Antitrust Attorney Jeff Goldstein Represents Only Franchisees And Dealers
Franchisees and dealers are often subjected to franchisors and suppliers’ newly developed and obtrusive marketing and pricing demands, many of which may seem to violate antitrust laws. Most antitrust laws’ general purpose, both at the federal and state levels, is to preserve and promote competition in certain markets. Many times, modern conceptions of fair competition, which focus on increased aggregate consumer welfare as a whole, are at odds with individual franchisees and dealers’ well-being, financial stability, and longevity. Without the help of an antitrust attorney, the wrongdoings may go unnoticed or without ramifications.
Most franchisees and dealers, as well as some inexperienced franchise attorneys, incorrectly believe that whenever a franchisor or manufacturer establishes a pricing policy or pricing guideline that is mandatory for their franchisees or dealers, antitrust laws are violated. Because of this inaccurate belief, franchisees and dealers have filed and funded many meritless cases. On the other hand, with the advocacy of an experienced antitrust attorney, certain distribution policies mandated by franchisors or suppliers could be viewed to injure not only individual franchisees and dealers, but overall competition as well.
Common Antitrust Violation #1: Unlawful Customer Restrictions
Protected and “exclusive” territories are common in franchising; and, while dividing geographic territories amongst franchisees is generally permissible, there are other types of customer restrictions that can violate federal and state antitrust laws. When examining customer restrictions for potential antitrust issues, the franchisor’s intent and the practical effect of a restriction are both important factors.
With regard to franchisor intent, if the purpose of a restriction is to limit customers’ options (i.e. by prohibiting franchisees from serving customers outside of their respective territories), then this is more likely to tend toward an antitrust violation. For example, if a franchisor wants to prevent franchisees from competing with one another on price (in order to drive up royalties and marketing fund contributions), this could be an unlawful practice. On the other hand, if a franchisor simply restricts franchisees from actively marketing outside of their respective territories (but does not restrict the customers they can serve), this is an industry-standard practice that generally does not raise antitrust implications.
This is a complicated and nuanced area, and franchisees who have concerns should discuss their franchisor’s specific practices with an antitrust attorney who has particular experience in franchising. Learn more.
Common Antitrust Violation #2: Minimum Price Fixing (Resale Price Maintenance)
Minimum price fixing (also know as “resale price maintenance”) is a common practice among franchisors, which often attempt to classify their pricing controls as “system standards.” Similar to customer restrictions, while minimum price controls can be legal under some circumstances, they can also violate federal and state antitrust requirements.
In 2007, the U.S. Supreme Court relaxed the federal restrictions on resale price maintenance; however, legislators and regulators in multiple states have continued to enforce the pre-2007 standards. In order to get around these state-level restrictions, franchisors often utilize practices such as establishing “suggested” retail prices, refusing to sell products to franchisees who resell them below a particular price point, and imposing minimum advertised prices. Learn more.
Common Antitrust Violation #3: Profit Passover Arrangements
In the franchise context, a typical profit passover arrangement involves one franchisee making a payment to another when the first franchisee sells a product or service to a customer in the second franchisee’s territory. This payment is typically mandated by the franchisor, which also predetermines the amount of “profit passover” that is owed. So, why do some franchisors require profit passovers, and why do they raise antitrust implications?
The idea behind profit passovers is that they are intended to compensate franchisees for the costs associated with other franchisees’ extra-territorial sales. In today’s world, most products and services come with warranties (especially in the ultra-standardized world of franchising), and performing warranty work comes at a cost. If one franchisee must perform warranty work as a result of another franchisee’s sale, then that sale can be a liability for the franchisee who is on the hook for any repairs. To compensate for this liability, franchisors require the selling franchisee to pay over a portion of the profit from the sale, which is termed a “profit passover.”
While this makes sense in theory, the problem is that it disincentivizes franchisees from making sales outside of their territories (because the profit margin is lower), and this can stifle competition. As a result, some profit passover arrangements constitute antitrust violations. Learn more.
