I. Factual Summary:

1. CUTCO cutlery has always been marketed through direct selling via Vector Marketing Corporation. This is viewed as an advantage because it allows the quality and performance features of the product to be explained and demonstrated directly to potential customers. Direct selling sets CUTCO apart from its competitors, who have traditionally used department stores and mass merchandisers to market their products. The people actually selling CUTCO cutlery are independent contractors who effectively operate their own business. The sales representatives are paid a commission on the products they sell but do not receive a salary from the company. For the most part, the sales representatives are recruited college students who sell CUTCO on their summer vacations.
2. Vector established a system of multiple mailings of a variety of catalogs to more than 4.6 million CUTCO customers throughout the year. In 2011, catalog mailings generated more than 120,000 orders and approximately $18 million in sales.
3. A closed customer site was created in 2000 to allow only existing customers to view prices and place orders. The site was limited to existing customers as a way to prevent hurting the field sales organization. As part of the direct marketing efforts of the field sales representatives, sales on the site have grown every year. In 2011, approximately 56,000 purchases of CUTCO products were made online with revenues of $8.7 million.
4. In 2006, CUTCO launched its pilot store with three main objectives: to test the market for retail sales, to ascertain the effect of retail sales on direct sales, and to determine whether the customer demographic would match or vary from existing customers. The initial cost of the pilot store was approximately $150,000 and was expected to bring in annual revenues between $250,000 and $300,000. This venture revealed