## Memorandum **To:** Chief Executive and General Counsel, Norvale Audio **From:** Counsel **Re:** Lawful unilateral minimum advertised price (“MAP”) policy under Aven competition rules ### 1. Bottom line Norvale should **not** adopt the Sales department’s program as proposed. The Sales features—signed “we agree to comply” language, negotiated exceptions, assurances that Norvale will “make everyone hold the line,” guarantees of enforcement against rivals, and retailer reporting—create strong evidence of a resale-price agreement and cartel facilitation. Norvale should instead **modify and adopt** the CEO’s unilateral design, using a public-ad-only MAP policy that: - regulates only **publicly advertised prices**, not confidential final sale prices; - is announced prospectively in writing; - does not require or accept retailer promises; - uses only **objective, independently administered exceptions**; - relies only on **independent public-data monitoring**; - does not solicit or use retailer complaints as a policing system; - does not discuss one retailer’s pricing or future pricing with another; - does not promise enforcement for any retailer’s benefit; - documents all enforcement as unilateral; and - is reviewed periodically under rule of reason. This design should keep the program on the **unilateral** side of the line under the supplied Aven rules and make it defensible under rule of reason. It does **not** eliminate risk. If personnel conduct, documentation, or market facts show that Norvale sought promises, negotiated price adherence, facilitated retailer coordination, or used the policy as a de facto resale-price restraint, liability risk returns. --- ## 2. Whether the proposed MAP design reaches advertising or resale price The Sales proposal is facially a **minimum advertised price** policy, not a resale-price-maintenance policy, because it prohibits advertising lower prices while leaving retailers free to set confidential checkout prices. Under the supplied rules, a MAP policy regulates public advertising, not the final confidential sale price, unless its language or enforcement reaches the transaction price. The proposed policy therefore **reaches advertising** if implemented as described: - a floor on public advertisements; - no restriction on confidential final sale prices; - enforcement only on public ads; - no investigation of private quotes or checkout prices. It would **cross into resale-price regulation** if Norvale does any of the following: 1. uses “minimum price” rather than “minimum advertised price” in enforcement or internal documents; 2. monitors confidential checkout prices, private quotes, customer-specific discounts, invoices, or cart prices that are not public; 3. threatens or penalizes retailers for lower prices that were not publicly advertised; 4. requires retailers to raise final sale prices, not merely advertised prices; 5. asks retailers to stop using “call for price” or other non-public pricing in a way that effectively controls transaction prices; 6. conditions supply, promotions, or support on retailer promises about final sale prices; 7. tells retailers what price they may charge customers after an individualized inquiry; or 8. uses the policy to coordinate final resale prices rather than public advertisements. The policy can remain an advertising-only MAP only if the line between public advertisement and confidential transaction price is clear and consistently respected. ### Practical distinction A public advertisement is a price communication directed to the general public or a broad audience of prospective purchasers without individualized negotiation. Examples: - product page price on a retailer website; - marketplace listing; - comparison-site price; - email or text campaign to a customer list; - social media ad; - flyer, catalog, or in-store sign; - publicly visible shopping-cart price; - publicly available coupon or code that reduces the displayed price. A confidential transaction price is not a public advertisement. Examples: - a price quoted to a specific customer after that customer inquires; - a personalized quote; - a private discount not publicly communicated; - a price revealed only in a private checkout or after individualized customer contact. If a retailer advertises no price, or uses “call for price,” Norvale should not investigate the subsequent private price. Attempting to police non-public quotes would likely transform the policy into a resale-price restraint. --- ## 3. How a unilateral policy differs from an agreement Under the supplied Aven rules, the distinction is not whether the policy has commercial force. A manufacturer may unilaterally announce resale conditions and independently decide whether to continue supplying a retailer that does not follow them. Unilateral conduct does not require retailer assent. The danger is that a policy that is structurally unilateral becomes an agreement in practice. ### Unilateral conduct Unilateral conduct is Norvale’s own decision about how it will deal. Examples of permissible unilateral language: - “Norvale will suspend promotional funds if a retailer’s public advertisement is below the MAP and is not corrected within the stated period.” - “Norvale may terminate supply based on independently observed public advertisements that violate the announced policy.” - “Retailers are free to set their