One way to stop discounting is to put in place channel health programmes with black box rebates.  This is a rebate, the value of which the partner can't calculate in advance.  The theory is that if the partner can't forecast it, then he can't discount down to that level.  So a rebate might be based on position in an international league table or some other measure.

MH: Does that work?

CP: Yes, for a while, although the biggest and most knowledgeable resellers generally work out the mechanics after a while, and then you have to move to some other measure.

MH: Sometimes everything just gets very emotional doesn't it? 

CP: Yes. You get to a situation where the distributors are convinced they are losing money on every transaction they make and refuse to sell the product.

MH: What steps do you take then?

CP: Well there is a normally a huge cloud of emotion and misinformation floating around and cries of "over distribution." At that point, it is often useful to call in a third party to find out precisely what is going on.  Beware the intermediaries' favourite song: "Please protect me, oh my supplier, from this nasty, nasty market!"  But often you find that suppliers are partly to blame.

"Beware the intermediaries' favourite song: "Please protect me, oh my supplier, from this nasty, nasty market!"

MH: How so?

CP: There is no point in complaining about low prices if you are trying to stuff your distributors with product at the end of every quarter. Unless you are consistent you can't expect consistent behaviour from your channel partners.

MH: What of illegal methods?

CP: What?  Like not delivering to people who annoy you?  Or refusing them marketing development funds?  Or partners' orders getting "lost"?  Suppliers do that all the time. Such measures look cheap, until the EU fines you.  Then they prove to be very expensive.  And, even if you are never caught, you are hardly promoting good relations between you and the other party.  These techniques are hardly going to enhance the experience enjoyed by the final customer and that, ultimately, is what counts, isn't it?  

MH:  So don't do them?

CP: Hmm. I would say legally reward those who behave well and do what you want, rather than go after those you don't like in an aggressive and illegal way.

Finally, the supplier always has the alternative of going to another model, such as selling direct to certain large accounts or making partners into agents rewarded with a fee rather than commission. But that is another story entirely.