Description
impact of law on supplier relations, competitor relations and consumer relations.
Legal Environment
Overview
• Inorder to protect the consumers from being cheated by deceptive claims and monopolistic practices by retailers, we see an increase in legal enforcement these days. • Such laws cover a wide range of issues like the location of a store, the building structure, its business practices, mergers and acquistions, pricing,product and promotional activities, trademark infingements and so on.
• Let us study the impact of law on: • Supplier Relations
– Pricing
• Vertical Price Fixing • Discriminatory Pricing
– Product – Purchasing – Channel Constraints
• Competitor Relations
– Pricing – Promotion – Trademarks
• Consumer Relations
– Pricing
• Deceptive Pricing • Predatory Pricing
– Promotion
• Deceptive Advertising • Deceptive Sales Practices
– Product
• Product Safety • Product Liability • Warranties
– Selling
• Products • Selling practices • Consumerism
• Employee Relations
Supplier Relations
• Retailer have to take special care about not contravening the regulations set by the legal framework, not only in their operations, but also in suppliers operations. • These are legal regulations concerning the relationship between retailers and suppliers in the area of pricing , product promotion and channel constraints
Pricing
• Retailers are not at complete freedom to fix the price to buy or sell the products of their stores. • Most of the laws framed by the government are aimed at restricting vertical price fixing and discriminative supplier pricing.
Vertical Price Fixing
• Vertical price fixing-sometimes referred to as “resale price maintenance”- occurs when a business at one level of distribution( eg. A manufacturer) dictates the price of terms under which a business at a different level of distribution(eg. At a different level of distributor) may resell the goods or services. • This type of price fixing was aimed at preventing large retailers from selling goods below the suggested retail prices and negatively affecting the business of small retailers. • But later this practice was considered illegal as it restricted the consumers to obtain goods and services at the best possible price.
• The resale price maintenance agreement would be in contravention of the Competition Act,2002, if such an agreement causes or is likely to cause a considerable effect on competition in India. • The manufacturer can suggest a price for the product being sold, but cannot impose that price on the retailer. • Neither the manufacturer nor the wholesaler can threaten to cut off the supply of goods if the retailer does not agree to sell the item at the price suggested by the retailer.
Discriminatory Pricing
• Price Discrimination occurs when a vendor sell the same merchandise at different prices to two or more retailers. • But under certain circumstances price discrimination is legal. • Different prices can be charged to different retailers when there is a difference in the manufacturing , sale and delivery costs due to difference in the order volume.
• Retailers cannot be charged with price discrimination I. If the cost of selling to a particular retailer is less II. If change in market conditions affects the marketability of a particular merchandise III. If they have to match the local competition. • Price discrimination by manufacturers usually is in the form of offering different customers (retailers and wholesalers) depending upon the order quantity. • Manufacturer offer trade discounts on bulk purchases.
Purchasing • Firms in retailing business face more ethical dilemmas while buying merchandise. These include issues related to product quality checking, sourcing , slotting fees, charge backs and bribery.
Channel Constraints• There are many laws that govern the retailer’s relations with other members in the distribution channel. These laws are concerned with practices like territorial restrictions, dual distribution, exclusive dealing and tying agreements. • According to Competition Act,2002 , it is illegal for enterprise or association of enterprises or person or association of persons to enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an adverse effect on competition within India.
Competitor Relations
• The survival and success of retailer depends upon the level of competition. • The competitive practices are often determined by rules and regulations. • The laws relating to competition pertain to pricing, promotion and trademarks.
Pricing
• Horizontal Price Fixing occurs when 2 or more competitors agree to sell their product for the same price, or according to some set formula.Such a practice is considered as illegal in most part of the world.
• Exchanging price information with competitors violates laws,it it affects prices.
• Promotion
• A retailer trying to harm competitors by attracting customers through false claims, either verbally or symbolically , can be said to be violating the law as per the Consumer Protection Act,1986.
• Trademarks
• The Retailer can register their store names, logos and private labels through trademark registration laws. • But it is the responsibility of the retailer to keep an eye on the market to check whether its trademarks are being used by anyone else.
