L and Ethical Issues in Channel Essay

756 WordsOct 12, 20124 Pages
LEGAL AND ETHICAL ISSUES IN CHANNEL RELATIONS 6.6 Companies are legally free to develop whatever channel arrangements that suit them. But there are a few legal and ethical issues that have to be considered in the marketing channel arrangements. Those issues are: (a) Exclusive Dealings Exclusive dealings refer to the arrangements done between the firm and the intermediary. For example, the dealers cannot handle competitorsÊ products; dealers can only handle the firmÊs products. Exclusive arrangements are legal as long as they do not substantially lessen competition or tend to create a monopoly, and as long as both parties enter into the agreement voluntarily. (b) Exclusive Territories Exclusive territories refer to certain areas of intermediaries. It is legal as long as the intermediary does not sell the products outside the predetermined territory.  TOPIC 6 MANAGING MARKETING CHANNELS, INTERMEDIARIES AND PHYSICAL DISTRIBUTION 82 (c) Tying Agreements Producers of a strong brand sometimes sell it to dealers only if they will take some or all of the rest of the product lines. This practice is called fullline forcing. Such tying agreements are not necessarily illegal but it will become a violation if the elements of market monopoly exist. (d) DealersÊ Rights Producers are free to select their dealers but their right to terminate dealers is somewhat restricted. In general, sellers can drop dealers „for cause‰ or for reasons stated in the agreement. ACTIVITY 6.2 Can you differentiate The Store supermarket line from the rice wholesaler at your place based on the purchase volume or sales volume of rice for both companies? EXERCISE 6.2 Essay Questions 1. Explain the meaning of: (a) Exclusive dealing (b) Exclusive territories (c) Tying agreements (d) DealersÊ rights 2. List and explain the forms or types of power that is frequently

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