final sale prices.” - “Norvale does not require retailer agreement to this policy.” These statements are acceptable if they are actually unilateral: Norvale decides its own future conduct based on objectively observable facts. ### Agreement or concerted action An agreement may arise if Norvale: - seeks or receives retailer promises; - negotiates price adherence; - invites collective enforcement; - gives assurances that competitors will comply; - uses coercion to obtain assent; - conditions benefits on retailer promises; - discusses one retailer’s pricing or future pricing with another; - asks retailers to report rivals as part of a policing system; - threatens to punish one retailer unless another raises price. The same economic result can be lawful if unilateral and unlawful if concerted. The policy text is only part of the issue. Day-to-day conduct matters. ### The key test Ask whether Norvale is: 1. **stating its own future business conduct** based on public facts, or 2. **inducing retailers to promise or coordinate** their pricing. The first is unilateral. The second is agreement risk. --- ## 4. Specific risks in the Sales proposal ### 4.1 Signed “we agree to comply” language Sales wants each retailer to sign: > “We agree to comply with Norvale’s pricing requirements.” This is high-risk. Under the supplied rules, a signed acknowledgment may confirm receipt only. Language promising compliance, accepting obligations, or requesting approval creates agreement evidence. That sentence is not receipt-only. It is an express retailer promise to comply. If Norvale requires it, the policy becomes far more like a resale-price agreement. **Required change:** - Do not require signatures. - If an acknowledgment is used, it must be optional and receipt-only. - Do not use words such as “agree,” “accept,” “obligation,” “require,” “approval,” or “consent.” - If a retailer voluntarily says “we will comply,” Norvale should not accept, rely on, or encourage that promise. - Do not condition supply, promotions, or support on a signature or promise. A safe acknowledgment is addressed in the draft policy below. --- ### 4.2 Negotiated exceptions by regional managers Sales wants regional managers to negotiate exceptions. This is high-risk. Negotiated exceptions are bilateral price accommodations. Even if the exception is small, the negotiation process can: - create agreement evidence; - reveal one retailer’s pricing position to Norvale and indirectly to others; - allow Norvale personnel to become price negotiators; - facilitate selective enforcement; - support an inference of concerted action. Under the supplied rules, policy exceptions must be objective and administered independently. Negotiated exceptions conditioned on retailer agreement may support concerted action. **Required change:** - No individual exceptions. - No regional-manager exceptions. - No “special case” exceptions. - Exceptions only from a published, objective list. - Exceptions administered by a centralized compliance function, not sales. - If a retailer requests an exception, the response is standard: objective categories only; no negotiation. Acceptable objective exceptions include: 1. discontinued products, as listed by Norvale; 2. manufacturer-authorized promotions announced in advance to all retailers with published dates, products, and advertised price floor or exact advertised price. Do not allow exceptions that depend on a retailer’s request, loyalty, competitive pressure, or promise to comply in the future. --- ### 4.3 “We will make everyone hold the line” Regional managers want to tell compliant dealers that Norvale will “make everyone hold the line.” This is high-risk. That statement is an assurance that competitors will comply. It invites collective enforcement. It also facilitates retailer coordination by signaling that Norvale is policing a group standard. Even if Norvale has no intent to create a cartel, the statement can be used as evidence that Norvale facilitated a resale-price understanding. **Required change:** Do not say: - “We will make everyone hold the line.” - “All retailers are going to comply.” - “We will enforce against all violators.” - “We are making sure nobody discounts.” - “If you comply, we will stop the others.” - “We will protect you if you hold your price.” - “We will enforce against [named rival].” - “We guarantee enforcement against every rival.” Permissible statements are narrow and unilateral: - “Norvale has a unilateral public advertised price policy.” - “The policy applies to public advertisements of covered products.” - “Norvale relies on independently obtained public data.” - “We cannot discuss or guarantee enforcement against any retailer.” - “We do not coordinate retailer prices or give assurances about other retailers.” The large dealer’s request—support only if Norvale guarantees enforcement against every rival—is a red flag. Norvale must reject the condition. Guaranteeing enforcement against rivals is an assurance that competitors will comply and may facilitate a retailer cartel. Norvale should not make special deals for large dealers. If a large dealer demands cartel-type assurances, Norvale’s response is no. Norvale may still unilaterally decide whether to supply that dealer under its normal business policies, but it may not accept a condition requiring price policing assurances. --- ### 