth rate, microbial and nutrient concentrations for well stimulation purposes. A representative model incorporating microbial concentration, its growth rate and skin factor is developed, validated and discussed. An explicit formulation which poses a solution to the equation for the model is used to describe the reservoir pressure responses. It is observed through plots of reservoir pressure against reference distances that flow and production rates improved as a result of an improved BHP when the microbial parameters were incorporated to the fluid transport equation at same injection rates and same reservoir parameters. The trend followed by the pressure profile plots correlates with that expected of a well stimulation pressure profile. Keywords: Well Stimulation, MEOR, Permeability, MEOR stimulation
ARTIST: a global approach to cloudify applications, OW2 Open Cloud Forum at C...Ocean Project
The European Project ARTIST aims to develop a set of methods and tools to aid companies in the cloudification of their applications considering technical - , business -, and organizational process – related aspects. In this talk, the methodology and some of the tools will be shown in a practical way, as if an actual migration project was actually taking place.
VIVER COMPANY SUCESSO TOTAL NO JORNAL LOUCOS POR MARKETINGScorpion Power PC
Viver Company faz sucesso em todo Brasil além de ser referência em excelencia citada no Jornal Loucos por Marketing
Participe de nossa fan page: https://www.facebook.com/aguiasviversaudenutricao
Fonte de Informação: http://www.jornalloucospormarketing.com.br/imagens/jornal/Jornal%20LPM%20nr%2048.pdf
Diário Oficial de 23 de janeiro de 2013 com várias nomeações, calendário de pagamentos dos servidores, novos presidentes de comissões. ARQUIVE AI. IMPORTANTE DOCUMENTO
Hierzu Guido Bierther, Gründer der Firma Airnergy aus Hennef, die das Hightech‐Gerät in einem zertifizierten Produktionsverfahren herstellt: „Dreh‐ und Angelpunkt der Airnergy‐Technologie ist der menschliche Stoffwechsel. Die mittels des Gerätes erzeugten Biopho-tonen ermöglichen eine verbesserte Zellatmung. Sie ist die Voraussetzung, um Adeno-sintriphosphat (ATP) bereitzustellen, der wichtigste Energielieferant des Stoffwechsels Mittels des Stream wandern die Biophotonen also über die Haut durch das gesamte Körpergewebe bis in jede Körperzelle. Im Gegensatz zu herkömmlichen Behandlungsmethoden, die das Gewebe zwischen den Zellen nicht erreichen, ermöglicht der transzelluläre Aspekt von Airnergy einen Energie‐Transport bis zu den Zentren des vegetativen Nervensystems, z. B. der Zirbeldrüse. Dadurch werden nicht nur die schmerzhaften Schübe der Mastodynie beeinflusst, vielmehr können davon auch alle damit verbundenen Körpersysteme, wie z. B. das Sinnessystem, der Bewegungsapparat oder die Atemorgane profitieren.“
Calling all B2B email marketers: this webinar is just for you! From email design tips and list building tactics to deliverability must-dos and social media integration, this presentation helps B2B marketers plan and execute successful email marketing campaigns
On May 1st Digital BrandWorks, an INC 500 digital consultancy, and Greenberg Traurig, an international law firm, pulled together some of the best thought leaders in ecommerce strategy, policy and execution to hold a panel discussion on the state of ecommerce today.
This event was the first in a series that will focus on how manufacturers and retailers can increase sales, protect margin, develop legal and comprehensive pricing policies to generally protect their brands online.
Joe Scartz, the CMO of Digital BrandWorks, spoke about the trends in ecommerce that impact every business. Specifically he covered:
How shopping has changed as ecommerce has continued to grow. Ecommerce is now 6% of total retail sales
The pain that bricks and mortars stores have experienced during this transition
The rise of Amazon as a preeminent retail player
Top Ecommerce categories
Brands selling direct
Mobile shopping growth
Showrooming and its impact on business
The growing trend of reverse showrooming
Omni-channel marketing and retailing and the future of retail
Tony Chvala, VP of Marketplace at Sears, spoke about tax issues facing etailers and tax nexus issues.
