Who Pays for Distributor Marketing: Co-Op Funds, MDF, and the Rules That Govern Them

Bottom line: In most medical device channels the manufacturer funds distributor marketing, through co-op accruals, market development funds, or both. That money is not a free marketing lever. Sections 2(d) and 2(e) of the Robinson-Patman Act, interpreted by the FTC in 16 CFR Part 240, treat promotional payments and services a seller gives a reseller as something that should be made available to all competing resellers on proportionally equal terms, with notice, and with reasonable checking that the activity actually happened. Most channel articles explain what a distributor program contains. This one is about who pays and what the payment has to look like.

This is general information, not legal advice, and Buzzbox Media is a marketing agency rather than a law firm. Robinson-Patman exposure is fact-specific, and the facts that matter are the ones inside your own contracts and claim files. Run any funding decision past your antitrust counsel before you act on it.

This guide is written for the marketing lead who has a distributor network and has just been asked to fund it. It assumes you already know what a channel program contains. If that is the open question, start with building the program itself and come back here when the budget question lands.

Who Actually Pays for Distributor Marketing

The manufacturer usually pays for the marketing that promotes its own products, and the distributor usually pays for the marketing that promotes its own business. That line is where most programs start, and it is also where most of them get blurry, because a distributor's catalog, trade show booth, and rep collateral promote both at once.

Three funding patterns cover nearly every medtech channel program:

• Manufacturer-funded. The manufacturer pays the full cost of an activity, either by producing the asset centrally and giving it to the distributor or by reimbursing the distributor's invoice in full.
• Shared-cost. The manufacturer reimburses an agreed share of an approved activity and the distributor carries the rest. This is the classic co-op structure and it is the one the FTC guides describe most directly.
• Distributor-funded. The distributor pays and the manufacturer contributes assets, staff, or product rather than money. Assets and staff are still something of value, which matters more than it sounds.

That last point is the one that surprises people. The two sections are written to cover both cash and kind. Section 2(d) covers payments to a customer for promotional services the customer performs, and section 2(e) covers services or facilities the seller furnishes to the customer. Section 240.7 lists demonstrators and demonstrations, displays, cabinets, and catalogues among the services and facilities the sections reach, so furnishing a booth, staffing a local event, or lending a field marketing person for a week points toward section 2(e) rather than around section 2(d).

We are not publishing accrual percentages on this page. Vendor blogs will tell you channel programs typically run at some percentage of purchases, and none of those figures trace to a named, dated, public source. Program terms in medical-surgical distribution are contract documents and they are not published. If someone quotes you a market-standard percentage, ask which document it came from.

Co-Op Funds Compared With MDF

The two terms get used interchangeably and they are not the same thing operationally, though they land in the same legal place.

Co-op funds are earned. The distributor accrues a balance tied to what it buys over a defined period, and draws that balance down by submitting approved activity for reimbursement. The accrual formula is written into the distributor agreement, the balance is visible to both parties, and unspent funds usually expire on a stated schedule.

Market development funds are allocated. The manufacturer decides that a launch, a territory, or a specific campaign gets a budget, and awards it outside any accrual formula. MDF is the discretionary instrument, and discretion is how one distributor ends up with materially better support than the distributor across town, without anyone ever deciding to favor it.

The labels carry no legal weight of their own. Part 240 never uses the term market development funds, and it mentions cooperative advertising only as an example of a promotional service the sections cover, not as a category with its own rules. What the guides ask is what the payment does. Under section 240.7 the question is whether the service promotes the customer's resale, so a discretionary launch fund paid to a reseller for promoting resale sits in the same analysis as an accrued co-op dollar. Renaming the program does not move it, and neither does routing it through an agency.

The Rule the Money Sits Under

The governing text is 16 CFR Part 240, the FTC's Guides for Advertising Allowances and Other Merchandising Payments and Services, known as the Fred Meyer Guides. They interpret sections 2(d) and 2(e) of the Robinson-Patman Act, codified at 15 U.S.C. 13(d) and 13(e). The current version was published in the Federal Register at 79 FR 58245 on September 29, 2014, with the text of the guides themselves beginning at 79 FR 58252. Every quotation on this page was checked against the eCFR text current to August 6, 2026.

