Imagine that an employee of a high-end apparel brand learns one of his company’s biggest retail partners — a luxury-goods store — is advertising some of his brand’s outfits for less than the company’s unilateral price policy (UPP) allows.
This clothing maker takes a zero-tolerance approach to these types of reseller violations. They know a lot of their brand value comes from their reputation in the market as a luxury brand, and they can’t afford to have their clothing advertised at a discount — not anywhere.
Now, if you’ll pardon the pun in this apparel-related story, here’s the wrinkle: This is the second time in recent months the brand has caught this retailer violating its UPP.
According to its policy, the company will issue one warning to a violator and then, if there is a second time, they’ll cut off inventory to the reseller for a certain period of time. The brand has had to issue these consequences to several violators in the past.
But when the employee calls up his contact at this big retailer, she profusely apologizes for the mistake and promises both to pull the offending ads right away and never to let it happen again. The employee agrees to this and decides to let the retailer off with this one final warning.
Question: Is that okay?
Not even close.
In Reseller Policy Enforcement, Consistency is Your Friend
If you think about the major red flags that can trigger scrutiny (or worse) from antitrust regulators, they all involve indications that a manufacturer has been colluding with one or more of its resale partners.
The standard legal principles that are always at play in antitrust matters — “price fixing,” “restraint of trade,” “conspiracy to create a monopoly” — describe manufacturers or brand owners granting some form of favorable treatment to some resellers over others.
Which means one of the best ways to keep your company on solid legal ground when it comes to your reseller pricing policy is to enforce that policy the same way with all of your authorized resellers.
There’s a big exception to this recommendation (and the clue is in the previous sentence), but we’ll discuss that in a minute. For now, the three key takeaways are:
1. Issuing the same consequences for all of your retailers — never playing favorites — is one of the best ways for your company to demonstrate it is operating on the right side of antitrust law.
2. It doesn’t matter why your company fails to consistently enforce your reseller policy. Even an innocent mistake — like an employee believing she’s being forgiving of an apologetic retailer by granting that company one more warning than the UPP allows — could still be deemed by regulators and courts to be illegal behavior.
3. Given how unforgiving antitrust law can be, and how easy it can be for an employee at your company to overstep the law (even without knowing it), you need a company-wide strategy for enforcing your reseller policy.
Two Ideas to Consistently Enforce Your Reseller Policy
- Build and distribute company guidelines for dealing with violations of your reseller policy.
The first step to making sure you’re applying the same rules and consequences to your resellers across the board is to figure out exactly what those rules are — and communicating them to your entire company.
Any employee who contacts a retailer about a violation needs to know before making that call what the company’s across-the-board policy is for this violation. If it’s a warning, fine. If it’s a 90-day suspension in inventory, fine. If it’s kicking the retailer out of the company’s Authorized Dealer Network, fine. But the employee needs to know that when it comes to reseller price enforcement, there are legal implications to bending or breaking the company’s own rules.
- Automate your reseller pricing across the Internet, and be ready to act if you spot violations.
Another mistake many manufacturers make is failing to effectively monitor their entire resale channel at all times. If one retailer is able to get away with violating the brand’s UPP or MAP or other type of reseller policy simply because the brand doesn’t know that violation is out there, another retailer might take issue with the brand. After all, the retailer might reason, they’d come after us if we tried undercutting their other retail partners like that.
This is why we strongly recommend an automated Internet Brand Protection platform — a solution that will track all of your products’ presence across the web, 24/7/365, issue you alerts to violations so your team can address them quickly, and automatically compile evidence of the violation in case you need supporting documentation.
The One Exception to the Consistent-Enforcement Guideline
We promised to tell you about the one exception to the rule that you need to enforce your reseller policy consistently, so here it is.
That rule applies only to your authorized resale partners — the businesses you have a relationship with and have officially given permission to represent your products to the public.
But antitrust law has nothing to say about how you go after unauthorized retailers.
You can’t go aggressively after a small retailer in your official resale channel but then — for the exact same offense against your reseller policy — simply slap the wrist of a large retailer. The law could view that as you working with a more lucrative partner to help rid them of a smaller competitor. That’s where consistent enforcement is important.
But those gray-market retailers — businesses you don’t work with and never gave the okay to sell your products — have no official right to represent your brand in the first place. Which means you can treat them entirely differently from your true retail partners.
So by all means, go after those unauthorized free-riding retailers with everything you’ve got. Send them cease-and-desist letters. Hire lawyers to go after them. Complain to the online marketplaces where you catch them selling your products. Get ‘em!
But for your official resale network… your company’s motto should always be “consistency in enforcement.”
If all of this sounds too daunting — contact a team of Brand Protection Experts to help you roll out your reseller monitoring and enforcement infrastructure.