4.4 Asking retailers to report competitors’ discounting Sales wants retailers to report competitors’ discounting. This is high-risk. Under the supplied rules, retailer complaints may be received, but the manufacturer must not solicit complaints as a policing system, disclose one retailer’s future pricing to another, or promise enforcement for a complainant’s benefit. Asking retailers to report rivals is worse than merely receiving complaints. It is solicitation of a retailer policing system. It also encourages exchange of competitively sensitive information among retailers. It can make Norvale appear to be facilitating a retailer cartel. **Required change:** - Do not ask retailers to report other retailers. - Do not ask for price lists, screenshots, invoices, cart prices, or competitor prices. - Do not offer incentives for reporting. - Do not use a retailer’s complaint as the enforcement trigger. - Do not tell a complainant that Norvale will investigate or take action for the complainant’s benefit. - Do not share one retailer’s pricing information with another. - If a retailer voluntarily sends a complaint, respond neutrally and do not rely on the complaint as the basis for enforcement. Norvale should use independent public-data monitoring. If independent monitoring independently discovers a public advertisement below MAP, Norvale may proceed under its unilateral policy. But it should not proceed because a retailer complained. A safe complaint response is: > “Norvale may receive notices from retailers, but Norvale does not solicit or use retailer reports as a price-policing system. Norvale cannot discuss another retailer’s pricing, future pricing, or a specific enforcement decision. Any Norvale decision will be based solely on independently obtained public data and the preannounced criteria in Norvale’s policy.” --- ## 5. Rule-of-reason risk using the supplied facts The policy will be judged under rule of reason. The relevant factors include market power, market coverage, barriers to entry, retailer or manufacturer cartels, price effects, service promotion, free riding, product launch needs, and less restrictive alternatives. ### 5.1 Market power Norvale has an 18% share. The next four manufacturers have shares of 16%, 14%, 11%, and 9%. The top five therefore have about 68% combined. This is not a dominant position. Norvale is a significant player, but it is not the clear leader. The next four manufacturers are close in size. That weakens the inference that Norvale can unilaterally force a substantial price increase or that its policy is likely to have coercive market-wide effects. This is a favorable fact for Norvale, but not decisive. Rule of reason still requires balancing. ### 5.2 Barriers to entry Entry has occurred twice in three years. That suggests the market is contestable and that entry barriers are not high. This further reduces the risk that a unilateral MAP policy will be used to entrench market power or prevent competition. If entry were slow or rare, the policy would look more suspicious. Here, the entry history helps Norvale. ### 5.3 Retailer structure Norvale sells through 120 retailers, and no retailer has more than 7% of national sales. This is a fragmented downstream market. No single retailer appears to have substantial market power. That reduces the likelihood that one retailer can be coerced into an agreement with significant market effect. However, 120 retailers is a broad network. A policy that applies to all of them could be viewed as broad in coverage. The risk is not that one retailer can dominate the market, but that many retailers could coordinate if facilitated. Norvale must therefore avoid anything that encourages retailers to monitor, pressure, or promise price behavior among themselves. The large dealer’s request for guaranteed enforcement against every rival is a warning sign of retailer-side coordination risk. Norvale must not respond in a way that facilitates it. ### 5.4 Service promotion and free riding Norvale funds in-store demonstrations, installer training, and a 60-day return program. Management believes some online sellers free ride on those services and then discount. This is a plausible procompetitive rationale. Premium speakers are a category where in-store experience, demonstration, and installer expertise can matter. If online sellers benefit from the customer education and service infrastructure but advertise lower prices, retailers that provide those services may be disadvantaged. This rationale should be documented accurately. It should not be a label. Norvale should be able to show, at least in general terms: - the services it funds; - the cost or investment involved; - examples or categories of free riding; - why low public advertisements undermine the willingness of service-intensive retailers to provide those services; - why the policy is intended to preserve service, not merely raise public prices. If the internal file says only “we need to stop discounting,” that will not be enough. If it says “we need to preserve demonstrations and installer training that customers value, and low public advertisements by non-service retailers undermine that service ecosystem,” that is stronger. ### 5.5 Price effects The policy restricts public advertising, not final confidential sale prices. That limits the direct price effect. Retailers can still