Consumer Relations
• Consumers today, more than ever before, are intelligent enough to differentiate between genuine offers and fake sales tactics. • Moreover, the law is actively making rules to safeguard the interests of the consumers. • We will discuss these rules under pricing,promotion,product and consumerism.
• Pricing :
• Deceptive Pricing : Advertising incorrect prices to attract customers into the store ,and later adding on some hidden charges to the price advertised for the product, or terming the product as unavailable, come under deceptive pricing. • This unfair practice is considered as an offense by the ‘misleading price indications’ and bait advertising clauses of the Consumer Protection Act,1986.
• Predatory Pricing : Predatory pricing occurs when a dominant firm sells products to cost for a long period of time to drive away competitors from the market. • Firms who have market power in more than one market may set prices below cost for a period of time to drive out rivals and restrict the entry of new players. • Large retailers who give massive discounts are also using the predatory pricing strategy to destroy independent, small retailers, which can’t compete on price. • This is specifically stated as an anti-competitive practice according to Competition Act, 2002.
• Promotion • Deceptive Advertising : It is most difficult for the law to prove a retailer guilty on the basis of deceptive advertising. This is because there is a very subtle difference between misleading claims and puffery promotions. • In Bait and Switch advertising, bait is the benefit or claim that the retailer makes to attract the customer into the stores, while switch is the alternate or the real motive that the retailer tries to promote once the customer comes into the store. • This type of advertising is unlawful practice under the Consumer Protection Act.
• Deceptive Sales Practices : There are some kinds of sales practices that are considered illegal . Omitting key facts in advertisements or in promotions by the salespersons is an unlawful practice for which the retailer is held responsible because it is the retailer’s firm that the salesman represents. • Using deceptive credit contracts is another illegal practice , whereby the customer is not provided with the right information to make purchase decisions.In these cases, the retailer generally hides facts/information or confuses the customer on the credit terms.
• Superficial discounting is another deceptive sales practice that retailers use to lure customers into buying products, which they otherwise would not. • In this the retailer present a product as remarkably valuable just by showing reduction from an exceptional high price which actually never existed.
• Product
• A retailer selling any kind of merchandise in his stores must provide information to the customers about its safety and capability to serve their needs. • Laws pertaining to the products sold by the retailers focus on product safety ,liability and warranties. • Product Safety – The retailer cannot be held responsible for the hazards that any of his merchandise may cause to the customers who use it.Inspite of this retailers selling eatables, explosives should be extra cautious while procuring merchandise.
• Product Liability
• The law in some countries holds that it is the responsibility of the retailers to warn the customer in advance about the probable hazards of using a particular product.
• Warranties
• The Retailer also has the responsibilty of ensuring the performance and safety of the product as promised in the warranties given by the manufacturer.
• Selling-The ethical questions in selling merchandise to customers are related to products that are being showcased and sold in the retail stores as well as the selling practices adopted by the salesperson in the store. • Consumerism- The efforts made by the government and business organizations to protect the basic rights of the consumer is referred to as consumerism.
Employee Relations
• The way retailers treat their employees is governed by certain laws, which are common to all kinds of establishments in the country. • The Minimum Wages Act,1948, addresses the primary concern of workers by setting minimum wages for employees-those working on temporary basis, piece-rate workers, and workers who are paid daily wages. • No employee can be asked to work more than nine hours a day without additional wages being paid. • The Protection of Civil Rights Act, 1955, prescribes “punishment for the preaching and practice of ‘untouchability’ for the enforcement of any disability arising there from and for matters connected therewith.”
Employee Relations(contd..)
• The standards for health and safety of workers in various establishments are set by 1987 amendment if The Factories Act. • The Child Labor Prohibition and Regulation Act, 1986 prohibits employers from employing children below 14 years of age. • The Disabilities Act,1995, aims at reducing discrimination against physical and mental disabilities while recruiting, so that they can also be provided with equal employment opportunities.
doc_991868784.pptx
impact of law on supplier relations, competitor relations and consumer relations.
