Mega Goods Inc. is a major discount retailer operating throughout Canada. The Home Co-op is also a nationwide chain, but it is a cooperative buying group of smaller retailers that band together in order to achieve buying power. Both retailers buy large volumes of plastic food containers from the major manufacturer (PFC Inc.) in the market. The product line is an important customer draw and is often used in special promotions.
Mega Goods is eager to increase its market share, particularly with the entry of a multinational, U.S.-based discounter into the Canadian market. It decides to attempt to eliminate the direct competition from Home Co-op in smaller centres. Mega Goods approaches PFC and requests changed conditions of purchase. Specifically, it asks for a significant drop in price in return for a reduced payment period. This change will place it at a distinct advantage over Home Co-op, as Home Co-op cannot pay quickly because of its membership structure. Mega Goods intends to approach all other major suppliers if this proposal works.
PFC management is quite concerned, as Home Co-op is a long-standing customer. Would supplying on Mega Goods’ terms be legal? Is it a wise business practice?