It is ILLEGAL under the RPA for Manufacturers and Suppliers to Give Higher Discounts, Rebates and Allowances to Companies Which Sell Their Products through WEBSITES

My experience before a federal judge recently has prompted this article. The judge made it clear that it was not obvious to him that sales of the product at issue (let's say "automobile batteries" for the sake of argument) made by an internet website would cause a loss of sales to the plaintiff (a bricks and mortar store 2,000 miles away from the stated office address of the website).

The argument inherent in the judge's comment (but not actually expressed by him) is two-fold:

1. the internet website is not in the geographic area and is no more competitive than a store selling the same type of automobile batteries in mainland China or Australia
2. there is a functional difference in selling products through internet websites as compared with selling the same products through a bricks and mortar store, and the manufacturer/supplier presumably is giving a higher discount to the website to take into account and offset these assumed higher distribution costs
3. it is obviously absurd to suggest such competition, because, if this is true, then a single website would be in competition with every bricks and mortar store in the United States selling the same product
4. the judge has never heard such an argument before because of the relative youthful status of website marketing, coupled with the paucity of RPA cases in comparison to other types of cases

The answer to these assumed (but not stated) arguments by the federal judge can be made along the following lines:

1. internet websites are worldwide in their reach and, when written in the English language, appear to persons in the United States or Canada to have its office in the U.S. or Canada, and to persons in Australia or England appear to have its office in Australia or England. Thus, the person purchasing through a website doesn't know and doesn't care where the website has its offices, and relies on the website to deliver what is ordered regardless of its location. For all the customer knows, the website has physical locations in each city from which the ordered product is shipped.
2. there is significant evidence to be obtained from major bricks and mortar retailers to the effect that they have proof from their own experience that website selling by them "cannibalizes" sales from their own bricks and mortar stores throughout the U.S.
3. if this is true, that a major retailer loses sales in each of its stores through its own website (even though the price to the customer is the same), it would seem to be perfectly clear and provable that when an independent store is in competition with one or more retail stores of a major retailer, that the major retailer's website will take away sales from the competing store as well, especially when there is a significant price advantage in purchasing from the website.
4. there is no demonstrable functional difference in selling products through websites; bricks and mortar sales to the consumer are retail sales, and website sales to the same persons are also retail sales, and there is no functional difference; a functional difference which caselaw recognizes is based on the level of distribution and not on the marketing method used to make sales at any level of distribution; a retailer can choose whatever marketing techniques he wishes to make sales, including direct mail, radio advertising, newspaper advertising, signs in the window, and discounts from list price, but these choices do not create functional differences under the RPA; whatever discounts, rebates and allowances are provided by the manufacturer/supplier should be made available to all on an equal basis, and the retailer then chooses how to use them; it does not permit the manufacturer to discriminate against bricks and mortar stores by subsidizing a retailer's efforts in making website or mail-order sales
5. also, it is not necessarily clear that there are higher distribution costs in making website sales
6. it is absolutely true that a single website (such as Amazon.com and Priceline.com) is in competition with virtually every bricks and mortar bookstore or travel agency in the United States, which makes it more imperative that the bricks and mortar stores start off with the same schedule of discounts, rebates, fees and allowances, and then for such stores to try to incorporate internet websales into their own marketing programs, obviously using their location and ability to deliver quickly as their main marketing point to prevent loss of sales to the distant major websites such as Amazon.com, or in the case of travel agencies to interface with Priceline.com and Travelocity.com and purchase tickets for their customers and charge a fee for such service
7. with the increase of RPA litigation, the foregoing arguments will be made in RPA cases, and with the increasing success of website marketing, taking sales from bricks and mortar stores, and commanding higher rebates, fees, discounts and allowances in the process, you can expect that there will be many cases involving this issue, which is a most critical issue coming up under the RPA

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   Initial Publication: 11/28/99; Last Update: 11/28/99

   Copyright © 1999 by Carl E. Person