Irv Scher, Partner at Greenberg Traurig spoke about MAP policies and related ecommerce pricing issues. Specifically he covered:
Selecting customers and limitations placed on those customers
Resale price maintenance
Areas suppliers should stay away from when having pricing discussions
Promotional pricing
Minimum Advertised Price Policies
Pricing Incentive
Steve Wadyka, Partner at Greenberg Traurig spoke about Brand Enforcement Online. Specifically he covered:
Challenges facing brand owners in internet enforcement
Search engine and keyword advertising
Domain name registrars
Counterfeiting and fraud as related to auction sites, online marketplaces, web hosting providers, payment processors and social media
Rogue websites
Joe Scartz spoke about increasing online sales and protecting margin. Specifically he covered
Minding your brand
Knowing how to monitor your brand online
Review of a SKU Score which diagnoses problems related to product listing, pricing, sellers, product score, distribution on ecommerce retail sites
Selling direct as a manufacturer
Marketing and merchandising in the online channel
Managing online retailers to increase velocity
We’d like to thank everyone who attended the event and everyone that organized the event for making this an insightful and valuable gathering.
MBA 5501, Advanced Marketing 1 Course Learning Outcom.docxaryan532920
MBA 5501, Advanced Marketing 1
Course Learning Outcomes for Unit VI
Upon completion of this unit, students should be able to:
6. Explore positioning, differentiation, and pricing strategies for effective marketing scenarios.
6.1 Compare the pricing strategies of a company and its competitors.
6.2 Describe pricing, distribution, or product strategies of a company with respect to the level of
differentiation.
6.3 Summarize how macro and micro environmental changes will impact a company.
Reading Assignment
Chapter 16:
Developing Pricing Strategies and Programs
Chapter 17:
Designing and Managing Integrated Marketing Channels, pp. 493–502
Chapter 18:
Managing Retailing, Wholesaling, and Logistics, pp. 527–542
Unit Lesson
Price is defined as the amount of money that is exchanged for something of value, which is defined by the
customer. This value proposition directly aligns with the amount of money that a consumer is willing to pay for
the prescribed product and/or service. Prices are adjusted based upon discounts, which could include
seasonal discounts, quantity discounts, cash discounts and/or simply sales discounts. Another factor that
could change the price are allowances; which include trade-ins and damaged goods allowances. Prices can
be set based upon a one-price policy, which suggests that prices are the same for everyone. These tend to
be low-cost, frequently purchased, and convenience goods. Alternatively, prices can be set based upon a
flexible price policy, which allows for prices to be set differently for different customers. These prices tend to
be set by salespeople who are working directly with the customer. A good salesperson understands his or her
customer enough to know how high of a price the customer will bear and will adjust the price accordingly in
order to secure the business. This model is used at car dealerships within the business-to-consumer (B2C)
model as well as in most purchasing situations in the business-to-business (B2B) sector.
As the marketing team looks to establish pricing policies, company-wide marketing objectives need to be
analyzed. The first pricing objective might be profit-oriented, which includes the concepts below.
Target return: This pricing policy establishes a predetermined profit level guideline. This could be a
return on investment or a certain sales level. Prices are then based upon this guideline.
Maximize profits: This pricing policy suggests that prices will be set as high as possible in order to
maximize profit levels. While this seems like an ideal alternative, careful research must be conducted
to understand the profit level that the customer will bear before moving on to the competitor.
UNIT VI STUDY GUIDE
Pricing and Distribution Strategies
MBA 5501, Advanced Marketing 2
Another pricing objective might be sales-oriented, which focuses on increased sales without regard to profit
levels. This alternative se ...
Strategic Marketing Decisions and Considerations - Madmarketingpro.comBobby Bruno
Here you will learn about what factors to pay attention to when developing a Marketing Mix. Marketers should have a strong understanding of various strategies and possible responses from the market, competitors, and consumers. You can see more like this on madmarketingpro.com
Distribution Management, Need for Marketing Channels,Decision involved in setting up the channels, Management Strategies, Introduction to logistics Management, Retailing, wholesaling, Multi Channel Marketing.
