Advisory opinion letter to Mr. Rossi

Dear Mr. Rossi:

Please excuse my delay in responding to your inquiry of May 20 1977, in the above referenced matter. A combination of conflicting business trips and vacation schedules has prevented me from confer. ring with the necessary Company personnel to obtain the answers tc your questions until now.

The following numbered paragraphs contain answers corresponding to the numbers of the questions posed in your May 20, 1977, letter (1) If Herman Miller were the named brand, it would be impossible for the dealer to bid a competing line along with Herman Miller ir many cases because the manufacturer of the competing line would not give special pricing to the dealer if that manufacturer were aware that the dealer would be bidding Herman Miller. Moreover, even if a dealer had the ability to bid two competing lines, and an institution specifies “Brand X or equivalent,” it would be a rare case when any particular dealer would bid more than one brand. Usually these specifications are the result of considerable pre-bid sales activity by dealers (sometimes in active participation with the manufacturer) and the dealers generally identify themselves with a specific brand during this pre-bid activity. Even if : dealer was not involved in the pre-bid sales effort with respect to a particular customer, that dealer is unlikely to bid the specified brand because he knows that some other dealer has established a preference with the customer on that product line through the pre-bid sales effort.

At this point two observations are in order. First, virtually every bid situation will attract a bid from each manufacturer either through a 1 ’ © Pal 1 © ’

ADVISORY OPINIONS 1169 nanufacturer. Consequently, a refusal by any manufacturer to quote a ipecial price to any particular dealer will not prevent the customer ‘rom obtaining a competitive price on that product line. Second, it should be noted that all dealers are not dual dealers on competitive yroducts, and in many cases a single-line dealer or dealers will be sidding against one or more dual-line dealers. This fact causes the following problem for the Company. Assume that Dealer A is a dual Jealer for Brand X and Herman Miller, and that Dealer A has succeeded in convincing an institutional purchaser to specify “Brand X or equivalent” in its bid invitation. Dealer B is a Herman Miller dealer and a single-line dealer. If Herman Miller decides to have its product bid under these circumstances, it is faced with the prospect of either: (a) extending special pricing to Dealer B to enable the dealer to bid, in which case, under its present policy, the Company would also extend the special pricing to Dealer A (the dual dealer) which has already identified itself with a competitive product (Brand X) on that bid; or (b) extending no special pricing to any dealer and bidding the project direct to the customer. This is obviously a difficult position for the Company because disclosing its bid price to Dealer A is in effect disclosure to its competition, while bidding direct jeopardizes its relations with Dealer B.

(2) The answer to this question is substantially the same as the answer to the preceding question. Whether the purchaser’s request for bids identifies the product by name or by description has no material

affect on the responses of the bidders.
(3) Yes.
(4) Yes.

(5) Undoubtedly there have been occasions when a dealer has mixed product lines in a bid to a nonproprietary specification, but those occasions are rare. Generally, the dealer will bid one manufacturer’s line rather than mix products in the bid.

(6) In the case posed under question (4), the dealer would not be precluded from obtaining special pricing under the proposed plan. However, if it is assumed that the case posed under question (5) would occur, then in that case the dealer would be precluded from obtaining the special pricing.

We trust that the foregoing is responsive to your inquiry. However, should you require additional information please feel free to contact us either by letter or collect telephone call at your convenience. In closing, we would like to point out that while all competitors in the office furniture industry vigorously extol the virtues of their respective product lines as opposed to those of other manufacturers, these products are for the most part functionally equivalent in the