State and Federal Antitrust Laws
United States antitrust law
In the United States, antitrust law is a collection of federal and state government laws that regulates the conduct and organization of business corporations, generally to promote competition for the benefit of consumers. The main statutes are the Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commission Act of 1914. These Acts serve three major functions. First, Section 1 of t…
How do antitrust laws affect franchisor pricing?
Historically, the U.S. antitrust laws have been a major concern for franchisors seeking to control franchisee pricing. This still is true for franchisors who want to limit the minimum prices that franchisees may charge, but the antitrust laws are of less concern for franchisors who want to limit maximum prices.
What is the history of antitrust law?
Congress passed the first antitrust law, the Sherman Act, in 1890 as a "comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade." In 1914, Congress passed two additional antitrust laws: the Federal Trade Commission Act, which created the FTC, and the Clayton Act.
What are the different types of antitrust laws?
Here is an overview of the three core federal antitrust laws. The Sherman Act outlaws "every contract, combination, or conspiracy in restraint of trade," and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize."
How are antitrust laws applied to mergers?
The antitrust laws proscribe unlawful mergers and business practices in general terms, leaving courts to decide which ones are illegal based on the facts of each case. Courts have applied the antitrust laws to changing markets, from a time of horse and buggies to the present digital age.
What is the rule of reason for franchise no-poach?
Why does the quick look rule apply?
Is a no poach required in franchise agreements?
Is a franchise no-poach agreement per se?
Is antitrust vertical or horizontal?
Can franchisees sue for poaching?
Should franchisors avoid no-poach agreements?
See 4 more
About this website
Does a franchise have protection under the law?
A: You are absolutely correct--there are various federal and state laws that protect your interests to some degree as you contemplate entering a franchise relationship. These laws generally relate to disclosures that companies must make to prospective buyers, and rules regarding franchise agreements in certain states.
Are franchisors liable for their franchisees wrongs?
Most courts have held that franchisors may be liable for the acts of their franchisees and franchisee employees. Courts are reluctant to hold franchisors liable for acts of their franchisees, because franchisors are often removed from the situation.
Is a franchisee personally liable?
Entering into your Franchise Agreement as an entity can significantly limit your personal liability. However, you are still personally liable for any personal guaranty that you sign. Most franchisors require franchisees to sign a personal guarantee.
Do anti trust laws apply to private companies?
In addition, the antitrust laws are also enforced privately in the United States--firms directly harmed by anticompetitive acts have standing to sue under the antitrust laws. The Clayton Act, which offers the successful plaintiff treble damages, often makes such private litigation quite attractive.
What are franchisees usually liable for?
Franchises offer limited liability for the franchisee from any legal suits brought by customers or employees. This means that the franchise owner's personal assets cannot be affected by the outstanding debts of the franchise.
Can I sue my franchisor?
Franchisees can sue franchisors for a variety of reasons, such as non-disclosed operating costs and for opening too many franchises in a geographic area.
Do you sue the franchisor or franchisee?
Can I Sue My Franchisor? Whether or not you, as a franchisee, can assert claims in a lawsuit against your franchisor is a loaded question. On one hand, the answer is yes; you can sue anyone for anything at any time — it doesn't mean you'll win or that the case will go anywhere, but you can.
What happens if a franchisee fails?
Often the best answer to a franchise that is not succeeding is for the franchisee to sell the business to a third party who becomes the new franchisee for that territory. This allows the failing franchisee to terminate its obligations under the franchise agreement and under any lease.
Who is responsible for business debt in a franchise?
Outstanding debts will belong to the nominated franchise outlet. This means each outlet will have its own address details and information directed at the debtor from where the location they purchased goods or services to avoid confusion.
Who do anti trust laws apply to?
Antitrust laws are statutes developed by governments to protect consumers from predatory business practices and ensure fair competition. Antitrust laws are applied to a wide range of questionable business activities, including market allocation, bid rigging, price fixing, and monopolies.
What are the big 3 antitrust laws?
The three major Federal antitrust laws are: The Sherman Antitrust Act. The Clayton Act. The Federal Trade Commission Act.
What is permitted under antitrust law?
agreements between competitors, which seek to limit or control production, supply or markets; market-sharing agreements between competitors irrespective of the form that they may take; this includes market sharing by way of product allocation, allocation of geographic markets or source of production; and.
What liability does a franchisor have?
Liability under the franchise agreement This means that a franchisee wishing to acquire the right and franchise to trade through a company is still personally liable for the failure by the franchisee company to perform its obligations under the franchise agreement or to pay sums when due.
Do you sue the franchisor or franchisee?
