Rod Harmon Attorney at Law rodharmon@abusivechargebacks.com 425.402.7800

The Buyer's Hold, or What Happens When the Music Stops?

Department Stores demand markdown allowances from vendors. If you're a vendor and you want an order for next season, you'd better agree to an allowance for last season's goods that had to be marked down in order to clear the inventory.  Unless you have a hot item, you'd better be ready to guarantee the buyer's projected margins from last season if you want that buyer to order goods from you for next season.  The Department Store is doing nothing wrong here.  You don't have to agree to the markdown, but they don't have to buy from you next season either.  But what happens if you decide not to sell to that Department Store next season?  Or maybe they don't want to buy from you anymore.  Then the Department Store loses all of its leverage for negotiating a post-season markdown chargeback.  Why should you agree to a post-season markdown if you aren't selling any goods to the Department Store for next season?   Here enters the "buyer's hold."  The buyer unilaterally instructs the accounting department not to pay you what you are owed. Without the bargaining leverage of future orders, the Department Store resorts to withholding payment for delivered goods, and strangles your cash flow.  Having brought you to your knees,the buyer negotiates a markdown allowance from you  This is the extortion of a price modification in bad faith.  Under the law of the sale of goods, it is invalid because it is a violation of the buyer's duty of good faith.  When the orders stop, the vendor has no reason to agree to a post-season markdown, and the department store has no right to extort one.  The vendor can recover extorted markdowns in court.

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