The statute itself is short. Section 2(d) makes it unlawful for a person engaged in commerce to pay anything of value to or for the benefit of a customer as compensation for services or facilities furnished by or through that customer in connection with the processing, handling, sale, or offering for sale of the seller's products, "unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities." Section 2(e) covers the mirror case, where the seller furnishes the services rather than paying for them, and forbids discriminating in favor of one purchaser by furnishing services "upon terms not accorded to all purchasers on proportionally equal terms."

Two features of the guides matter before you read any further.

They are guides, not law. Section 240.1 says so in its own words: the guides "are what their name implies" (guidelines for compliance with the law), they "do not have the force of law," and they "do not confer any rights on any person and do not operate to bind the FTC or the public." What binds is the statute and the case law. The guides are the FTC's published account of how it reads them, which is why they are the most useful document in the file and still not the last word.

The name comes from a Supreme Court case. The guides are called the Fred Meyer Guides after FTC v. Fred Meyer, Inc., 390 U.S. 341, decided March 18, 1968. The Court held that retailers who buy through wholesalers and compete with a supplier's direct-buying retailer are within the protection of section 2(d), so promotional allowances given to the direct buyer should be made available to those competing retailers on proportionally equal terms. The Court also framed the reach of the section narrowly in the same breath, saying that on the facts of that case section 2(d) "reaches only discrimination between customers competing for resales at the same functional level." That indirect-customer holding is now written into the guides, and it is the part of this subject most likely to catch a manufacturer by surprise.

On enforcement: the FTC filed a Robinson-Patman complaint against Southern Glazer's Wine and Spirits on December 12, 2024, in the U.S. District Court for the Central District of California, alleging price discrimination under section 2(a) of the Act, 15 U.S.C. 13(a). That is section 2(a) and not the promotional-allowance sections, so it is not a Part 240 case. It is worth knowing anyway, because the statute had gone largely unenforced for a long stretch. Announcing the case, then-Chair Lina Khan said that "enforcers have ignored this mandate from Congress for decades." The vote to file was 3 to 2, with two Commissioners dissenting, so the appetite for this kind of case is itself contested. Everything here describes allegations rather than findings. Check the FTC's case page for where the matter actually stands rather than relying on any summary, including this one.

Does Any of This Reach Your Channel

Before anyone redesigns a program, work the threshold questions. Section 240.2 lists the conditions, and a channel that misses one of them is in a genuinely different conversation.

• Are you a seller of products? Section 240.3 defines a seller as any person who sells products for resale, with or without further processing, and a device manufacturer selling to a distributor for resale reads onto that definition directly. Note what the statute is written around: section 2(e) speaks of a commodity bought for resale and section 2(d) of products or commodities. A program funding a reseller's promotion of a service contract, a software subscription, or a training offering therefore raises a threshold question these guides do not answer, and it is one to put to counsel rather than assume in either direction.
• Is the customer buying for resale? Section 240.4 defines a customer as any person who buys for resale, directly from the seller or the seller's agent or broker, and also includes any buyer for resale who purchases from or through a wholesaler or other intermediate reseller. Read that agent-or-broker clause carefully: it describes who the buyer bought from, not a rule that an agent is itself a customer. This is the question that splits a medtech channel in half, because a commissioned sales agency that never takes title is not obviously buying for resale.
• Is the payment tied to resale rather than to the original sale? Section 240.2 draws the line at the resale, "not the initial sale between the seller and the customer." Section 240.7 Example 1 makes the distinction concrete with a supermarket: an allowance paid to stock a new product and find shelf space for it relates primarily to the initial sale and, the guides say, should be assessed under section 2(a), while a further allowance for prime endcap display relates to resale and should be assessed under section 2(d). Medtech raises the same question under other names. When money moves for stocking incentives, placement support, or in-service and display programs, the dividing line the guides use is whether the payment is primarily about the sale into the distributor or the resale out of it. Which side a specific arrangement lands on is fact-specific, and consignment sits apart from this example rather than inside it, because title may not pass to the distributor at all.
• Are the customers competing? Section 240.5 defines competing customers as businesses that compete in the resale of the seller's products of like grade and quality at the same functional level, whether or not they buy directly. Distributors in different territories that never compete for the same account are a different case from two distributors bidding the same health system.
• Is there interstate commerce? Section 240.6 sets a low bar. If any part of the business is not wholly within one state, the Act may reach it.

