Exclusive Dealing and Exclusive Appointments

Agreements requiring franchisees to deal exclusively with a single
franchisor are generally a fundamental element of franchise systems.
Such exclusive dealing arrangements are found to violate federal
antitrust laws relatively infrequently, due in large part to lack of
foreclosure (as discussed below) or existence of competitive benefits to
consumers, or both. A franchisor’s grant of an exclusive territory to a
franchisee in which the franchisor will not appoint any other franchise, or
exclusive appointment, is essentially the inverse of an exclusive dealing
arrangement. Like exclusive dealing arrangements, exclusive
appointments are prevalent in the franchise context and run afoul of
federal antitrust laws only under unusual circumstances. This Chapter
considers the antitrust implications of both types of exclusivity.
A. Can a Franchisee Be Required to Deal Only with Its Franchisor?
A contractual requirement that a franchisee not market goods or
services of, or enter into a trademark license with, a competitor of its
franchisor is, in the usual case, enforceable under the antitrust laws.
Similarly, a requirement that the franchisee offer goods or services at a
franchised location only under the franchisor’s mark raises no antitrust
issues under normal circumstances.
1. Exclusive Dealing, Generally
An exclusive dealing contract involves an agreement to conduct
business only with a particular supplier and to refuse to deal in the
products of the supplier’s competitors. Exclusive dealing arrangements
may be challenged under Sections 1 or 2 of the Sherman Act1 or
Section 3 of the Clayton Act2 in private litigation. Exclusive dealing
1. 15 U.S.C. §§ 1, 2.
2. 15 U.S.C. § 14. Section 3 provides:
It shall be unlawful for any person engaged in commerce, in the
course of such commerce, to lease or make a sale or contract for
sale of goods, wares, merchandise, machinery, supplies, or other
commodities, whether patented or unpatented, for use,
consumption, or resale within the United States or any Territory

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