Common Antitrust Violation #4: Product and Service Tying Arrangements
Tying arrangements are very different from profit passover arrangements, but they too can violate antitrust laws at the federal and state levels. In a nutshell, a tying arrangement involves the purchase of one product or service being conditioned on the purchase of another. In other words, the second (and perhaps unwanted) product or service is “tied” to the first.
Franchisors routinely require franchisees to purchase specific products and services. These purchasing requirements promote, and may even be essential to, brand standardization. So, requiring franchisees to purchase certain products or services is not in itself an antitrust violation. However, if franchisees are being forced to purchase additional items that they do not want or need in order to buy the items that they do want or need, then this may raise a red flag. Often, these types of tying arrangements are designed to inflate franchisors’ profits directly, or to increase the revenue of suppliers who then pay rebates to the franchisor. Learn more.
Common Antitrust Violation #5: Unilateral Refusals to Deal
Another example of an antitrust violation that is common in franchising is franchisors unilaterally refusing to deal with individual franchisees. These refusals can take the form of tying arrangements (i.e. the franchisor refuses to sell one product to a franchisee unless the franchisee also purchases the “tied” product), indirect pricing controls (i.e. the franchisor refuses to sell products to a franchisee who resells them below a certain price), and territorial restrictions (i.e. the franchisor only offers certain opportunities to franchisees in certain areas).
Similar to the other common antitrust violations discussed above, unilateral refusals to deal are not per se unlawful, but rather may constitute antitrust violations depending on the specific factual circumstances involved. If your franchisor is refusing to deal with you in a manner that is inconsistent with its treatment of other franchisees, you should discuss your situation with an experienced antitrust attorney. Learn more.
Antitrust Violations in Franchising: What Franchisees and Dealers Need to Know
1. State and Federal Antitrust Laws Protect Franchisees and Dealers.
While state and federal antitrust laws protect consumers, they also protect franchisees and dealers. If you own a franchise or dealership and you believe that your business is being harmed by an anti-competitive practice, you may have a claim for an antitrust violation.
2. Antitrust Violations Can Take Many Different Forms.
Not all franchisor pricing guidelines are illegal. Franchisors have legally-recognized legitimate interests in controlling their franchisees’ practices in various respects, and many practices that are harmful to franchisees are permissible (even if not economically advisable) under the law.
Aside from the antitrust violations listed above, other franchisor policies and practices that can give rise to private causes of action for state and federal antitrust violations include:
- Exclusive Territories and Exclusive Distributorships
- Exclusive Dealership
- Agreements on Terms of Trade & Restraint of Trade
- Full Line Pricing
- Discriminatory Prices or Terms of Sale
- Franchisee and Dealer Terminations
- Predatory Advertising
3. The Franchise Model Has Unique Implications for Antitrust Claims.
While franchisors and manufacturers are subject to the same antitrust laws as other large corporations, antitrust issues often have unique implications within the franchise model. As a result, franchisees and dealers pursuing legal remedies for antitrust violations should seek the representation of an antitrust attorney with significant antitrust and franchise law experience.
4. Laws Allow for Private Civil Actions with the Assistance of an Antitrust Attorney
While state and federal authorities pursue select cases of anti-competitive conduct, franchisees and dealers will often need to initiate civil litigation in order to protect their rights. Antitrust laws at both levels of government include “private right of action” clauses that allow for these types of lawsuits.
5. Franchisees and Dealers Affected by Antitrust Violations Various Potential Remedies Available.
In private antitrust litigation, franchisees and dealers generally have a few different remedies available. Depending upon the facts and specific legal issues involved, the potential remedies can include restitution, damages, and injunctive relief prohibiting the anti-competitive activity.
The Success of Our Antitrust Attorneys at Goldstein Law Firm
Antritrust attorney Jeff Goldstein and the lawyers at Goldstein Law Firm have over thirty years of experience successfully representing only franchisees and dealers in cases involving antitrust violations and other anticompetitive conduct by franchisors and suppliers. Attorney Goldstein’s success in protecting franchisees, dealers, and other small businesses from antitrust and other anticompetitive conduct is distinguished.
