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[G1]- Co6-Rules (Meet-the-Competittion Clauses (MCCs) (An MCC changes the…

- - - - with the assurance of the customer's continued business
  - - - you are not the only one producer
        
        how can you improve your bargaining position
    - - for supplier
        
        if he tried, you could then come back with a lower price and keep the business
        
        rival runs a risk anytime he cuts price to go after your business
        
        a ravial can't come in and take away your customers simply by unedercuting your price
        
        remember that sasking for an MCC is a way of getting paid to play
        
        you won't have to lower your price preemptively
        
        if another seller underbids you , you'll now have the chance to repond.
        
        a win-win element
        
        your high pricew set a good precedent
        
        give rivals some room to rise [rice to their own customers
        
        with your higher profits ,you have more to lose
      - for customers
        
        the only one to benefit ,who'd end up with even more of the pie
        
        why do they go with MCCs
        
        even without f formal MCC,it's generally accepted
        
        customers don't leave their current supplier without giving them a last chance to bid
        
        may be the norn in their industry
        
        customers' purchasing agents are foucsed on the short term
        
        customers don't thoughly understand the rule's implications
        
        offer some benefits
        
        assure producers fo a long-term relationship with customers
        
        with this assurance pruducers are more willing to
        
        invest in serving their customers better
        
        lead a long-term win for the sustomer
        
        more likely to share technology and ideas
  - - - a meet-the-competition clause is actually enhanced by it
  - - - give the incumbent a chance to match it
      - if the incumbent mattches the revial's bid
        
        he's guaranteed to keep the customer
    - - the rival has much less incentive to play the game in the frist place
        
        that's why MCCs put an incumbent seller in a powerful way
    - - if you face a rival whose main object in life appears to be hurting you rather than doing well for himself
        
        they creat a vulnerability
      - allow competitors to bid without having to diliver
- - - - much more common with customers
  - - - take the product from the supplier
        
        Suppliers that face large fixed costs relative to variable costs.
        
        The supplierr.
        
        to plan production better.
        
        You
        
        PROS
        
        reducing the incentive of a rival to go after your customer base
        
        help stabilize market share in your industry.
        
        CON
        
        Increases severity of price war if deterrence fails
      - pay the supplier a penalty
- - - - advantage
        
        allows you to charge your own customers low prices without threatening your rival's customer base
        
        encourages customers (even price shoppers) to become loyal
      - disadvantage
        
        in rewarding loyalty in cash rather than kind, doesn't raise your added value
        
        Is ineffective on small-ticket items
      - example
        
        General Motor
        
        GM card
        
        the owners of GM card can earn credit equal to 5% of their charge volume, which could be applied to the purchase or lease of any new GM car or truck.
        
        charge a low price to your own customers, without threatening your rivals' customer bases
        
        Healthy Imitation
        
        Ford imitate GM card
        
        many company imitate GM card
        
        car buyers should choose side, then they can get the credit from their cardmakers
        
        Chrysler
        
        provide larger rebate later in the year, it would go back to buyers and make up the difference
        
        customers now had no incentive to wait, they buy the car, and Chrysler has less inventories.
        
        Chrysler seldom offer rebates to clear out their car, because it is too costly that they should make refunds to customers who bought in January.
  - - - Either you lose power or someone else gains power
    - - Not to push a rule to far
        
        The rules always may be negotiable
        
        The party with the power who gets to make the rules.
- - - - Antitrust Law
        
        MCC
        
        A Finical Option
        
        gives the seller the right to sell something tomorrow by matching the best price.
        
        Have a direct value
        
        the option ends up raising tomorrow’s price
        
        1 more item...
        
        The Robinson-Patman Act prohibits companies from engaging in price discrimination.
        
        An important excetion
        
        The lower price was made in good faith t meet a equally low price of a competition
        
        Protecting yourself against the charge of price discrimination.
        
        MFC
        
        Facilitating practice
        
        Substantially lessen competition
        
        Violation of Section 5 of the Federal Trade Commission Act
        
        The net effect is ambiguous.
        
        Rival can more easily come after one of them with a low price
        
        Competition Increase
        
        More relevant to the smokestack industries
        
        Sustaining prices above variable cost
        
        For the industries those have huge up-front R&D cost
        
        current U.S. antitrust law appreciates this perspective