Category management is a crucial aspect of procurement as it goes beyond simply acquiring goods and services. Through the development of categories, the organization can better understand its spending patterns and identify critical areas where savings are possible. Selling at the right price is one of the secrets to a flourishing business. If your goods are cheap, you might sell more but find it difficult to make a profit. On the other hand, if your goods are too expensive, customers will shop at competitor retailers, causing you to lose market share. Category management helps retailers cope with the complexity of their operations and maximize their return on inventory investment. Improvements in product range and merchandising enhance shopper satisfaction and store loyalty and reduce stockouts. These factors help to lift sales. Pricing is one of the most important factors in the field of Trade. Pricing to a commodity means attaching value to the product. To purchase or sell it both the consumer taking the product and the seller giving off the product benefits from the 'value' in return for some bearing.
2. 2
Legal Constraints
on Marketing
Channel Policies
Market Coverage
Policies
Pricing Policies
Discounts
Product Policies
Exclusive Dealing
Product Line
Policies
Promotional
Allowances and
Services
3. 3
Legal Constraints on Marketing Channel
Policies
The policies addressed below are as follows:
Market coverage policies
Customer coverage policies
Pricing policies
Product line policies
Selection and termination policies
4. 4
Legal Constraints on Marketing Channel
Policies
There are a number of ways in which competition can be
threatened:
• Collusion:
• Discriminatory pricing.
• Predatory pricing
• Territorial restrictions and customer coverage restrictions
• Price maintenance.
• Tying
5. 5
Market Coverage Policies
From a legal perspective, channel intensity is linked to the concept of market
coverage, about which there is significant legal concern.
Selective and exclusive coverage policies have been called "territorial
restrictions" by anti-competitive enforcement agencies, because they are
used by suppliers to limit the number of resellers in a defined territory.
In reality, territorial assignments are rewards or spatial allocations given
by suppliers adopting selective or exclusive market coverage policies in
return for distributors' promises to cultivate the geography they have been
given.
6. 6
Market Coverage Policies
The supplier's objective in instituting territorial and other kinds of so-called "vertical
restraints" is to limit the extent of intra-brand competition. A critical issue that
has evolved in anti-competitive cases is whether such policies actually promote (or
at least do not substantially lessen) inter-brand competition.
In the language of anti-competitive enforcement, territorial restrictions range from
absolute confinement of reseller sales, which is intended to completely foreclose
or eliminate intra-brand competition, to lesser territorial restrictions, designed to
inhibit such competition.
Absolute confinement involves a promise by a channel member that it will not sell
outside its assigned territory. Often combined with such a promise is a pledge by
the supplier not to sell to anyone else in that territory, an arrangement known as an
exclusive distributorship. On the other hand, an airtight territory exists when
absolute confinement is combined with an exclusive distributorship. On the other
hand, an area of primary responsibility requires the channel member to use its best
efforts - or to attain a quantified performance level - to maintain effective
distribution of the supplier's goods in the territory specifically assigned to it.
7. 7
Market Coverage Policies
Profit pass-over arrangements require that a channel member who sells to a
customer located outside its assigned territory compensate the distributor in
whose territory the customer is located. Such compensation is ostensibly to
reimburse the distributor for its efforts to stimulate demand in its territory
and for the cost of providing services on which the channel member might
have capitalized.
Finally, a location clause specifies the site of a channel member's place of
business. Such clauses are used to "space" resellers in a given territory so
that each has a "natural" market comprising those customers who are
closest to the reseller's location. However, the reseller may sell to any
customer walking through its door. Furthermore, the customers located
closest to it may decide to purchase at more distant locations.
8. 8
Market Coverage Policies
In addition, suppliers might wish to
allocate different accounts to
different intermediaries.
This limits intra-brand competition;
the customer sees only one seller of
the firm's value offer, not multiples.
This policy can also facilitate
segmented pricing, charging higher
prices to segments of buyers with a
higher willingness to pay for the
firm's value offer.
Such policies have an economic as well
as a service rationale. As mentioned in
the context of market coverage policies,
permitting multiple channels to compete
for the same customer makes it possible
that one channel will bear the cost of
providing valued service outputs to the
customer, whereas another channel closes
the sale.