Two of those deserve more than a bullet.

The rep agency question. Medtech channels routinely mix stocking distributors with independent commissioned rep agencies who carry a bag, earn commission, and never buy anything. Under section 240.4 such an agency is not obviously a customer, and sections 2(d) and 2(e) reach payments made in connection with resale. So the promotional-allowance framework may not reach a purely commissioned agency at all.

Three cautions come with that, and they are why this belongs with counsel rather than in a program memo. What the contract calls the entity does not settle it, since the test in the guides is whether it buys for resale, and agencies that stock or take title to any product are a different case from those that never do. Being outside sections 2(d) and 2(e) is not the same as being outside every rule, and payments to anyone who orders or recommends a device in a clinical setting run into the second rulebook below. And a company running both models should not assume one answer covers both, which is a reason not to write a single program document that treats the two as interchangeable.

The indirect customer. Section 240.4 counts as a customer any buyer of your product for resale who purchases from or through a wholesaler or other intermediate reseller. Section 240.10(b) then puts the notice obligation on you: when some competing customers do not buy directly, the seller must take steps reasonably designed to give those indirect customers notice too. If you sell through a master distributor who resells to regional dealers, those dealers may be your customers for this purpose even though they never appear in your own sales records. The reach is not unlimited. The note to section 240.4 carves out situations such as a purchaser of distress merchandise, a retailer buying only from other retailers, and one making sporadic purchases, and it treats a seller having been put on notice that a retailer sells its product as part of the picture.

What Proportionally Equal Actually Requires

Proportionally equal does not mean identical. Section 240.9 opens by saying promotional services and allowances should be made available to all competing customers on proportionally equal terms, that no single way to do this is prescribed by law, and that "any method that treats competing customers on proportionally equal terms may be used." It then names the method it says is generally easiest: basing the payments made or the services furnished on the dollar volume or the quantity of the product purchased during a specified period. The guides add that other methods reaching proportionally equal allowances are acceptable, so this is a standard rather than a required formula.

The guides' own arithmetic is the clearest statement of the standard. Example 7 in section 240.9 describes a seller offering one dollar per unit purchased during a promotional period. One buyer purchases 100 units, another 50, another 25, and proportional equality is maintained by allowing them 100 dollars, 50 dollars, and 25 dollars respectively. Different amounts, one rate.

Four requirements sit underneath that, and each is somewhere different in the guides.

• One plan. Section 240.8 says a seller making payments or furnishing services under the Act should do so according to a plan, and that a seller with many competing customers or a complex program would be well advised to put the plan in writing.
• Functional availability. Section 240.10(a) says the seller should take reasonable steps to ensure services and facilities are useable in a practical sense by all competing customers, which may require offering alternative terms so smaller or differently shaped customers can participate. The guides' own example is a plan built around broadcast and newspaper advertising that online retailers cannot practically use, where the seller should offer proportionally equal alternatives such as online advertising.
• Notice. Section 240.10(b) puts an affirmative duty on the seller to take steps reasonably designed to notify competing customers that the offer exists, with enough detail and enough time for them to decide whether to participate. The guides list acceptable methods, including direct notice, materials in shipping containers, and announcements in widely distributed trade publications.
• Every service, not just the big one. Section 240.9(b) says that when a seller offers more than one type of service or payment, all of them should be offered on proportionally equal terms.

One recognized defense, one statement of when the obligation is met, and one argument the guides foreclose are worth knowing. Section 240.14 preserves a meeting-competition defense: a seller may defend by showing that particular payments were made or services furnished in good faith to meet equally high payments or equivalent services offered by a competing seller, and the seller must reasonably believe its offer is necessary to meet the competitor's. Section 240.10(a)(3) is not a defense so much as a description of compliance, saying that where proportionally equal alternatives are offered, at least one is useable in a practical sense by all competing customers, and the seller refrains from steps that prevent participation, a customer's own failure to participate does not place the seller in violation.

