Exclusive Dealing and Exclusive Appointments

• Pages: 115-125

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CHAPTER IV

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 Sections1 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