The free-riding channel does not bear
the costs of channel flows necessary to
provide the demanded service outputs,
but does get the sale and the profit from
the customer. In the long run, profits and
economic viability will suffer in the cost-
bearing channel.
9. 9
Pricing Policies
Prices and price levels can be
influenced in many ways throughout
marketing channels. In fact, we have
just finished discussing two of them -
market coverage and customer
coverage. Because these policies are
both aimed at reducing or restraining
the amount of intra-brand
competition, the indirect effect of the
reduction is, in theory, supposed to
be an increase in the price of the
brand from its level in the absence of
the policies.
In other words, restrictions on intra-brand
competition are indirectly supposed to
result in higher prices and, thus, higher
gross margins. Obviously, price
competition induced by inter-brand
competitors can upset this arrangement.
Two policies that have a direct effect on
price - price maintenance and price
discrimination. We separate the
discussion of the two because they have
very different motivation,
implementation, and anti-competitive
concerns.
10. 10
Price Maintenance
Price maintenance in marketing channels is the specification by suppliers,
typically producers, of the prices below or above which other channel
members, typically wholesalers and retailers, may not resell their value
offers. Thus, the policy is frequently called resale price maintenance
(RPM).
11. 11
Price Maintenance
RPM inhibits competition between
stores carrying the same brand.
If a producer deems service to be
essential, it can be required of all
retailers through dealership contracts,
rather than through minimum RPM.
Despite these arguments, setting
minimum resale prices remains a
legal activity as long as it is not done
as part of a concerted effort among
multiple parties.
Legal control over resale prices by
producers is possible under various
conditions:
Act unilaterally; statements and actions
should come only from the producer.
Avoid coercion; don't use annually
renewable contracts conditioned on
dealer adherence to producer's specified
resale price. Vertically integrate; form a
corporate vertical marketing system.
Avoid known discounters; establish
screening and performance criteria
difficult for discounters to meet.
12. 12
Price Discrimination by Buyers.
Price discrimination by a seller between two competing channel members can
be viewed as an attempt to exercise reward power relative to the channel
member receiving the lower price. However, forcing a discriminatory price
from an upstream seller in a channel may be viewed as coercion by the
buyer.
It is generally held to be unlawful for a person or organisation in commerce
knowingly to induce or receive a discrimination in price. To violate this
concept, buyers must be reasonably aware of the illegality of the prices
they have received. This section prevents large, powerful channel members
from compelling sellers to give them discriminatory lower prices. It would
be enforced on the grounds that this use of coercive power is an unfair
method of competition.
13. 13
Price Discrimination by Buyers
It may also illegal for buyers to coerce favours from suppliers in the form of
special pro-motional allowances and services. This stipulation raises the
possibility that slotting allowances could be illegal. Slotting allowances
are fixed payments made by a producer to a retailer for access to the
retailer's shelf space. They are used predominantly in grocery retailing, but
have also been observed in the software, music, pharmaceutical, and
bookselling industries.
Slotting allowances are not illegal in and of themselves. However, they
could be construed as illegal under certain conditions. Slotting allowances
could be challenged if competing retailers agreed on the amount of slotting
allowances or the allocation of shelf space to producers. The practice could
also be challenged if used as part of a conspiracy to monopolize trade or
if used to exclude certain producers from retail shelf space.
14. 14
Promotional Allowances and Services
In order to entice channel members to advertise, display, promote, or
demonstrate their wares, suppliers use all sorts of monetary inducements.
These rewards may be prohibited. Various regulations may prohibit a
seller from granting advertising allowances, offering other types of
promotional assistance, or providing services, display facilities, or
equipment to any buyer unless similar allowances and assistance are made
available to all purchasers
Because buyers differ in size of physical establishment and volume of sales,
allowances obviously cannot be made available to all customers on the
same absolute basis. Therefore, the law stipulates that the allowances be
made available to buyers on "
proportionately equal terms."
15. 15
Certain stipulations may be applicable regarding
adherence:
Allowances may be made only for services actually rendered, and they must not substantially
exceed the cost of these services to the buyer or their value to the seller.
