If you are like most dissatisfied franchisees, you want to get out of the system, and you are prepared to do so by all legal means available. However, you also probably know that your rights under your franchise agreement are limited. In fact, if you have reviewed the “Termination” section of your agreement, you may have noticed that you don’t actually have any termination rights at all (in contrast to your franchisor, which probably has multiple options for forcing you out of the franchise system). Fortunately, an antitrust attorney who is familiar with the franchise relationship may be able to help.
What is Antitrust Law?
Antitrust law prohibits private parties (i.e. franchisors, vendors and other third parties) from entering into agreements that constitute unreasonable restraints on trade. Antitrust law has its origins in consumer protection, with the Sherman Antitrust Act of 1890 (the “Sherman Act”) outlawing business arrangements (which, at the time, used a specific form of trust) that created monopolies and restricted market competition. The Sherman Act remains relevant today, and various other laws at the state and federal levels prevent anti-competitive conduct and establish other antitrust protections as well.
How is Antitrust Law Relevant to Franchisees?
So, how is antitrust law relevant to franchisees? In the franchise context, the Sherman Act and other state and federal antitrust laws prohibit franchisors from entering into contracts that either (i) force franchisees to pay more for products and services than market forces would dictate, or (ii) restrict franchisees’ ability to offer competitive prices to their customers. Some specific examples of relevant anti-competitive practices include:
- Unilaterally refusing to deal with franchisees or non-preferred vendors
- Entering into “tying arrangements” that require franchisees to purchase one product in order to purchase another one
- Establishing minimum prices to be offered by franchisees
- Restricting customers’ access to franchisees in competing territories
- Granting exclusive territories that result in unreasonable restraints on trade
- Engaging in discriminatory pricing practices or offering different franchisees different terms of sale for anti-competitive purposes
- Engaging in predatory advertising and pricing tactics that harm franchisees or consumers
However, it is important to note that none of these examples are per se unlawful (meaning that they would be prohibited regardless of the specific factual circumstances involved). Antitrust is a highly complex and fact-specific area of the law; and, while many anti-competitive practices are illegal, there is a lot that franchisors can get away with as well.
Do Franchisees Need an Antitrust Lawyer with Franchise Law Experience?
Yes, without a doubt. Just as antitrust law is a nuanced and highly-complex practice area, so too is franchise law. If an antitrust lawyer does not routinely handle franchise-related litigation, he or she is going to lack the insights needed to represent his or her franchisee clients effectively. If your franchise is struggling and you want a way out, you need to choose an attorney who gives you the best chance at securing a favorable outcome. This means choosing an attorney who has specific (and successful) experience representing franchisees under similar circumstances.
Contact Antitrust Attorney Jeffrey M. Goldstein for a Free Consultation
Attorney Jeffrey M. Goldstein has over 30 years of experience representing franchisees in antitrust litigation. For a free, no-obligation consultation, call 202-293-3947 or inquire online today.