Opinion ID: 3012576
Heading Depth: 3
Heading Rank: 1

Heading: Rebate program

Text: This case centers on 3M's programs that, beginning in 1993, involved offers by 3M of package orbundled discounts for various items ranging from home care and leisure products to audio/visual and stationery products. Customers could earn rebates by purchasing, in addition to transparent tape, a variety of products within 3M's stationery division, such as Post-It Notes and packaging products. These programs created incentives for retailers to purchase more 3M products and enabled customers to have single invoices, single shipments and uniform pricing programs for various products in its consumer products division. The size of the rebate, however, was linked to the number of product lines in which the customers met the targets, an aggregate number that determined the rebate percentage the customer was to receive on all of its 3M purchases across all product lines. Therefore, if customers failed to meet growth targets in multiple categories, they received no rebate, and if they failed to meet the target in one product line, 3M reduced their rebates substantially. These requirements are at the crux of the controversy here, as LePage's claims that customers could not meet these growth targets without eliminating LePage's as a supplier. In practice, 3M's rebate program evolved so that it offered three different types of rebates: Executive Growth Fund, _________________________________________________________________ 3. It appears that at least at the times material to this action, there were no other domestic manufacturers of transparent tape. There were, however, foreign manufacturers. 5 Partnership Growth Fund and Brand Mix Rebates. 3M developed a test program called Executive Growth Fund (EGF ) for a small number of retailers, 11 in 1993 and 15 in 1994. Under EGF, 3M negotiated volume and growth targets for each customer's purchases from the six 3M consumer product divisions involved in the EGF program. A customer meeting the target in three or more divisions earned a volume rebate of between 0.2-1.25% of total sales. Beginning in 1995, 3M undertook to end the EGF test program and institute a rebate program called Partnership Growth Fund (PGF ) for the same six 3M consumer products divisions. Under this program, 3M established uniform growth targets applicable to all participants. Customers who increased their purchases from at least two divisions by $1.00 and increased their total purchases by at least 12% over the previous year qualified for the rebate, which ranged from 0.5% to 2%, depending on the number of divisions (between two to five divisions) in which the customer increased its purchases and the total volume of purchases. Under both the EGF and PGF programs, customers could use their rebates as they saw fit. In 1996 and 1997, 3M offered price incentives called Brand Mix Rebates to two tape customers, Office Depot and Staples, to increase purchases of Scotch brand tapes. 3M imposed a minimum purchase level for tape set at the level of Office Depot's and Staples's purchases the previous year with growth factored in. To obtain a higher rebate, these two customers could increase their percentage of Scotch purchases relative to certain lower-priced orders.