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.
Unilateral Sales Policy
Meaning
A business practice where a manufacturer independently establishes minimum resale prices and ceases doing business with any reseller that fails to adhere to them is a standard tool for brand protection. This method, called a unilateral sales policy, differs from a bilateral agreement because the manufacturer does not seek the distributor’s consent or agreement to the pricing terms. This distinction is critical for complying with antitrust laws that prohibit resale price maintenance agreements.
Legal Position
The legal strength of this policy depends on it being completely one-sided. If the manufacturer negotiates or seeks a promise from the reseller to comply, the policy becomes a bilateral agreement, which can be prosecuted as illegal price-fixing in many jurisdictions. To maintain the legality of this approach, the manufacturer must simply state the policy and act independently when a breach occurs.
This requirement makes the policy delicate to execute but highly effective when managed correctly.
Implementation Method
Manufacturers must communicate the policy clearly to all authorized dealers without inviting discussion or negotiation. The policy document lists the minimum prices for each product and states the consequences of non-compliance, which typically start with a warning and escalate to termination of the account. This clear communication ensures that all partners understand the rules of engagement.
Compliance Challenge
Monitoring the retail prices of thousands of online resellers requires automated tracking tools. When a price violation is detected, the sales team must not discuss the violation with the reseller. The manufacturer must simply stop shipping to the offending account to avoid creating an illegal agreement.