1 The basic notion of any discussion of legal issues in marketing: You probably need legal advice before implementing any marketing plan Before marketing a product: Do you have a legal right to its design, features, and name? Is it safe? Does it do what it is sold to do? Before you set or change a price, are you involved in “price fixing”?

2 Before you take on a distributor, do you have a legal agreement on pricing, territory, and competing distributors of your product? Before you send out a sales force, do they understand that bribes and kickbacks are illegal? Do you understand that you are responsible for what they say?

3 Before you advertise… Do you have enough stock on hand? Do you have evidence of superiority over competition if you claim it? Do you have evidence of sales at a price you claim to be discounting from? Or evidence of competitors’ prices if you claim yours are lower?

4 Trademark issues can be cloudy Should the Trademark Office allow a company to register the mark FIDO LAY for edible dog treats? Will that confuse buyers? The issues are similarity of markets, goods, and channels of trade

5 All products have “implicit warranties” Seller warrants they he/she is the legal owner and can convey ownership The seller warrants that the product will perform adequately in normal applications and that the product can do what it is supposed to do

6 Is it legal to charge different prices to different buyers? Yes, if they are end users No, if they are distributors, unless a manufacturer can show that the costs to sell to one buyer were less than to sell to others, or price reductions were given to meet “specific competitive offers” (a key loophole in price discrimination law)

7 Predatory pricing Consider a grocery chain that prices below cost to achieve a monopoly position or intimidate competitors. That’s illegal. Tests are: predator initiates cuts, does so only in areas where it competes with victim, raises prices after victim is driven out, and no legitimate purpose for the cuts is evident

8 Yes, it can be legal to: Require distributors not to carry competing brands Establish exclusive territories for distributors or sales agents Require a retailer to charge no less than the minimum price the manufacturer dictates

9 Three useful ideas For an innovation to be patented, it must be useful and cannot be obvious from prior technology Puffery is harmless exaggeration that clearly does not deceive regarding the virtues of a product Retailers must offer “rain checks” or risk accusations of “bait and switch” practices

10 Statutory Provisions Section 1 of the Sherman Act: “Every contract, combination... or conspiracy in restraint of trade or commerce... is declared to be illegal.” Section 2 of the Sherman Act: prohibits monopolization, attempts to monopolize, and conspiracies to monopolize.

11 What about good citizens? University of Wisconsin President gathers local tavern owners together. He asks the tavern owners to do something about the amount of drinking on and around campus. The tavern owners announce that they have agreed to eliminate “happy hour” to reduce the level of alcohol consumption.

12 Oops…… The tavern owners have just agreed to set a new, higher price. The naked fixing of prices is a per se illegal violation of Section 1 of the Sherman Act. Because it is a per se violation, the “noble cause” will not even be heard by the judge; the owners simply cannot make this agreement.