Section 240.15 forecloses the argument most finance teams reach for first: it is no defense to a charge of discrimination in the payment of an allowance or the furnishing of a service to show that the payment or service could be justified through savings in the cost of manufacture, sale, or delivery. Note how that differs from section 2(a), where the statute itself carries a proviso allowing differentials that make only due allowance for cost differences. That contrast is one reason the stocking versus display distinction in section 240.7 does real work, because the same dollars can land under provisions with different defenses available.

Which Funding Structures Hold Up

Every row below comes from the examples inside 16 CFR 240.9 and 240.10. The guides describe structures rather than blessing them, and the right-hand column is this page's read of where the pressure sits, not a finding by the FTC and not a clearance for any particular program.

The pattern across all six rows is the same: the disparity that matters is in the rate and the practical availability, not in the dollar total. A program where the biggest distributor draws the most money is unremarkable. A program where the biggest distributor draws money on better terms is the one to look at.

Notice, Claims, and Proof of Performance

The guides put an affirmative notice duty on the seller, and it is the requirement most channel programs quietly fail. Section 240.10(b) says the seller has an obligation to take steps reasonably designed to provide notice to competing customers of the availability of promotional services and allowances, including enough detail, in time for an informed decision. A program that exists in a portal only the top tier logs into, or that is communicated verbally by the regional manager who happens to like a given account, is not obviously meeting that.

Proof of performance is not a formality bolted onto the claim form. Section 240.12 states the expectation directly: the seller should take reasonable precautions to see that the services it is paying for are furnished and that it is not overpaying for them, the customer should spend the allowance solely for the purpose it was given, and improper payments should be discontinued when the seller knows or should know funds are being misused.

The overpayment half of that gets ignored. Section 240.13 describes how it goes wrong: a customer who has arranged a rebate or a reduced advertising rate should tell the seller that the claimed rate is subject to that reduction and refund any excess, and the guides treat an advertising medium billing at rates above what the customer actually paid as a problem in its own right. So a claim file that proves the ad ran but not what it truly cost only answers half the question section 240.12 asks.

Section 240.13 is also where the guides note that this is not a one-sided problem. Sections 2(d) and 2(e) apply to sellers rather than customers, but the guides state that where there is likely injury to competition the Commission may proceed under section 5 of the FTC Act against a customer that knows or should know it is receiving a discriminatory allowance not available to its competitors on proportionally equal terms, and that advertising media may face section 5 exposure for double or fictitious billing. A distributor pressing for terms outside the published plan is not necessarily standing on safe ground either.

Using a third party does not move the obligation. Section 240.11 lets a seller contract with wholesalers, distributors, or other third parties to perform its obligations, and then says plainly that the use of intermediaries does not relieve a seller of its responsibility to comply. On the guides' own terms, outsourcing a channel program to an agency or a fund-management platform leaves that responsibility with the seller.

The Second Rulebook in Healthcare

Part 240 is an antitrust and advertising framework. In medtech it is not the only one that touches money moving toward whoever buys or recommends your device, and it is usually not the more dangerous one.

The federal Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b), is a criminal statute that reaches knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or reward the purchase, lease, ordering, or recommending of any good or item for which payment may be made under a federal health care program. The intent element is doing real work there, and the statute also carries express exceptions, with further regulatory safe harbors at 42 CFR 1001.952. What it does not do is ask whether an allowance was proportionally equal. The two regimes ask different questions and neither answer cures the other.

Whether it reaches a given program depends on who is at the other end of the money. A stocking distributor with no billing relationship to Medicare is a different fact pattern from a durable medical equipment supplier that bills federal programs directly, and both are different from a physician-owned distributorship. On that last one the government has been unusually direct. The HHS Office of Inspector General's Special Fraud Alert on physician-owned entities, issued March 26, 2013, addresses entities that derive revenue from selling implantable medical devices ordered by their physician-owners for procedures those owners perform, and states that OIG believes such entities "are inherently suspect under the anti-kickback statute." The same alert says hospitals and ambulatory surgery centers that enter into arrangements with them may also be at risk, because the statute ascribes criminal liability to parties on both sides. It also says the lawfulness of any particular arrangement depends on the intent of the parties, so "inherently suspect" is a statement of how OIG approaches these entities rather than a declaration that a given one is unlawful.