The seller must design a promotional program in such a way that all competing buyers can
realistically implement it.
The seller should take action designed to inform all competing customers of the existence and
essential features of the promotional program in ample time for them to take full advantage of
it.
If a program is not functionally available to (i.e., suitable for and usable by) some of the seller's
competing customers, the seller must make certain that suitable alternatives are offered to such
customers.
The seller should provide its customers with sufficient information to permit a clear understanding
of the exact terms of the offer, including all alternatives, and the conditions on which payment
will be made or services furnished.
16. 16
Functional Discounts.
In the discussion of channel flows previously, the Equity Principle was
introduced. That principle involves the use of reward power in granting
discounts to individual channel members based on the functions, or
marketing flows, they perform as they divide distribution labour.
A functional discount is a means of implementing the Equity Principle
directly. It provides for a set of list prices at which value offers are
transferred from the producer to a downstream channel member, plus a list
of discounts off list price to be offered in return for the performance of
certain channel flows or functions.
17. 17
Product Line Policies
For a wide variety of logical reasons, channel managers may wish to restrict
the breadth or depth of the value offer lines that their channel partners sell.
Here, we look at the rationale for four policies - exclusive dealing, tying, full-
line forcing, and designated value offer policies - as well as the anti-
competitive concerns surrounding them.
18. 18
Exclusive Dealing
Exclusive dealing is the requirement by a seller that its channel intermediaries sell or
lease only its value offers or brands, or at least no value offers or brands in direct
competition with the seller's value offers. If intermediaries do not comply, the seller
may invoke negative sanctions by refusing to deal with them. Such arrangements
clearly reduce the freedom of choice of the intermediaries (resellers).
Some of the managerial benefits of exclusive dealing follow:
Resellers become more dependent on the supplier, enabling it to secure exclusive
benefit of the reseller's energies.
Competitors are stopped from selling through valuable resellers.
With a long-term exclusive relationship, sales forecasting may he easier, permitting the
supplier to achieve more precise and efficient production and logistics.
19. 19
Exclusive Dealing
Resellers may obtain more stable prices and may gain more regular and frequent
deliveries of the supplier's value offers.
Transactions between resellers and the supplier may be fewer in number and larger in
volume.
Resellers and the supplier may be able to reduce administrative costs. Both may be
able to secure specialized assets and long-term financing from each other.
Resellers generally receive added promotional and other support as well as avoid the
added inventory costs that go with carrying multiple brands.
Requirements contracts are variants of exclusive dealing.
20. 20
Exclusive Dealing
Exclusive dealing lessens inter-brand
competition directly, because competing
brands available from other suppliers are
excluded from outlets.
To be illegal, such arrangements must
have a tendency to work a substantial, not
merely remote, lessening of competition
in the relevant competitive market.
"Substantiality" may be determined by
taking into account the following factors:
•The relative strength of the parties
involved
•The proportionate volume of commerce
involved in relation to the total volume of
commerce in the relevant market area
•The probable immediate and future
effects that preemption of that share of
the market might have on effective
competition within it
•The duration of the contracts
•The likelihood of collusion in the
industry and the degree to which other
firms in the market also employ exclusive
dealing
•The height of entry barriers
•The nature of the distribution system and
distribution alternatives remaining
available after exclusive dealing is taken
into account
21. 21
Tying
Tying exists when a seller of a value offer that buyers want (the "tying value
offer -product") refuses to sell it unless a second ("tied") value offer (goods
and services) is also purchased, or at least is not purchased from anyone
other than the seller. Thus, a producer of motion picture projectors (the
tying value offer) might insist that only its film (the tied value offer) be
used with the projectors, or a producer of shoe machinery (the tying
product or value offer) might insist that lessees of the machinery purchase
service contracts (tied service) from it for the proper maintenance of the
machinery.
Many of the business reasons for using tying policies are similar to those for
using exclusive dealing.
22. 22
Reasons for tying, beyond those that apply from
the discussion of exclusive dealing, are:
• Transferring the market demand already established for the tying value offer (e.g.,
can closing machines) to the tied value offer (e.g., cans).
