Parallel Imports Undercutting an Appointed Distributor in Its Own Territory
Parallel imports undercut appointed distributors when wholesale pricing gaps across territories exceed landed transport and tariff costs.
Dual Pricing Clause
Meaning
A contractual provision that establishes two different price levels for the same product based on the customer’s sales channel or the final destination of the goods. Including a dual pricing clause in a distribution agreement allows a manufacturer to protect its local market investments from low-cost parallel imports. This pricing mechanism often sits at the center of disputes regarding antitrust and regional trade regulations.
Channel Separation
Manufacturers often charge a higher price for goods sold online compared to those distributed through physical retail showrooms. This structure compensates brick-and-mortar partners for the higher overhead costs associated with product demonstrations and customer service. It encourages physical retailers to continue stock investments in the brand.
Legal Restriction
Antitrust authorities in some jurisdictions scrutinize these multi-tiered pricing models to prevent market fragmentation and anti-competitive practices. In the European Union, for example, agreements that restrict cross-border trade through discriminatory pricing are heavily restricted to protect the single market. This regulatory oversight means that companies must justify any price differences using objective cost differences rather than geography.
It requires companies to design pricing structures that comply with local competition laws.
Economic Margin
Distributors must negotiate these terms carefully to ensure that their blended margin remains viable across all sales activities. If online sales are penalized too heavily, the distributor may lose the ability to compete in growing digital marketplaces. It creates a balance between protecting traditional stores and expanding online reach.