give confidential discounts. However, public advertised prices may become less competitive. A MAP can reduce public price transparency and make advertised prices appear more uniform. Under rule of reason, that is a potential anticompetitive effect. The fact that internal analysis does not quantify a price increase is not fatal, but it is a weakness. Norvale should strengthen the record by: - capturing baseline public advertised prices for representative SKUs before launch; - tracking public advertised prices after launch; - tracking service metrics where possible, such as demonstration activity, installer training participation, or retailer service complaints; - reviewing whether public price changes are accompanied by service improvements; - revisiting the policy if public prices rise without service benefits. Norvale should not document the goal as “raise prices.” The documented goal should be preservation of service and prevention of free riding. ### 5.6 Less restrictive alternatives Norvale should consider less restrictive alternatives before and after adoption. Possible alternatives include: 1. **Service-conditioned promotional support** Tie demonstration and installer-training funding to actual service performance, authorized demonstrator status, or participation in training programs, rather than price advertising. 2. **Non-price advertising standards** Require accurate, non-misleading product claims or service disclosures without setting a price floor. 3. **Channel-specific support** Offer different support structures for brick-and-mortar service retailers and online-only sellers, based on objective service roles. 4. **Narrower product coverage** Apply the MAP only to products where service-intensive demonstration and installer support are material and free riding is documented. 5. **Shorter duration and periodic review** Use a one-year pilot with explicit review metrics. A MAP is less restrictive than full resale-price maintenance because confidential discounts remain possible. But it is still more restrictive than a pure service-based funding model. If Norvale can achieve the service goal without restricting public advertising, that may be preferable. If the specific concern is that low public advertisements undermine service-intensive retailers, a MAP may be a reasonable, less restrictive way to protect the service ecosystem without controlling final sale prices. ### 5.7 Cartel risk There is no stated evidence of a manufacturer cartel. Norvale should not contact competitors about MAP policy, price levels, or enforcement. On the retailer side, the market is fragmented, but the large dealer’s guarantee request shows that at least one retailer may be interested in cartel-like enforcement. Norvale must avoid facilitating that. The policy should therefore include explicit prohibitions on: - discussing one retailer’s pricing with another; - promising enforcement against a specific retailer; - inviting retailers to monitor or pressure each other; - issuing public compliance lists or “MAP-compliant dealer” badges that imply a retailer price understanding; - public statements that “all Norvale dealers will hold prices.” Parallel conduct by other manufacturers may be lawful if independent, but it can increase scrutiny. Norvale should keep its policy formation and enforcement independent. ### 5.8 Overall rule-of-reason assessment Using the supplied facts: - Norvale’s market power is moderate at most; - entry has occurred; - retailers are fragmented; - the service rationale is plausible; - the policy, if properly designed, restricts only public advertising; - final confidential sale prices remain free. These facts support a defensible rule-of-reason position. But the position is not automatic. If Norvale implements the policy with signed agreements, negotiated exceptions, assurances, retailer reporting, or confidential price monitoring, the rule-of-reason analysis will worsen significantly. **Risk rating:** - Sales proposal as submitted: **high risk**. - CEO’s unilateral design, properly modified and implemented: **low-to-moderate risk**, with residual uncertainty. --- ## 6. Objective exception and enforcement design ### 6.1 Objective exceptions Exceptions must be objective and administered independently. Acceptable exceptions: 1. **Discontinued products** Products that Norvale has formally discontinued, as listed on a Norvale Discontinued Products List. The list should be maintained by a centralized function and updated prospectively. 2. **Manufacturer-authorized promotions** Promotions announced in advance to all retailers with published: - products; - dates; - advertised price floor or exact advertised price; - open eligibility terms; - no retailer-specific negotiation. During an authorized promotion, the published promotion price floor controls. If a retailer advertises below the published promotion floor, that can be a violation. Do not allow: - retailer-specific exceptions; - regional exceptions; - “competitive pressure” exceptions; - exceptions conditioned on retailer promises; - exceptions negotiated by sales; - exceptions that require a retailer to request approval. If a retailer asks for an exception, the response should be: > “Norvale does not grant individual exceptions. Exceptions are limited to the objective categories in the policy: discontinued products and manufacturer-authorized promotions as published.” ### 6.2 Enforcement design Enforcement should be mechanical, public-data-based, and documented. Recommended enforcement matrix: 1. **Monitoring** Norvale uses independent public data only. 2. **Identify potential violation** A public advertisement for a covered product is below the applicable MAP. 3. **Verify independently** Norvale confirms the public advertisement through its own independent data capture. It does not rely on a retailer complaint as the basis for action. 