• Using the tied value offer (paper) to meter usage of the tying value offer (copying
machines).
• Using a low-margin tying value offer (razors) to sell a high-margin tied value offer
(blades).
• Achieving cost savings via package sales. For example, the costs of supplying and
servicing channel members might be lower, the greater the number of value offers
included in the "package."
• Assuring the successful operation of the tying value offer (an automobile) by
obliging dealers to purchase tied value offers (repair parts) from the supplier.
23. 23
Tying
A tying agreement in effect stops competing sellers from the opportunity of
selling the tied commodity or service to the purchaser. Indeed, like
exclusive dealing policies, the critical issue in the condemnation of tying is
the foreclosing of inter-brand competition from a marketplace. But tying
contracts are viewed much more negatively by the courts than are
exclusive dealing arrangements or requirements contracts.
However, certain types of tying contracts are legal. There have been rulings
that if two value offers are made to be used jointly and one will not
function properly without the other, a tying agreement is within the law.
(Shoes are sold in pairs, and automobiles are sold with tires.) In other
cases, if a company's goodwill depends on proper operation of equipment,
a service contract may be tied to the sale or lease of the machine.
24. 24
Full-Line Forcing
One special form of value offer policy is called full-line forcing. Here a
seller's leverage with a value offer is used to force a buyer to purchase its
whole line of goods. This policy is illegal if competitive sellers are
unreasonably prevented from market access.
Therefore, the presumption against tying arrangements is not quite as strong as
the per se rule against horizontal price-fixing conspiracies.
25. 25
Horizontal Price-fixing Conspiracies.
The issues on which courts are most
likely to focus are whether -
(1) there are two distinct value offers;
(2) the seller has required the buyer to
purchase the tied value offer in order to
obtain the tying value offer;
(3) the seller has sufficient market power
to force a tie-in;
(4) the tying arrangement affects a
substantial amount of commerce in the
market for the tied value offer; and
(5) whether the tie is necessary to fulfil a
legitimate business purpose.
However, these structural per se criteria
are not likely to be satisfied for sellers
with relatively small market shares,
especially when the tying value offer is
unpatented.
26. 26
Designated Product Policies
A producer may want to sell some portion of its product line only through a
limited number of resellers, whereas its other resellers may sell a different
subset of the company's value offers.
Such a policy can help preserve the producer's exclusive brand name and
prevent its erosion through overly broad distribution through outlets with
an insufficiently high-quality image or service provision capabilities.
Further, this effectively gives resellers reasonable profit-making opportunities.
If the reseller has at least some value offers for which there is little or no
competition, it can confidently invest in customer service and promotional
activities, secure in the knowledge that its efforts will not fall victim to free
riding by other resellers.
Editor's Notes
Failure to meet performance targets may result in termination, but the channel member is free to sell outside its area, and other wholesalers or retailers may sell in its territory.
Despite their different characters, territorial and resale restrictions are treated identically under the law. Both are viewed as restraints of trade and, therefore, can be directly challenged. But, their legality may have to be judged under a rule-of-reason approach. That is, they will be considered legal if they have not substantially lessened inter-brand competition.
The free-riding channel does not bear the costs of channel flows necessary to provide the demanded service outputs, but does get the sale and the profit from the customer. In the long run, profits and economic viability will suffer in the cost-bearing channel. This is not in the producer's best interest, because the failure of the cost-bearing channel will hurt the producer as well as the free-riding channel.
If the price is at a "reasonable" level, this means gross margins available to resellers may be sufficient to pay for the provision of service outputs desired by end-users, as assessed by the supplier setting the policy.
Announce resale price policy up front; the policy should be established when arrangements are first made with channel members and should specify that the producer will refuse to deal with any dealer not willing to adhere to the announced terms.
Requirements contracts are variants of exclusive dealing. Under these, buyers agree to purchase all or a part of their requirements of a value offer from one seller, usually for a specified period and price. Such arrangements clearly reduce the freedom of choice of the buyer, but guarantee the buyer a source of supply at a known cost, often over a very long period of time (e.g., 10 years).