For more than 100 years the Supreme Court has consistently held that a business entity has the “unilateral” right to do business or not to do business with whomever it chooses and to establish the terms and conditions of its business relationships. This “unilateral right,” however, is qualified and its boundaries have been shaped over time by the antitrust laws. Today, the precise contours of this “unilateral right” and its proper exercise play an important role in the decision making in many business relationships, including the manufacturer-retailer relationship. With the rise of online retailing, manufacturers face significant challenges in controlling product distribution and supporting healthy retail partnerships. This column explores the ability of manufacturers to control retailers and retail pricing under the antitrust laws.
2. Colgate retail price policies. Colgate retail price policies pertain to the control over retail selling prices. Assuming product title passes to the retailer, a manufacturer may rely on the Colgate doctrine to unilaterally control retail selling prices. Under a Colgate policy, the manufacturer may unilaterally:
- Select its retail partners
- Set all terms and conditions (including retail prices) in forming and amending its retail policy
- Announce, in advance, its policy and any amendments thereto to its retailers
- Unilaterally terminate, if it chooses, any non-compliant retailer.
The decision to formulate and implement a Colgate policy must be done independently. It is a take it or leave it policy.