4. **Written notice** Norvale sends the retailer written notice identifying the public advertisement and the applicable MAP. 5. **Cure period** The retailer has a fixed period, such as five business days, to correct or remove the advertisement. 6. **If corrected** No penalty for that advertisement. 7. **If not corrected** A violation occurs. 8. **Graduated unilateral consequences** Using a rolling 12-month count: - first violation: 30-day suspension of promotional funds; - second violation: 60-day supply suspension; - third violation: termination of supply on notice. 9. **Documentation** Each decision is documented as unilateral and based on preannounced criteria. 10. **No ad hoc settlements** Norvale should not negotiate waivers in exchange for promises. If the monitoring data is wrong, the notice can be withdrawn, but Norvale should not bargain. 11. **No conditional threats** Norvale must never threaten to punish Retailer A unless Retailer B raises or maintains price. 12. **No public enforcement lists** Norvale should not publish lists of penalized retailers or announce enforcement actions in a way that invites retailer coordination. ### 6.3 Termination documentation A termination notice should say, in substance: > “Norvale has independently determined, based on publicly available advertisements dated [dates], that [Retailer] had three uncorrected public advertised price violations within a rolling 12-month period. Pursuant to Norvale’s unilateral public advertised price policy, Norvale has decided to terminate supply effective [date]. This decision is a unilateral business decision based solely on preannounced criteria. No retailer agreement or promise is required or accepted.” Avoid language such as: - “you breached your pricing agreement”; - “you failed to honor your promise”; - “you violated Norvale’s requirement that you comply”; - “we are doing this because [other retailer] reported you”; - “we are enforcing against you because [other retailer] is complying.” --- ## 7. Internal training, complaint handling, monitoring, and documentation ### 7.1 Internal training All sales, regional, customer service, and commercial staff should be trained. The most likely failure mode is not the policy text but personnel conduct. Employees should be told: #### Permissible statements - “Norvale has a unilateral public advertised price policy.” - “It applies only to public advertisements.” - “Retailers remain free to set final sale prices.” - “Norvale does not require or accept retailer promises.” - “We cannot discuss other retailers’ pricing or specific enforcement decisions.” - “We do not use retailer reports as a price-policing system.” - “Exceptions are objective and published; I cannot negotiate an exception.” - “Norvale does not coordinate retailer prices.” #### Prohibited statements - “We will make everyone hold the line.” - “You have to sign this pricing agreement.” - “If you agree, we will keep your promotional funds.” - “We will guarantee enforcement against [rival].” - “Send us other retailers’ prices.” - “Report your competitors’ discounting.” - “We will cut off [Retailer A] if you raise your price.” - “All Norvale dealers are holding the line.” - “We will enforce against everyone who violates.” - “Please send us a price list.” - “We will protect you if you comply.” Training should include: - annual refresher; - written policy; - scripts; - employee attestation that they have read and understand the protocol; - escalation path to Legal/Compliance for any exception, complaint, or enforcement issue. Regional managers should not have authority to discuss policy exceptions or enforcement discretion. --- ### 7.2 Complaint handling Norvale may receive complaints, but it must not operate a complaint-driven policing system. Protocol: 1. Do not advertise a complaint channel as a way for retailers to police rivals. 2. If a retailer voluntarily submits a complaint, log the date and subject, but do not treat it as an enforcement trigger. 3. Do not ask the complainant for evidence, screenshots, invoices, price lists, or customer-specific pricing. 4. Do not confirm whether the named retailer is under review. 5. Do not tell the complainant that Norvale will take action. 6. Do not share the complainant’s information or the subject retailer’s pricing with anyone. 