Jeff Goldstein, in contrast to ninety-nine percent of other antitrust attorneys , represents only franchisees and dealers – not franchisors, suppliers or manufacturers – in cases around the country. This exclusive focus on franchisees and dealers has, in part, allowed Jeff Goldstein and his associates to quickly and accurately find, detect, discover, and investigate anticompetitive conduct of franchisors and dealers. Further, Goldstein Law’s experience and expertise with franchise litigation allows its lawyers to successfully protect their franchisee and dealer clients from the harmful economic damages caused by franchisor and supplier anticompetitive conduct that violates antitrust laws.
What Can Franchisees Do if They Suspect an Antitrust Violation?
If you suspect that your franchisor may be violating California or U.S. federal antitrust laws, it is important that you speak with an antitrust attorney promptly. You may have a right to sue to stop your franchisor’s unlawful practices; but, if your franchisor has been concealing these practices, you could be running up against the statute of limitations. At the Goldstein Law Firm, we can use our experience to quickly assess your case and help you determine whether it is in your best interests to pursue litigation.
Are All Franchisors Susceptible to Antitrust Claims?
No, not necessarily. In addition, it may be possible for franchisees in certain geographic areas to have antitrust claims while franchisees in other locations do not. This is because a fundamental principle of antitrust law is that, in order to commit a violation, the violator must have sufficient “market power” to have a negative impact on competition.
Similar to the other aspects of an antitrust claim, market power is a fact-driven issue. Truth be told, most franchisors do not have the market power to broadly control the prices offered to consumers. However, franchisors can exert market power over their franchisees; and, in niche markets, franchisors may be able to establish sufficient geography-specific market power to substantiate a pricing-related antitrust claim. As a result, to a certain extent, the size of a franchise system can be irrelevant – or at least non-determinative of the viability of franchisee-initiated antitrust litigation.
Can Franchisees Join Together to Pursue Antitrust Claims?
Due to the nature of certain antitrust violations, oftentimes, multiple franchisees will suffer similar negative effects. When this is the case, it may be possible for franchisees to join together as a group to take legal action against their franchisor. While group representation of franchisees presents its own potential legal challenges, antitrust cases will often involve circumstances in which joint legal action is a viable option. In order to decide whether group representation is appropriate, an antitrust attorney will need to thoroughly assess the relative similarity of the franchisees’ claims as well as any potential conflicts (or other drawbacks) to multi-plaintiff litigation in light of the circumstances at hand.
How Can an Antitrust Attorney Help a Struggling Franchisee?
While the Federal Trade Commission (FTC), U.S. Department of Justice (DOJ), and other authorities can enforce franchisors’ obligations under state and federal antitrust laws, many of these laws also give franchisees a “private right of action” against their franchisors. In other words, if your franchisor has committed an antitrust violation that has harmed your franchise, you can sue for damages and other remedies. If your franchise is struggling and you want out, filing an antitrust claim could provide the leverage you need to negotiate a termination on favorable terms.
If you believe that your franchisor may have committed an antitrust violation, you should speak with an attorney promptly to determine what options you have available. Remember, while antitrust laws exist at the federal level, there are state-specific antitrust laws as well. So, franchisees in some states may have causes of action that are not available to franchisees in others. An attorney who is familiar with these laws and how they apply specifically within the franchise context will be able to provide you with a thorough assessment and help you choose the best path forward.
What Remedies Will an Antitrust Attorney Pursue in Private Litigation?
The remedies available will depend upon the specific statutes at play and the unique facts and circumstances involved in your case. Generally speaking, however, potential remedies in private antitrust litigation include:
- Restitution
- Damages
- Injunctive relief (i.e. to stop the anti-competitive activity)
To effectively stop wrongful anticompetitive conduct by your franchisor or supplier, you should contact antitrust attorney Jeff Goldstein at the Goldstein Law Firm. Contact us online now or call us at 202-293-3947. Don’t let your franchisor or supplier’s hidden or oppressive anticompetitive agenda destroy your business and personal fortunes.
