Definition
Channel conflict is friction that happens when two sellers go after the same customer or deal. It can be two partners, or a partner and the vendor's own sales team. It often shows up as price undercutting, disputed credit or a partner who feels cut out of a deal.
Some conflict is normal in any program with more than one route to market. The problem starts when partners stop trusting that they will be paid for the work they do. When that happens, they bring fewer deals and share less about their pipeline.
Most vendors manage conflict with clear rules of engagement and a deal registration process. Fast, fair decisions on disputes matter as much as the written rules.
In practice
A reseller registers a firewall deal, then the vendor's direct rep quotes the same customer a lower price. The channel manager has to settle who owns the deal before the customer gets confused.