7. If independent monitoring independently identifies a violation, Norvale may proceed under the policy, but the decision should be documented as based on independent public data, not the complaint. Standard response: > “Thank you. Norvale does not solicit or use retailer reports as a price-policing system and cannot discuss another retailer’s pricing, future pricing, or a specific enforcement decision. If Norvale takes any action, it will be a unilateral business decision based solely on independently obtained public data and the preannounced criteria in Norvale’s policy.” --- ### 7.3 Monitoring Monitoring must be independent and public-only. Recommended design: - Use a third-party public-price monitoring service or an internal team independent of regional sales. - Capture only public advertisements: websites, apps, marketplaces, comparison sites, public social media posts, flyers, signs, public email campaigns, and publicly visible cart prices. - Do not collect: - private quotes; - customer-specific discounts; - invoices; - checkout records; - retailer margins; - confidential price lists; - prices disclosed only after individualized customer inquiry. - Retain evidence: - retailer name; - product SKU; - URL or advertisement source; - date and time captured; - advertised price; - applicable MAP; - screenshot or data capture. - Do not share monitoring results with retailers or complainants. - Do not use monitoring data to negotiate exceptions or penalties beyond the preannounced policy. - If data is wrong, correct the record and withdraw the notice if appropriate. The monitoring function should be separate from sales. Regional managers should not have access to enforcement data or the ability to direct monitoring targets. --- ### 7.4 Documentation Norvale should maintain a defensible file showing that the policy is unilateral and reasonably designed. The file should include: 1. **Business justification memorandum** - market shares; - entry history; - retailer structure; - service programs funded by Norvale; - evidence or analysis of free riding; - why public advertisements, not final sale prices, are the concern; - less restrictive alternatives considered; - rule-of-reason factors. 2. **Policy approval records** - approval by CEO/General Counsel or equivalent; - antitrust counsel review; - distribution list. 3. **Policy text** - final retailer-facing policy; - effective date; - prospective application. 4. **MAP and list-price records** - current list prices; - MAP formula; - list-price changes and effective dates. 5. **Covered product list** - which products are covered; - why covered; - updates. 6. **Exception lists** - discontinued products; - manufacturer-authorized promotions; - promotion terms; - dates; - published price floors. 7. **Monitoring logs** - independent data captures; - dates; - evidence. 8. **Notice and cure records** - notice sent; - cure period; - retailer correction; - no-penalty determination if corrected. 9. **Penalty and termination decisions** - data relied on; - violation count; - unilateral rationale; - approval by compliance function, not sales. 10. **Complaint log** - date; - subject; - standard response; - confirmation that no action was taken for the complainant’s benefit; - confirmation that no retailer pricing information was shared. 11. **Training records** - materials; - attendance; - attestations. 12. **Periodic review memoranda** - public price trends; - service metrics; - complaints; - enforcement actions; - market changes; - whether the policy should continue, modify, or stop. Documentation should avoid labels that misstate the policy. Internal memos should not say, “we will control resale prices” or “we will stop retailers from discounting.” They should say, “Norvale is adopting a unilateral public advertised price policy to preserve service-intensive retail support.” Labels do not save a policy that is implemented as an agreement. --- ## 8. Whether Norvale should adopt, modify, or abandon the policy Norvale should: 1. **Abandon the Sales proposal as submitted.** The signed agreement language, negotiated exceptions, assurances, guarantees, and retailer reporting create serious agreement and cartel risk. 2. **Adopt the CEO’s unilateral design, modified.** The CEO’s approach is the correct foundation: written, prospective, receipt-only, independent public monitoring, no retailer promises, no discussion of rivals’ future prices, unilateral enforcement. 3. **Modify the design to reduce rule-of-reason and agreement risk.** Add: - no mandatory signature; - optional receipt-only acknowledgment; - clear public-ad definition; - explicit statement that final sale prices are free; - objective exception administration; - cure period; - graduated penalties; - central compliance ownership; - complaint protocol; - training; - documentation; - annual review. 4. **Abandon the policy later if facts change.** Norvale should suspend or modify the policy if: - Norvale gains substantial market power; - entry slows; - retailer concentration increases; - evidence emerges of retailer or manufacturer coordination; - public prices rise without service improvement; - internal personnel cannot follow the unilateral protocol; - the service rationale weakens; - a less restrictive alternative becomes clearly superior. --- ## 9. Draft retailer-facing policy language The following is a draft policy. It is designed to keep the program unilateral under the supplied Aven rules. It does not claim that risk is zero. --- ### Norvale Audio Unilateral Public Advertised Price Policy **Effective Date:** [date] #### 1. Purpose and unilateral character This policy reflects a unilateral business decision by Norvale Audio to support the in-store demonstrations, installer training, and 60-day return services associated with its premium speakers. It is intended to address free riding through publicly advertised discounts. This policy