154 Antitrust Handbook for Franchise and Distribution Practitioners
Oil Express Nat’l, Inc. v. D’Alessandro,1 the plaintiff, a franchisor of
quick-change oil stations, alleged that the defendant franchisees
instigated a royalty boycott and convinced 27 other franchisees to join.2
The court held that the franchisor could not prove extortion or a boycott
because, at the time of the alleged threat, the franchisees had been
terminated and therefore did not owe any fees; as such, they had nothing
with which to threaten the franchisor.3 The court observed that even if
the franchisor’s allegations about a royalty boycott were true, it had not
suffered any antitrust injury. The court pointed out that antitrust injury
“‘should reflect the anticompetitive effect either of the violation or of the
anticompetitive acts made possible by the violation.’”4 Since the
franchisor’s complaint focused merely on its own pecuniary damages
and not on any effects on competition, the court ruled that the franchisor
could not prove antitrust injury.5
The outcome in Oil Express, while pointing to the hurdles to
recovery, does not immunize joint royalty negotiations by franchisees.
Whether such joint negotiations should be condemned as per se unlawful
or whether the practice should be assessed under the rule of reason is an
b. Exit from System
Similarly relying on the lack of antitrust injury, another court found
no antitrust violation where franchisees acted jointly to leave the
franchisor’s system. In McAlpine v. AAMCO Automatic Transmissions,6
AAMCO, the franchisor, alleged that eleven of its franchisees in the
Detroit area had engaged in an unlawful restraint of trade by
simultaneously terminating their franchise agreements to form their own
competing transmission repair business. The court held that, although
AAMCO was harmed by the conduct, it could not prove an antitrust
violation because the cause of AAMCO’s injuries was the franchisees’
breach of their franchise agreements, not a violation of the antitrust
1. No. 96C 1528, 1998 WL 214727 (N.D. Ill. April 27, 1998).
2. The alleged purpose of the royalty boycott was to force the franchisor to
lower its royalty rate from 5% to 1%. Id. at *1.
3. Id. at *3.
4. Id. (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477,
5. Id. at *4.