1. Charge back fee clauses by large retailers negotiable?
Chargebacks (often referred to as "expense-offsets") are financial penalties for non-compliance with your customer's requirements. Retailers issue chargebacks because vendor noncompliance disrupts operations and creates an additional expense for the retailer. Therefore, retailers create "expense offset policies" that are intended to recover the additional cost incurred by the retailer due to vendor noncompliance.
Unfortunately chargebacks have become profit-centers for a lot of retailers. Chargeback fees vary greatly from customer to customer. Manufacturer’s claim their profits are being slashed unmercifully and unfairly due to retailers claiming non-compliance.
Some common challenges that organizations face with chargeback problems are:

Frequency of change: Vendor manuals and routing guides change regularly and companies have issues keeping up with the changes. Complexity of the problem: Sometimes hundreds of chargebacks are issued and some of them are too small to investigate and are unclear. Also, every retailer's chargeback deduction schedule is different. Internal Organizational Effort: Since so many departments are involved (Logistics, A/R, A/P, sales and etc) internal efforts to manage chargebacks are very challenging.

According to a guide from the Credit Research Fund (www.crfonline.org) suppliers should form a compliance team of their own. The groups job is to examine compliance manuals, determine which requirements can’t be met, then ask the retailers for a waiver or compromise or modified agreements in writing and include them in vendor agreements-- so in essence yes chargeback fees can be negotiable.

2. Doctrine of Unconscionability

Unconscionability is decided on a case-by-case basis, with consideration of the following factors:

The oppressiveness of the contract upon the disadvantaged party Unfair surprise to the disadvantaged party Allocation of risk to the disadvantaged party due to superior bargaining power on the part of the stronger party Gross disparity in consideration Evidence that the stronger party knowingly took advantage of the weaker party. The presence of high pressure sales tactics or misrepresentation

In this instance I believe the doctrine of unconsionability can be applied as the chargebacks are totally one-sided. Given the nature that there is no standard for chargebacks and that they can vary depending on the retailer - there is evidence that vendors are being taken advantage of by retailers - with the threat of noncompliance resulting in approximately over 10% loss in profits.

3. Is it ethical for retailers to impose a “take it or leave” attitude on small suppliers?

The mere fact that the clause implies “take or leave” demonstrates the one-sidedness of the contract (unconscionability) and therefore it is not ethical. This type of contract often results in monopolies in which “mom and pop” suppliers go out of business because they cannot comply with the ever changing demands of multiple retailers. The courts should enforce some type of standardization with regards to chargebacks so that the playing field can be leveled-- resulting in equal bargaining power for the suppliers and variety in goods for the consumer.

www.crfonline.org; www.ediacademy.com