is not an agreement with retailers. Norvale does not request or accept retailer promises about prices, and it does not require retailer assent to this policy. #### 2. Scope This policy applies only to: - Covered Norvale Products, as listed on Norvale’s Covered Products page; and - Public Advertised Prices, as defined below. This policy does not limit a retailer’s final sale, transaction, checkout, quote, or confidential price to any customer. Retailers remain free to set their final sale prices. This policy applies prospectively from the Effective Date. Norvale will not impose penalties for public advertisements that ended before the Effective Date. #### 3. Definition of Public Advertised Price A **Public Advertised Price** is a price for a Covered Product that is communicated to the general public or to a broad audience of prospective purchasers without individualized customer negotiation. Examples include prices displayed on a website, app, marketplace, comparison site, social media post, flyer, catalog, sign, email or text campaign to a customer list, or similar public advertisement. A Public Advertised Price includes the price displayed after applying any coupon, code, or discount that is part of the public advertisement or otherwise publicly available. A price disclosed only to a specific customer after individualized inquiry, or as a personalized non-public quote, is not a Public Advertised Price. #### 4. Minimum Advertised Price For Covered Products, the minimum advertised price, or MAP, is 92% of Norvale’s current published list price for that product, or the price published by Norvale as the applicable list price. Norvale may update list prices only prospectively and through its normal business process. #### 5. Objective exceptions The MAP does not apply to: 1. products on the Norvale Discontinued Products List; and 2. Norvale-authorized promotions that have been announced in advance to all retailers with published dates, products, and an advertised price floor or exact advertised price. During a Norvale-authorized promotion, the published promotion price floor controls. Norvale does not grant individual, regional, or negotiated exceptions. #### 6. Monitoring Norvale will rely only on independently obtained public data. Norvale does not: - solicit or use retailer reports as a price-policing system; - request price lists, invoices, checkout records, or customer-specific pricing; - disclose one retailer’s pricing or future conduct to another retailer; - discuss another retailer’s pricing or specific enforcement decision with a third retailer; or - promise enforcement for any retailer’s benefit. #### 7. Notice, cure, and unilateral consequences A violation occurs only if a Public Advertised Price for a Covered Product is below the applicable MAP and is not corrected within five business days after written notice from Norvale identifying the public advertisement. If the advertisement is corrected within the cure period, no penalty results for that advertisement. If the advertisement is not corrected: 1. first violation in a rolling 12-month period: 30-day suspension of Norvale promotional funds; 2. second violation in the rolling 12-month period: 60-day suspension of supply; 3. third violation in the rolling 12-month period: termination of supply on 30 days’ notice. Each consequence is a unilateral business decision by Norvale, not enforcement of a retailer obligation. Norvale may unilaterally decide to resume supply or promotional funds; no retailer promise is required. #### 8. No coordination or assurances Norvale does not: - coordinate retailer prices; - give assurances that other retailers will or will not advertise particular prices; - discuss other retailers’ prices or future pricing; - threaten to punish one retailer unless another retailer raises or maintains a price; - invite retailers to monitor or pressure other retailers; or - issue public statements that retailers collectively “hold the line.” #### 9. Acknowledgment No signature is required, and no adverse consequence follows from declining to sign. If a retailer wishes to acknowledge receipt, the acknowledgment may state only: > “I acknowledge receipt of Norvale’s unilateral public advertised price policy dated [date]. I do not agree to any pricing obligation, and Norvale does not request or require my assent.” #### 10. Review Norvale will review this policy at least annually or if market conditions, product lines, service programs, or competitive conditions change. --- ## 10. Implementation steps To keep the program unilateral, Norvale should implement the following steps. ### Step 1: Stop the Sales proposal immediately Issue an internal hold directing that no employee: - requests retailer signatures promising compliance; - negotiates exceptions; - guarantees enforcement against rivals; - tells retailers that Norvale will “make everyone hold the line”; - asks retailers to report competitors’ discounting; - shares one retailer’s pricing with another; - monitors confidential transaction prices; - conditions benefits on retailer promises. ### Step 2: Create a policy owner outside sales Assign ownership to General Counsel, Compliance, or an independent Pricing Policy Officer. Regional managers should not administer exceptions, enforcement, or policy interpretation. ### Step 3: Prepare the rule-of-reason justification file