What Is Fair Selling?

In the U.S. at least, if you are selling products to the retail or wholesale trade, you need to sell on equal terms to outlets that may be competing with each other, unless you can economically justify different terms. You cannot sell 100 green pencils to stationery store A for $30 and sell an identical batch of 100 green pencils to a competing stationery store for $35 without clear economic justification.

Clear economic justification may be that one store pays cash in advance for your product, while another store retains the right to return unsold goods to you after a period of time. One store may require that your product be individually boxed.

High volume can be a basis for a deeper discount if it can be economically justified. You must be able to show that the higher volume actually lowers your cost of doing business.

Not only must pricing be nondiscriminatory, but other terms of the sale must be equal as well. Those terms may include payment method, advertising allowances, and freight allowances, among others.

The main concern of the courts is that larger retailers and wholesalers may be demanding and getting better terms than their smaller rivals without any cost justification.

Often when you are selling to a large retailer or large wholesaler they will insist you sign a contract where you guarantee that you will sell to no one else for better terms than they are receiving or they will be entitled to draconian penalties. You need to take such contracts seriously. Like the fair selling laws, such contracts pressure you to sell to everyone at the same terms. Don’t make the mistake of making an exception.

About Bob Adams

Bob Adams is a Harvard MBA serial entrepreneur. He has started over a dozen businesses including one that he launched with $1500 and sold for $40 million. He has written 17 books and created 52 online courses for entrepreneurs. Bob also founded BusinessTown, the go-to learning platform for starting and running a business.