Describe three of the legal issues in supply chain management.

Question

What will be an ideal response?

Answer 1

1. Exclusive dealing is when a supplier creates a restrictive agreement that prohibits intermediaries that handle its product from selling competing firms' products. Whether a particular arrangement is legal depends on whether it interferes with the intermediary's right to act independently or the rights of competitors to succeed-that is, is competition lessened by the arrangement? Exclusive dealing lessens competition if it (1) accounts for substantial market share, (2) involves a substantial dollar amount, and (3) involves a big supplier and smaller intermediary, which sets up a case for coercion. 
2. An exclusive territory protects an intermediary from having to compete with others selling a producer's goods. Can a producer always grant an intermediary an exclusive territory for sales purposes? Not necessarily. For this practice to be legal, it would have to be demonstrated that the exclusivity doesn't violate any statutes on restriction of competition. This issue often manifests itself in the context of suppliers limiting the number of retail outlets within a certain geographic area. One possible defense of exclusive territories might be that the costs of a new store (restaurant, retailer, dealer, etc.) entering the market are so great that the nature of the market and risks involved demand an opportunity for exclusivity. 
3. A tying contract is when a seller requires an intermediary to purchase a supplementary product to qualify to purchase the primary product the intermediary wishes to buy. Example: "You can buy my printer, but to do so you must sign a contract to buy my ink"-thus, the products are "tied together" as terms of sale. Tying contracts are illegal, but historically it has often been difficult to prove in a court of law whether an agreement is or isn't a tying contract.