Legal Environment
Overview
• Inorder to protect the consumers from being cheated by deceptive claims and monopolistic practices by retailers, we see an increase in legal enforcement these days. • Such laws cover a wide range of issues like the location of a store, the building structure, its business practices, mergers and acquistions, pricing,product and promotional activities, trademark infingements and so on.
• Let us study the impact of law on: • Supplier Relations
– Pricing
• Vertical Price Fixing • Discriminatory Pricing
– Product – Purchasing – Channel Constraints
• Competitor Relations
– Pricing – Promotion – Trademarks
• Consumer Relations
– Pricing
• Deceptive Pricing • Predatory Pricing
– Promotion
• Deceptive Advertising • Deceptive Sales Practices
– Product
• Product Safety • Product Liability • Warranties
– Selling
• Products • Selling practices • Consumerism
• Employee Relations
Supplier Relations
• Retailer have to take special care about not contravening the regulations set by the legal framework, not only in their operations, but also in suppliers operations. • These are legal regulations concerning the relationship between retailers and suppliers in the area of pricing , product promotion and channel constraints
Pricing
• Retailers are not at complete freedom to fix the price to buy or sell the products of their stores. • Most of the laws framed by the government are aimed at restricting vertical price fixing and discriminative supplier pricing.
Vertical Price Fixing
• Vertical price fixing-sometimes referred to as “resale price maintenance”- occurs when a business at one level of distribution( eg. A manufacturer) dictates the price of terms under which a business at a different level of distribution(eg. At a different level of distributor) may resell the goods or services. • This type of price fixing was aimed at preventing large retailers from selling goods below the suggested retail prices and negatively affecting the business of small retailers. • But later this practice was considered illegal as it restricted the consumers to obtain goods and services at the best possible price.
• The resale price maintenance agreement would be in contravention of the Competition Act,2002, if such an agreement causes or is likely to cause a considerable effect on competition in India. • The manufacturer can suggest a price for the product being sold, but cannot impose that price on the retailer. • Neither the manufacturer nor the wholesaler can threaten to cut off the supply of goods if the retailer does not agree to sell the item at the price suggested by the retailer.
Discriminatory Pricing
• Price Discrimination occurs when a vendor sell the same merchandise at different prices to two or more retailers. • But under certain circumstances price discrimination is legal. • Different prices can be charged to different retailers when there is a difference in the manufacturing , sale and delivery costs due to difference in the order volume.
• Retailers cannot be charged with price discrimination I. If the cost of selling to a particular retailer is less II. If change in market conditions affects the marketability of a particular merchandise III. If they have to match the local competition. • Price discrimination by manufacturers usually is in the form of offering different customers (retailers and wholesalers) depending upon the order quantity. • Manufacturer offer trade discounts on bulk purchases.
Purchasing • Firms in retailing business face more ethical dilemmas while buying merchandise. These include issues related to product quality checking, sourcing , slotting fees, charge backs and bribery.
Channel Constraints• There are many laws that govern the retailer’s relations with other members in the distribution channel. These laws are concerned with practices like territorial restrictions, dual distribution, exclusive dealing and tying agreements. • According to Competition Act,2002 , it is illegal for enterprise or association of enterprises or person or association of persons to enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an adverse effect on competition within India.
Competitor Relations
• The survival and success of retailer depends upon the level of competition. • The competitive practices are often determined by rules and regulations. • The laws relating to competition pertain to pricing, promotion and trademarks.
Pricing
• Horizontal Price Fixing occurs when 2 or more competitors agree to sell their product for the same price, or according to some set formula.Such a practice is considered as illegal in most part of the world.
• Exchanging price information with competitors violates laws,it it affects prices.
• Promotion
• A retailer trying to harm competitors by attracting customers through false claims, either verbally or symbolically , can be said to be violating the law as per the Consumer Protection Act,1986.
• Trademarks
• The Retailer can register their store names, logos and private labels through trademark registration laws. • But it is the responsibility of the retailer to keep an eye on the market to check whether its trademarks are being used by anyone else.
