UNFAIR FRANCHISOR CONDUCT
Unfair franchisor and supplier conduct in the franchise world is multi-faceted, and refers to many different schemes, policies and formats. Based on franchisee lawyer Jeff Goldstein’s over three decades of complex litigation on behalf of franchisees and dealers, he has identified three general areas of unfair franchisor conduct, each of which will be explored and discussed at length in the sub-tabs under this substantive section holder.
First, Unfair Franchisor Conduct includes wrongful and unfair supplier unfair competition, whereby Franchisees and dealers complain frequently that their franchisors, suppliers or manufacturers have injured them by engaging in unfair competition or unfair practices. In making these complaints, franchisees and dealers almost always describe the allegedly wrongful conduct by franchisors and suppliers as unfair competition. The layman’s use of this term is far more encompassing than it is under relevant trade practice laws and statutes. Unlike the antitrust laws, which have readily identifiable and specific elements of prototypical transgressions, the substance of unfair competition and unfair acts and practices laws differs significantly across states and jurisdictions.
Second, Unfair Franchisor Conduct includes wrongful franchisor tying and supply restrictions, whereby Franchisees and dealers consistently but understandably complain about supply and source restrictions imposed on them by their franchisors, including unlawful antitrust tying claims. Manufacturers and franchisors publicly justify the imposition and enforcement of source controls as necessary to maintain system quality standards. Suppliers and franchisors also argue that such source controls maintain necessary uniformity and make franchisees more efficient and successful. In addition, of course, some franchise and distribution systems must use restricted supply sources to protect their commercial secrets, such as recipes, for instance.
Third, Unfair Franchisor Conduct includes wrongful antitrust violations by franchisors and suppliers, whereby Franchisees and dealers are systematically subjected to new and obtrusive marketing and pricing demands made by franchisors and suppliers that seem at first blush to violate the antitrust laws. The general purpose of most antitrust laws, both at the federal and state levels, is to preserve and promote competition in relevant markets. Many times, however, modern conceptions of competition, which focus on increased aggregate consumer welfare in the economy as a whole, are inconsistent with notions of the well-bring of individual competitors, which focus or the financial stability and longevity of individual franchisees and dealers.