The practical takeaway for a marketing lead is narrow. Before marketing funds are extended to any channel partner that also orders, bills for, or recommends the device in a clinical setting, that arrangement belongs in front of compliance and counsel rather than in the co-op claim process. Proportional equality is an antitrust answer to an antitrust question. It does not speak to the kickback analysis at all.

What Belongs in the Written Plan

Section 240.8 recommends a plan, in writing where the program is complex or the customer list is long. The guides do not specify a format. Most of the items below track obligations named across Part 240, gathered into the order a program document would state them. The last two are operational housekeeping rather than anything the guides require.

• Who is eligible, defined by function rather than by name, including indirect customers who buy through a master distributor or intermediate reseller.
• The basis for the allowance, expressed as a share of cost, an amount per unit, or a percentage of purchases over a stated period. The guides prescribe no particular formula, only that competing customers be treated on proportionally equal terms, which is easiest to show when one basis is applied consistently.
• The measurement period the accrual is calculated over, and what happens to an unused balance at the end of it.
• Eligible activities, with alternatives that a smaller or differently shaped distributor can practically use, per section 240.10(a).
• How customers are notified, by what method and how far ahead of the participation deadline, per section 240.10(b).
• What a claim has to include, covering both that the activity ran and what it actually cost net of any rebate or discount, per sections 240.12 and 240.13.
• Who approves claims and on what timeline, so approvals do not become an informal channel for discretion the written rate does not permit.
• Brand and claim controls, since anything the funds pay for still has to survive your own promotional review before it reaches a clinician.

That last item is where this guide meets the rest of your compliance stack. Co-op money frequently funds materials your regulatory team never sees, written by a distributor's marketing coordinator, carrying claims your cleared labeling does not support. The funding rules and the claim rules are separate systems and the money is what connects them. If your distributor materials do not run through a review chain, start with how promotional review actually runs, then look at what the distributor's reps need from you so the funded materials and the field training say the same thing.

Building or refreshing a distributor marketing program? Buzzbox Media works exclusively with medtech companies and healthcare associations, with over 15 years in the category, and builds distributor marketing programs alongside the review chains that govern what those programs produce. Book a 30-minute Healthcare Marketing Consultation. That call is a marketing conversation about how a program gets built, communicated, and measured. It is not legal advice, not a compliance or contract review, and not a substitute for your antitrust counsel, who should be the one reading your program terms.

Frequently Asked Questions

Who pays for distributor marketing in medical devices? In most channel programs the manufacturer funds the marketing and the distributor executes it, through either a co-op program or market development funds. Distributors also spend their own money, and many programs are shared-cost by design, with the manufacturer reimbursing an agreed share of an approved activity. There is no standard split. Where the split starts to carry legal weight is between distributors who compete with each other, because federal law treats promotional money offered to resellers as something that should be available to competing resellers on proportionally equal terms.

What is the difference between co-op funds and market development funds? Co-op funds are usually accrued: the distributor earns a balance tied to what it purchases, and draws that balance down by submitting approved marketing activity for reimbursement. Market development funds are usually discretionary: the manufacturer allocates an amount for a specific campaign, region, or launch, often outside any accrual formula. The labels are industry convention rather than legal categories. Federal law looks at what the payment actually does, not what the program is called, so a discretionary fund that pays a reseller for promoting resale sits under the same rules as an accrued one.

Do you have to offer every distributor the same marketing money? Not the same dollar amount. The standard in the FTC guides at 16 CFR 240.9 is proportionally equal terms, and the guides say this is most easily done by basing payments on the dollar volume or the quantity of product purchased during a specified period. A distributor that buys twice as much can earn twice the allowance under the same rate. What the guides say a seller should not do is run rates that step up with volume, because a graduated rate gives the larger buyer a richer return per dollar.