Consumer Relations
• Consumers today, more than ever before, are intelligent enough to differentiate between genuine offers and fake sales tactics. • Moreover, the law is actively making rules to safeguard the interests of the consumers. • We will discuss these rules under pricing,promotion,product and consumerism.
• Pricing :
• Deceptive Pricing : Advertising incorrect prices to attract customers into the store ,and later adding on some hidden charges to the price advertised for the product, or terming the product as unavailable, come under deceptive pricing. • This unfair practice is considered as an offense by the ‘misleading price indications’ and bait advertising clauses of the Consumer Protection Act,1986.
• Predatory Pricing : Predatory pricing occurs when a dominant firm sells products to cost for a long period of time to drive away competitors from the market. • Firms who have market power in more than one market may set prices below cost for a period of time to drive out rivals and restrict the entry of new players. • Large retailers who give massive discounts are also using the predatory pricing strategy to destroy independent, small retailers, which can’t compete on price. • This is specifically stated as an anti-competitive practice according to Competition Act, 2002.
• Promotion • Deceptive Advertising : It is most difficult for the law to prove a retailer guilty on the basis of deceptive advertising. This is because there is a very subtle difference between misleading claims and puffery promotions. • In Bait and Switch advertising, bait is the benefit or claim that the retailer makes to attract the customer into the stores, while switch is the alternate or the real motive that the retailer tries to promote once the customer comes into the store. • This type of advertising is unlawful practice under the Consumer Protection Act.
• Deceptive Sales Practices : There are some kinds of sales practices that are considered illegal . Omitting key facts in advertisements or in promotions by the salespersons is an unlawful practice for which the retailer is held responsible because it is the retailer’s firm that the salesman represents. • Using deceptive credit contracts is another illegal practice , whereby the customer is not provided with the right information to make purchase decisions.In these cases, the retailer generally hides facts/information or confuses the customer on the credit terms.
• Superficial discounting is another deceptive sales practice that retailers use to lure customers into buying products, which they otherwise would not. • In this the retailer present a product as remarkably valuable just by showing reduction from an exceptional high price which actually never existed.
• Product
• A retailer selling any kind of merchandise in his stores must provide information to the customers about its safety and capability to serve their needs. • Laws pertaining to the products sold by the retailers focus on product safety ,liability and warranties. • Product Safety – The retailer cannot be held responsible for the hazards that any of his merchandise may cause to the customers who use it.Inspite of this retailers selling eatables, explosives should be extra cautious while procuring merchandise.
• Product Liability
• The law in some countries holds that it is the responsibility of the retailers to warn the customer in advance about the probable hazards of using a particular product.
• Warranties
• The Retailer also has the responsibilty of ensuring the performance and safety of the product as promised in the warranties given by the manufacturer.
• Selling-The ethical questions in selling merchandise to customers are related to products that are being showcased and sold in the retail stores as well as the selling practices adopted by the salesperson in the store. • Consumerism- The efforts made by the government and business organizations to protect the basic rights of the consumer is referred to as consumerism.
Employee Relations
• The way retailers treat their employees is governed by certain laws, which are common to all kinds of establishments in the country. • The Minimum Wages Act,1948, addresses the primary concern of workers by setting minimum wages for employees-those working on temporary basis, piece-rate workers, and workers who are paid daily wages. • No employee can be asked to work more than nine hours a day without additional wages being paid. • The Protection of Civil Rights Act, 1955, prescribes “punishment for the preaching and practice of ‘untouchability’ for the enforcement of any disability arising there from and for matters connected therewith.”
Employee Relations(contd..)
• The standards for health and safety of workers in various establishments are set by 1987 amendment if The Factories Act. • The Child Labor Prohibition and Regulation Act, 1986 prohibits employers from employing children below 14 years of age. • The Disabilities Act,1995, aims at reducing discrimination against physical and mental disabilities while recruiting, so that they can also be provided with equal employment opportunities.
doc_991868784.pptx