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Choosing Buying Group Lawyers and Law Firms for Your Group Purchasing Organization

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Buying Group Lawyers – Choosing the Best Buying Group Lawyer for Your GPO (Group Purchasing Organization) is Critical to Managing Risk Effectively

You are assessing lawyers to represent your buying group or GPO and you don’t know where to start, or finish for that matter, and although there may be many lawyers generally available, you are probably finding very few lawyers that specialize in legal representation and advice specifically for Buying Groups and GPO’s – That simply won’t do.

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Assessing buying group lawyers for your GPO

You are assessing buying group lawyers for your GPO, also known as a Group Purchasing Organization, and you are struggling to set the criteria for the selection of a law firm or lawyer to assist in the organization and operation of the buying group or GPO, but you realize rightfully so, that this is a critical decision so it can’t be taken lightly.  While there are hundreds and even thousands of highly qualified business lawyers available in most states, very few of them have experience in all the areas of law that a buying group or GPO is not only likely to encounter, but where the nuances of a buying group or GPO impacts the application of the law and the many instruments required for risk mitigation. 

Simply put, there are very few experienced buying group lawyers or GPO lawyers in existence and sacrificing this experience when choosing your buying group lawyer, GPO lawyer or buying group law firm can prove to be catastrophic when you can least afford it. This isn’t hard to understand when you merely look at how few buying groups or GPO’s there are in existence in the United States comparatively speaking when looking at registered businesses overall. The reason most lawyers don’t have the experience required to offer professional legal advice and representation to buying groups and GPO’s is that there aren’t enough organizations to provide the necessary experience the law firm or lawyer requires to do so professionally. This experience is reserved for the few who specialize in helping buying groups and GPOs navigate the complex field of law related to their organizational requirements. Let’s investigate the areas of law any buying group or GPO lawyer needs to have to offer professional advice to your buying group or group purchasing organization (GPO).

Buying Group Lawyers, GPO Lawyers and Their Law Firms – The Necessary Experience any Lawyer or Law Firm Representing a GPO or Buying Group Needs to Offer Professional Legal Advice and Representation

When it comes to buying group lawyers for your buying group or GPO you need to assess their experience in many areas including distribution law, antitrust law, franchise law, product liability law, intellectual property law, information technology law, employment law, securities law, tax law, commercial and bankruptcy law as well as general contract law, as these areas of law represents the majority of advice and representation you will be seeking when you retain legal representation from a buying group lawyer.  Each of these areas of law impacts buying groups in specific ways that even lawyers with deep expertise in any one of them might not have dealt with in their practice.  On this point there is no compromise, you need the complete package of experience, not just a sampling. When it comes to buying groups, GPOs, and the law you can’t have gaps, you need to know your interests are protected, top to bottom, and that requires an experienced buying group or GPO lawyer.

Examples taken from each of these areas of law will be helpful to illustrate the complexities buying groups and GPO’s present. 

Buying Group Lawyers, GPO Lawyers, Their Law Firms, and Distribution Law

Because many buying groups and GPOs are involved in the distribution of products you need to ensure any buying group lawyer or law firm you consider has experience in Distribution Law. 

Complicating matters further, and in most cases, the group is not directly in the chain of title of the product.  The contracts with the approved vendors of the buying group need to be carefully crafted to avoid having the group become unintentionally liable for the purchases of its members, yet to have the vendor be responsible for indemnifying the group against third party claims and other damages involving the sale of its products.  Several other fine points require different treatment of the group legally speaking, from that of the typical distributor customer of a vendor, must also be considered.

Buying Group Lawyers, GPO Lawyers, Their Law Firms, and Antitrust Law

Choosing the right lawyer for your buying group among buying group lawyers is critical in mitigating risk from antitrust scrutiny.  Section 1 of the Sherman Act pertains to conspiracies to restrain trade.  A conspiracy requires the involvement of two or more actors.  In many instances, a buying group will not be considered as a single actor, but rather a group of actors consisting of two or more of its members.  This is especially true if the group is owned by and governed by its members.  Ironically, however, the more integrated a group is and the more engaged it is in taking risks and making profit, the more likely it will be viewed as a single actor.  Areas of concern in the antitrust field for buying groups include price fixing, territory, customer or product allocations, boycotts, and price discrimination.  The complexion, structure of ownership and method of operations of each buying group or GPO, brings its own unique set of issues to the realm of antitrust law thus requiring a buying group lawyer that has experience in, and an understanding of, the finer nuances of your buying group and it’s processes. That requires deep buying group representation experience, experience Ray Law Firm has, and can proudly bring to your organization.

