Deconstructing Agent Agreements Reveals Opportunities and Pitfalls

With no end to the recession in sight, agents more than ever need to ensure their contracts with service providers and master agencies are leak-proof.

The Spring 2009 Channel Partners panel, “Deconstructing the Agent Agreement,” will help agents do just that. And the timing couldn’t be better because the coming year brings with it both dangers and prospects.

On Monday, moderator Rick Dellar of Intelisys Corp., will be joined by Mark Del Bianco, principal of the Law Office of Mark C. Del Bianco; Ben Bronston, partner at Nowalsky, Bronston & Gothard; Brian Daucher, partner at Sheppard, Mullin, Richter & Hampton LLP; and Neil Ende, managing partner at Technology Law Group LLC to discuss the best ways to navigate contracts in global financial uncertainty.

“The opportunities and the pitfalls come from the economic problems spreading across the globe,” said Del Bianco. “Many telcos — incumbent and competitors — are cutting marketing costs and staff, and turning to the agent channel because there are lower costs for the telco; they pay nothing until a contract is signed and revenue is coming in from the customer.”

On top of that, enterprises are cutting costs by using more services such as Web conferencing and software-as-a-service, and looking to agents to help them implement these platforms, Del Bianco said. All of that puts agents in a good position when it comes to bargaining power, which means they need to ensure their contracts continue to serve them well.

That’s the good news. The bad news is the economic implosion raises the stakes on agents’ existing business, said Del Bianco. A number of agreements let telcos terminate contracts for convenience, he said.

“Telcos seeking to cut their expenses take advantage of these clauses and in many cases can immediately cease commission payments,” Del Bianco added. “Newer agent agreements often state that only termination ‘for cause’ allows the telco to stop paying commissions. So, telcos are naturally starting to terminate agreements for cause when an agent is in technical breach of a minor condition or warranty in the agreement.”

The best defense, then, is a good offense.

“Agents need to take the process of negotiating their agent agreements very seriously because their commission streams are only as good as their agreements allow,” said Bronston.

Another business benefit, noted Daucher, is that agents can “protect the goodwill they have developed in their businesses” when they’re able to anticipate and manage potential conflicts.

“The disparity in negotiating position should be understood before conflicts develop,” he said.

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