Is an Unlawful Tying Arrangement Limiting Your Ability to Succeed as a Franchisee?
In franchise relationships, franchisors have the upper hand. This manifests itself in more ways than one, and in some cases franchisors’ attempts to exercise control over their franchisees’ businesses can go too far. When franchisor-imposed obligations transition from burdensome operational requirements and brand controls to illegal anticompetitive restraints, franchisees can often seek redress under the Sherman Act and other federal antitrust laws.
Perhaps one of the most common types of anticompetitive practices in franchising is the use of unlawful tying arrangements. If you believe your franchised business may be suffering due to an illegal tying arrangement imposed by your franchisor, franchisee attorney Jeffrey M. Goldstein can help. Jeffrey M. Goldstein has over 30 years of experience representing franchisees and dealers, and has successfully represented numerous clients in disputes involving allegations of tying arrangements and other antitrust violations nationwide.
Unlawful Tying Arrangements in Franchising
What is a Tying Arrangement?
A “tying arrangement” is any commercial transaction in which the sale of one item (the “tying” item) is conditioned upon either: (i) the purchase of another item (a “tied” item), or (ii) an agreement not to purchase the tied item from a competitor. These items can be products or services (which is most common), or they can be things like trademark licenses, real estate leases and even franchises.
Tying arrangements can violate the Sherman Act in two different ways: They can violate Section 1, which prohibits “contracts in restraint of trade,” and they can violate Section 2, which prohibits monopolization. In addition, depending on the specific circumstances involved, franchisees may be able to challenge tying arrangements under the Clayton Act, the FTC Act and other state and federal laws as well.
Examples of Unlawful Tying Arrangements
To illustrate, let’s look at an example. Say you go to the hardware store to buy a hammer – you want to hang a picture on the wall and you need to put in a nail. But, when you get to the hardware store, you are told that in order to buy a hammer, you must also buy a leaf blower.
You live in a condo, so you have no use for a leaf blower whatsoever. However, since you don’t have any other options, you are forced to make the purchase and return to your condo with hammer and leaf blower in tow. This would be a fairly simple example of a tying arrangement.
Of course, the scenarios can get much more complicated – and much more expensive as well. For example, say you signed a franchise agreement for a fast food restaurant, and then once you signed you were told that you were required to purchase your ingredients from the franchisor and its affiliates.
This is actually a real-life example (from the case of Burda v. Wendy’s International, Inc.), and one in which a federal court ruled that the franchisee could assert a claim for an illegal tying arrangement against the franchisor.
Is Your Franchise Subject to an Unlawful Tying Arrangement?
There are countless other examples of unlawful tying arrangements in franchising, with the unifying theme being that the franchisee is hampered in its ability to succeed as a result of an anticompetitive restriction imposed by its franchisor. To learn more about pursuing arbitration or litigation for an illegal tying arrangement, contact the Goldstein Law Firm today.
Request a Free Consultation With National Franchisee Lawyer Jeffrey M. Goldstein
If you believe that your franchise may be suffering as a result of an illegal tying arrangement, contact the Goldstein Law Firm for a free consultation. Call our Washington D.C. law offices at 202-293-3947 or submit our online consultation form to request an appointment today.