Buying Group Lawyers, GPO Lawyers, Their Law Firms and Franchise Law

When it comes to choosing your buying group or GPO lawyer or law firm you need to make sure that any potential candidate, or firm, has not only distribution law and antitrust law experience, you need to make sure they are well versed in franchise law.

To come within the definition of a franchise, these three elements must exist:  (1) a fee is charged to the participants; (2) a trademark is licensed to the participants; and (3) significant marketing assistance or control is provided to and/or exercised over the participants.  Many buying groups who provide marketing programs can unwittingly fall into the trap of being classified as a franchise.  In some states, that can open the group up to significant penalties and make it much more difficult to terminate members.  There are several exclusions and exemptions that apply to the definition of a franchise that can be beneficial to a group seeking to avoid this tangled web of regulations.  To be effective, the buying group’s legal counsel needs to be aware of these franchise issues.

Buying Group Lawyers, GPO Lawyers, Their Law Firms, and Product Liability Law

When it comes to buying group or GPO lawyers, and their law firms one of the most important areas of law they need experience in, is product liability law.  If a defective product of a group approved vendor could inflict death, personal injury, or property damage, it is possible that the group could be named as a defendant in a product liability lawsuit.   There are several steps the group can take in advance to limit its exposure to product liability.  Appropriate indemnity provisions should be included in the contracts of the vendors and the members, along with provisions requiring sufficient insurance coverage and the furnishing of insurance certificates.  Due to the uniqueness of the group dynamics, the indemnity provisions typically found in supply contracts will need to be modified by the buying group lawyer or law firm to fit the circumstances of the group. Therefor in addition to the above-mentioned areas of law any lawyer you are considering to represent your buying group or GPO has, you must ensure the chosen lawyer has experience in product liability as it pertains specifically to buying groups and GPOs.

Buying Group Lawyers, GPO Lawyers, Their Law Firms, and Information Technology Law

Choosing among buying group lawyers for your organization means closing the legal gaps, and in no other area of law do we see an exponentially growing need for not only buying group or GPO lawyers with experience in information technology law, but all lawyers. From IT related service platforms to the use of Generative AI that might bind or place risk on the group itself, you need representation with experience to ensure risk mitigation.

An increasingly growing number of buying groups are discovering the economies of presenting IT solutions for their membership to share.  Examples of such IT programs include a database of product images and descriptions that members can draw from in compiling product catalogs, a common online product ordering system, and a data warehouse that tracks all the purchases and sales of each member.  The contracts with the third parties who provide such IT solutions are usually written on two levels.  One is with the group itself and then there is a separate contract for the individual members to sign in order to avail themselves of the program (sometimes referred to as an End User Agreement).  On occasion, an IT vendor might attempt to bundle these contract considerations into one agreement with the group, thinking that the group has the power to bind its individual members contractually.  Such is seldom the case.  Having a working knowledge of information technology law is important for buying group counsel as it negotiates through the various provisions in a contract that do not pertain to a group or are adverse to its best interests.

Buying Group Lawyers, GPO Lawyers, Their Law Firms, and Intellectual Property Law

Having a buying group lawyer or law firm with experience in intellectual property law is critical when it comes to private labelling and exclusive branding opportunities. One of the big advantages that come with the purchasing power of a buying group is having the opportunity to develop a private label or exclusive brand product program for the members. Not only does the exclusive brand program enable group members to better manage and control warranty claims on the products sold by them, but often manufacturers will give a greater discount on goods that do not reflect the manufacturer’s brand.  Also, if a private label program facilitates changing approved vendors for a given line of goods that are sold under the group’s brand, such change is a seamless transition as far as the end users are concerned.  They have no idea it even happened. 

Additionally, many buying groups have marketing programs for their members.  By identifying their businesses with a common trademark, the members can appear to be part of a national or superregional chain of stores.  In both examples, registering the trademarks or service marks involved is essential.  Keeping control of the trademarks through licensing agreements is equally important.  A buying group needs legal counsel experienced in intellectual property law to guide and help manage it through these various legal nuances.  A typical trademark lawyer who does not understand how buying groups function might overlook and miss some important pieces of the overall puzzle.

Buying Group Lawyers, GPO Lawyers, Their Law Firms, and Employment Law

As groups mature and grow, so does the number of their staff, and the need for the professional services of an experienced buying group lawyer.  Personnel changes, particularly involuntary termination of employees, requires guidance of experienced counsel.  Buying groups should have a well thought out and well documented program to follow in each step of the employment process.  Counsel can assist the group in preparing or reviewing their forms for employment applications, employment agreements (which typically contain confidentiality and non-disclosure provisions), employee handbook, employment policies, and separation agreements.  While it is true that for the most part there is little difference in the types of issues that arise in buying groups as opposed to other companies, nevertheless, it is helpful for the group to have legal counsel with a good working knowledge of employment law, rather than having to turn to other counsel adding complexity to a process that can be easily handled by competent buying group lawyers.

