How do I price my software?

November 18, 2005 10:23 AM

How do commercial software companies stop dealers and others from selling their products on eBay? And how do they control pricing in general? I need some education.

I work for a software company that has a network of authorized dealers. We have a suggested retail price and dealers are free to sell the software for what they want. We are considering added a "Minimum Advertised Price" to make sure the little guys who sell one and two copies aren't out advertised by our bigger dealers. Is anyone familiar with the contractual language to enforce this?

As a side note almost, when I go to eBay I see very few copies of, say, DreamWeaver for sale. Why not? Don't DreamWeaver resellers see eBay as a viable channel or is MacroMedia preventing this somehow?

posted by dhacker to technology (3 comments total)

Online third party reselling tools are normally authorized in contracts, so if Best Buy wanted to, they could resell Dreamweaver on places like Ebay. If it's not in the contract, the only way to combat illegal resells is to hound the lawyers on them.
posted by cleverusername at 11:04 AM on November 18, 2005

It is my understanding that, in practice, many manufacturers enforce their "Minimum Advertised Price" by threatening to withdraw their advertising support dollars (theoretically used by dealer to fund, in whole or in part, advertisements that mention the manufacturer's products) rather than threatening legal action. The manufacturer carefully adjusts its advertising budget such that a dealer who choses to violate MAP effectively makes less money than a dealer who honors MAP. The MAP violator's increase in sales due to having a price lower than anyone else is insufficient to overcome the MAP violator's lower margin caused by having larger advertising expenditures.
posted by RichardP at 12:43 PM on November 18, 2005

Note that controlling of advertised prices and of selling prices are two different things.

IANAL, but there seems to (or were) laws out there to prohibit (at least in some circumstances) setting a minimal price. See, for example, this 1993 proposed final judgment in a civil antitrust complaint under Section 4 of the Sherman Act, alleging that the manufacturer obtained agreements from retail dealers to maintain the minimum retail price as a condition of receiving and continuing to receive V2 skates from Canstar USA.

As for advertised prices, I do recall seeing ads that say "price too low to advertise" or similar, implying that such restrictions (a) existed and (b) were legal. But, of course, one shouldn't trust all ads.
posted by WestCoaster at 12:57 PM on November 18, 2005