Before launch, prepare a memorandum documenting: - Norvale’s 18% share and competitors’ shares; - entry twice in three years; - 120 retailers and no retailer over 7%; - service programs funded by Norvale; - evidence or analysis of online free riding; - why public advertised prices, not final sale prices, are the concern; - less restrictive alternatives considered; - why the policy is prospective and limited in duration pending review. ### Step 4: Define covered products, list price, and MAP Publish: - the list of Covered Products; - the current list price for each covered product; - the MAP formula; - the effective date; - how list-price changes will be communicated. The covered-product list should be objective. It may be all premium speaker products or a narrower subset, depending on the free-riding evidence. A narrower product scope can reduce rule-of-reason risk. ### Step 5: Publish objective exception lists Maintain: - a Discontinued Products List; - a promotion calendar with published promotion terms. All exceptions must be available to all retailers and not subject to negotiation. ### Step 6: Announce the policy in writing Send the policy to all retailers in writing. Do not: - hold meetings to discuss compliance; - ask for promises; - request signed acknowledgments; - discuss other retailers’ behavior; - invite retailers to report competitors; - condition supply or promotions on agreement. If a retailer asks questions, use approved scripts and route legal issues to Compliance. ### Step 7: Make acknowledgment optional and receipt-only If any retailer wants to sign, use only the receipt-only language in the policy. Do not require signatures. Do not treat a signature as a promise. ### Step 8: Train all customer-facing staff Provide training and scripts covering: - the difference between public advertised price and final sale price; - no agreement language; - no negotiated exceptions; - no guarantees; - no retailer reporting; - no sharing of competitor pricing; - standard complaint responses; - escalation to Compliance. Require employee attestations. ### Step 9: Implement independent public monitoring Use a third-party monitor or an internal team independent of sales. The monitor should: - capture only public advertisements; - retain evidence; - not collect confidential pricing; - not receive instructions from regional managers; - not share results with retailers or complainants. ### Step 10: Stand up complaint handling Create a standard complaint response. Do not: - investigate for the complainant’s benefit; - confirm whether a named retailer is under review; - share one retailer’s pricing with another; - promise enforcement. ### Step 11: Use the enforcement matrix For each potential violation: 1. verify independent public evidence; 2. send written notice; 3. allow five business days to cure; 4. close without penalty if corrected; 5. apply graduated penalty only if not corrected; 6. document the decision as unilateral. No ad hoc waivers. No negotiated settlements. No conditional threats. ### Step 12: Document every decision Maintain a file for each enforcement action showing: - public evidence; - MAP; - notice; - cure period; - retailer response; - violation count; - unilateral rationale; - compliance approval. For terminations, use the unilateral termination language described above. ### Step 13: Conduct periodic review Review at six months and again at 12 months, or sooner if facts change. Review: - public advertised price trends; - service metrics; - enforcement actions; - complaints; - retailer concentration; - manufacturer competition; - entry; - whether the policy is still necessary and proportionate. If the policy is being used in a way that creates agreement risk, stop or modify it. ### Step 14: Do not coordinate with competitors Norvale should not contact other manufacturers about: - MAP levels; - enforcement; - exceptions; - list prices; - promotion terms; - retailer compliance. If another manufacturer approaches Norvale about a similar policy, route the contact to Legal and do not discuss substantive terms. --- ## 11. Residual risk The recommended policy is designed to remain unilateral under the supplied Aven rules. It does not eliminate risk. Risk remains because: - employee statements can create agreement evidence even if the written policy is clean; - retailers may coordinate among themselves and blame the manufacturer; - parallel policies by competitors may draw scrutiny; - public price effects may be challenged; - the service rationale may be disputed; - a court or regulator may examine the practical operation, not just the label; - any movement toward confidential price monitoring would likely convert the policy into resale-price regulation. The goal is not zero risk. The goal is a policy that is: - public-ad-only; - prospective; - unilateral in substance and documentation; - objective in exceptions; - independent in monitoring; - free of retailer promises, assurances, and negotiated exceptions; - supported by a credible service rationale; - reviewed over time. If Norvale follows those disciplines, the policy should be defensible under the supplied rule-of-reason framework. If Norvale allows Sales to negotiate exceptions, collect retailer reports, promise enforcement, or obtain signed compliance promises, the policy should be treated as high-risk and not implemented.