Can you give one distributor more co-op money than another? More in absolute dollars, yes, if it falls out of a single rate applied to purchases. More in rate or richness, that is where exposure starts. Sections 2(d) and 2(e) of the Robinson-Patman Act, 15 U.S.C. 13(d) and 13(e), reach payments and services a seller provides to customers in connection with the resale of its products, and require them to be available on proportionally equal terms to competing customers. Intent is not the test. A program that simply grew up around one distributor relationship can create the same disparity as one designed that way.

What counts as proof of performance on a co-op claim? The FTC guides do not prescribe a document set. Section 240.12 states the operative expectation: the seller should take reasonable precautions to see that the services it is paying for are actually furnished and that it is not overpaying for them, and should discontinue improper payments when it knows or should know that funds are being misused. In practice that means a claim carries evidence the activity ran and evidence of what it truly cost, such as a tear sheet, screenshot, campaign report, or third-party invoice showing the net rate rather than a rate card figure.

Does Robinson-Patman apply to independent sales rep agencies? It may not, and the distinction turns on whether the agency buys. The FTC guides define a customer at 16 CFR 240.4 as a person who buys for resale, directly from the seller or the seller's agent or broker, or through a wholesaler or other intermediate reseller, and sections 2(d) and 2(e) reach payments made in connection with resale. A commissioned rep agency that never takes title is not obviously buying for resale, so the promotional-allowance analysis may not reach it at all. That is a fact question for counsel rather than a labeling exercise, because what the parties call the entity matters less than whether it buys, and hybrid agencies that stock some product blur the line. Sitting outside these sections is also not the same as sitting outside every rule, since money paid to anyone who orders or recommends a device in a clinical setting raises separate healthcare fraud and abuse questions. A company running both stocking distributors and commissioned agencies should not assume one answer covers both.

Sources

Every legal statement on this page traces to one of these. All were retrieved and checked on August 9, 2026.

• 16 CFR Part 240, Guides for Advertising Allowances and Other Merchandising Payments and Services. Text current to August 6, 2026 via the eCFR: read Part 240 on the eCFR
• 79 FR 58245, the FTC final rule publishing the current guides, September 29, 2014. The rule document runs from page 58245, and the text of the guides begins at 58252, which is the source note the eCFR carries: read the 2014 final rule in the Federal Register
• 15 U.S.C. 13, Robinson-Patman Act, section 2 of the Clayton Act as amended, including subsections (a), (d), and (e): read 15 U.S.C. 13 on the U.S. Code site
• FTC v. Fred Meyer, Inc., 390 U.S. 341, decided March 18, 1968: read the opinion at Cornell LII
• FTC v. Southern Glazer's Wine and Spirits, LLC, complaint filed December 12, 2024 in the U.S. District Court for the Central District of California, alleging price discrimination under section 2(a). Allegations, not findings. FTC case page, check here for current status: open the FTC case page
• 42 U.S.C. 1320a-7b(b), the federal Anti-Kickback Statute: read 42 U.S.C. 1320a-7b on the U.S. Code site
• HHS Office of Inspector General, Special Fraud Alert: Physician-Owned Entities, March 26, 2013: open the OIG alert PDF

No accrual rates, program percentages, or market-standard figures appear on this page. Medical-surgical distributor program terms are private contract documents, no primary public source states a representative figure, and a modelled number here would be worth less than the omission.

Related reading: building the distributor program itself, what the distributor's reps need from you, and how promotional review actually runs. For channel and launch context, start at Module 6 of the Medical Device Launch Roadmap.

This guide is general information for medical device companies, not legal advice. Buzzbox Media is a marketing agency, not a law firm, and nothing on this page creates an attorney-client relationship. Robinson-Patman exposure depends on facts this page cannot see, and the law changes. Sources were checked on the date shown above. Consult your own antitrust counsel and compliance team before you fund, change, or withdraw a distributor marketing program.

This guide is published by Buzzbox Media, a healthcare marketing agency in Nashville. We run medical device marketing for medical device companies.

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