Buying Group Lawyers, GPO Lawyers, Their Law Firms, and Securities Law

For groups which are owned by their members, having competent buying group lawyers who understand federal and state securities laws as they apply to buying groups and GPO’s, and specifically pertaining to how and when members acquire ownership in the group, is essential.  The higher the cost of the buy-in, the more important compliance with those laws is.   In most cases, the new member will qualify as an “accredited investor” under SEC Rule 501 of Regulation D.3.  Such status greatly reduces the amount of paperwork required to comply with the securities laws.  It is important for legal counsel to make sure that accredited investor status of each new owner is well documented and that such shareholder provides an investment letter to further protect the group.

Buying Group Lawyers, GPO Lawyers, Their Law Firms, and Tax Law

When the group is first established, careful consideration should be given as to whether it wishes to be a tax-paying entity, such as a C corporation, or whether it wishes to be a tax pass-through entity, such as a limited liability company.  Yet another choice is to be a T corporation, which is especially designed for co-operatives.  Groups are seldom able to qualify as S Corporations because many of their shareholders are corporations.  There are highly complex and sophisticated (many have said, non-sensical) tax laws to be taken into account in making such decisions.  Unless, the group’s counsel is a high-level tax expert, he or she would do well to consult with one in order to provide the group the advice most advantageous for it.

Buying Group Lawyers, GPO Lawyers, Their Law Firms, and Commercial and Bankruptcy Law

Let’s face it, even the most careful screening of prospective members and vendors cannot prevent one or more from going insolvent or bankrupt and having a competent buying group lawyer or firm on retainer will prove invaluable during these trying times.  Regarding members, the best type of security is for the group to always owe the member more than the member owes the group.  If the group has a central billing program, i.e., an arrangement in which the supplier bills the group, the group bills and collects from its members and then pays the supplier, the possibility of the member owing the group more than the group owes it, becomes very real.  Any buying group lawyer you may be considering needs to have a good working knowledge of commercial law and  what is needed to secure and perfect the group’s rights in any additional collateral furnished by the member to protect the group, should the member be unable to pay its debt to the group.  If the member goes into bankruptcy, it is often difficult and expensive for the group to have the trustee to release the member’s ownership rights in the group.  Having the right security and the right leverage is critical at that point in time.  Another bankruptcy trap to navigate is when a supplier goes bankrupt.  The trustee will likely seek to recover rebates paid to the group during the 90-day “preference period” leading up to the filing date of the bankruptcy as preference payments.  Having knowledgeable buying group or GPO lawyers will enable the group to assert defenses available to such claims with result that they can be drastically reduced in settlement or even eliminated altogether.

Buying Group Lawyers, GPO Lawyers, Their Law Firms, and General Contract Law

With millions and possibly billions of dollars flowing through a buying group, it is important that the group’s contracts with its suppliers and members be tightly drawn and enforceable.  The ability to spot and address the nuances peculiar to buying group, marketing group and GPO contractual relationships comes with deep experience of buying group lawyers.  Such experience is gained over the years as new and unique situations are encountered and handled.  It is very common for a legal solution (or contractual provision) found to work well for one buying group to also be helpful for an unrelated buying group or GPO represented by the same lawyers and counsel. 

While many business lawyers are very well versed in one or more of the areas discussed above, very few have experience in all these areas of concentration.   It is true that many law firms have great expertise in all these areas, but most lack attorneys and lawyers who are well acquainted in all these areas insofar as they pertain to buying groups, so true buying group lawyers and attorneys. Accordingly, making the right choice in the selection of your buying group or GPO lawyer can benefit the group for years to come.

When it Comes to Legal Representation for Your Buying Group Count on the Buying Group and GPO Law Firm, and its Buying Group Lawyers Other Groups Have Counted on Since 1985

Ray Law Firm and its experienced buying group and GPO lawyers have served buying groups, marketing groups and GPOs in various locations throughout the United States as well as internationally since 1985.  We understand how each of these areas of the law impacts buying groups and GPOs specifically.  We are well equipped to guide founders, and board members in making the right choices in setting up their group and in dealing with the myriad of legal issues they are likely to encounter over the future years of operation. If you are looking for a buying group law firm with competent lawyers to provide effective legal counsel for your buying group or GPO, feel free to contact us at 423-693-0160 with any specific issues or questions you may have.