Drafting Basic Wholesale Price Floor Agreements in Multi-Channel Distribution
Draft wholesale price floors as net realized invoice caps that cap accumulated trade discounts, restrict online resale channels, and enforce compliance via rebate offsets.
Colgate Policy
Meaning
A unilateral business practice allows a manufacturer to announce a minimum resale price and refuse sales to distributors who do not comply. Under a colgate policy, the manufacturer avoids the risk of price-fixing claims by acting entirely on its own. It does not seek agreements or negotiate terms with resellers.
Distribution Control
Preserving brand value and maintaining margins across all sales channels relies on strict enforcement of these pricing rules. The policy allows a brand owner to protect its distribution network from price erosion. Resellers receive clear notice that deviation from the minimum price will lead to an immediate end to their supply.
This unilateral decision protects margins without creating bilateral liabilities.
Legal Boundary
Antitrust laws do not restrict a company from choosing its business partners based on pricing decisions. When executing a colgate policy, a supplier must avoid any negotiation or signed agreement regarding retail prices. Once a contract is signed to enforce the pricing, the unilateral protection is lost.
Market Application
Market entry and brand positioning often dictate when a supplier adopts this approach. A manufacturer can establish high brand equity and protect premium retail partners by keeping price competition out of the distribution channel.