Page 87 - Lighting Magazine January 2020

In a seminar on Navigating Vertical Pricing Policies at the recent ALA Conference, anti-trust lawyer Herbert Allen detailed the acronyms that have made many heads spin in the industry. BY LINDA LONGO
Pricing Policies
ith the highest recorded, most profitable online holiday shopping period barely in our collective rearview mirror, in-
ternet pricing remains a hot button topic among brick-and-mortar showrooms selling merchandise in virtually every category you can think of — and naturally lighting is no exception.
Getting down to the nitty-gritty of the subject matter can be tricky as a lot of misconceptions re- main as to what is legal and illegal when it comes to online pricing.
Washington, D.C.-based anti-trust lawyer and compliance specialist Herb Allen, of the Polsinelli law firm, specializes in advising trade associations and companies on the design and implementation of antitrust compliance programs and serves as outside legal council on antitrust issues to sev- eral trade associations, including the American Lighting Association (ALA). He is also a trusted resource for advising manufacturers and distribu- tors on Retail Price Maintenance (RPM) strategies, including Minimum Advertised Price (MAP) poli- cies and Unilateral Pricing Policies (UPP). Other similar terms that industry members often hear grouped in this same category are Internet Minimum Advertising Price Policies (IMAP) and Unilateral Minimum Resale Price (UMRP).
During his seminar at the ALA Conference in Phoenix, Allen laid down some ground rules. “Anti- trust law requires companies to make their own independent decisions about how to implement vertical pricing restraints,” he notes, explaining that this eliminates concerns of collusion and price-fixing.
Retail Price Maintenance (RPM) involves practices where manufacturers set minimum or maximum prices for their downstream resellers. “Some apply only to internet sales, and some ap- ply to all sales,” Allen states. Having RPM gives
retailers the ability to advertise that they have the “best” price – since conceivably everyone should be selling at the same price – and promotes competition by leveling the playing field between larger and smaller retailers. According to Allen, smaller retailers may be less willing to carry prod- ucts without the manufacturer having an RPM in place. When the customer knows that the price will be the same across all outlets, it simplifies the customer’s shopping experience because it elimi- nates the need to do price comparisons.
This is all a perfect world scenario, however, because unauthorized deep discounting occurs online and not only from third-party sellers.
“There are risks and challenges to enforcing RPM, according to Allen. “You might have to make hard decisions regarding particular resellers, espe- cially if they’re an important channel,” he advises, adding, “Retailers with multiple distribution chan- nels may have greater difficulty identifying how RPM violators are obtaining products.” Another challenge is that online marketplaces often permit seller anonymity and typically will not police price disputes.
WHY MANUFACTURERS NEED RETAIL PRICE MAINTENANCE
➡ Protects brand equity
➡ Encourages retailers to invest in advertising & customer
service
➡ Encourages diversity of distribution channels, including brick- and-mortar retailers
➡ Encourages retailers to carry your products over other brands by protecting retailer profit margins
➡ Eliminates retail free-riders (retailers who sell the product, but don’t advertise or do customer service)
January 2020 | enLIGHTenment Magazine 83