Can I Sue My Franchisor? Whether or not you, as a franchisee, can assert claims in a lawsuit against your franchisor is a loaded question. On one hand, the answer is yes; you can sue anyone for anything at any time — it doesn't mean you'll win or that the case will go anywhere, but you can.
What happens if a franchisee fails?
Often the best answer to a franchise that is not succeeding is for the franchisee to sell the business to a third party who becomes the new franchisee for that territory. This allows the failing franchisee to terminate its obligations under the franchise agreement and under any lease.
Who is responsible for business debt in a franchise?
Outstanding debts will belong to the nominated franchise outlet. This means each outlet will have its own address details and information directed at the debtor from where the location they purchased goods or services to avoid confusion.
No-Poach Guidance Issued by DOJ - The National Law Review
In a speech on January 19, 2018, the Department of Justice Antitrust Division’s chief antitrust enforcer referenced a 2016 joint policy statement from the U.S Department of Justice& ...
Franchise No-Poach Agreements: Is Reform on The Horizon?
[12] Case No. 20-CV-13561 (11th Cir.). The DOJ recently filed an amicus brief arguing that, at least as to hiring, franchisees operate as independent economic actors and are therefore capable of conspiring under the antitrust laws. [13] Fuentes v. Royal Dutch Shell PLC, Civ. A. No. 18-5174, 2019 WL 7584654, at *1 (E.D. Pa. Nov. 25, 2019).
No-Poach Prosecutions: A Growing Problem for M&A Deal Teams?
M&A deal teams should take note of heightened scrutiny of HR and employment practices by antitrust enforcers in the US and Europe. No-poach, non-solicitation, and wage-fixing agreements ...
Franchising and the Antitrust Laws: Panacea or Problem
the antitrust laws were franchising's big problem.JP Here, as the Fortune article indicated, perhaps the antitrust laws are "trying to shield specific competitors against the effects of competitive innovation,"'6 and trying to maintain the size, shape, or type of distribution system against changes resulting from the free
What is the rule of reason for franchise no-poach?
There are three contenders: The rule of reason requires the government or plaintiff to prove that the agreement in question is, on balance, anti-competitive.
Why does the quick look rule apply?
Courts in the Western District of Washington and the Northern District of Illinois have concluded that the quick-look rule may apply because there were at least some horizontal facets to the franchise no-poach agreements at issue. [12]
Is a no poach required in franchise agreements?
It also argued that no-poach provisions are not reason ably necessary to the proper functioning of franchise agreements, so the ancillary-restraint exception should not apply. The Stigar case settled before the court issued an opinion, but other courts that have weighed in are split over the applicable test.
Is a franchise no-poach agreement per se?
Even if the per se rule does not apply under federal law, several states seem determined to pursue franchise no-poach agreements as per se violations of state law. California Senior Assistant Attorney General Kathleen Foote has stated publicly that franchise no-poach agreements are probably per se violations of California’s Cartwright Act. Moreover, the Washington AG’s office, which has investigated more than 100 franchise no-poach agreements, recently convinced a state court that the per se rule may apply to claims under Washington’s consumer protection law, apparently because the franchisor and franchisee were potentially competing for the same employees and because the agreements inured to the benefit of franchisees. [16] Therefore, franchises operating in those and other states with similar laws should avoid no-poach language in franchise agreements subject to their jurisdiction.
Is antitrust vertical or horizontal?
First, courts appear to view them as predominantly vertical even if they have some horizontal effects on hiring. Second, they commonly restrict only intra-brand hiring, while the Supreme Court has long held that “the primary purpose of the antitrust laws is to protect inter-brand competition.”.
Can franchisees sue for poaching?
A court in the Southern District of Illinois suggested that the per se rule may apply, depending on how independently the franchisees operated, where a franchise no-poach agreement contained an enforcement provision allowing franchisees to sue for poaching violations. [13]
Should franchisors avoid no-poach agreements?
Franchisors should steer clear of no- poach agreements with other franchisors, and franchisees should avoid similar agreements with other franchisees. These horizontally oriented no-poach agreements are likely per se violations of federal law, not to mention state laws, and the DOJ may be inclined to prosecute them as criminal violations. [17]
What is the second test in antitrust?
The second test amounts to a de facto rule-of-reason analysis for institutions that might yet merit single entity status but which could also serve as cover for cartels. Courts have appealed to the second test when candidate single entities have failed the first test.
What is the difference between control rights and fragmented evidence?
In contrast, evidence that control rights are fragmented and are distributed across the parties that constitute the candidate single entity complicates appeals to the single entity defense.
What is the rule of reason for franchise no-poach?
There are three contenders: The rule of reason requires the government or plaintiff to prove that the agreement in question is, on balance, anti-competitive.
Why does the quick look rule apply?
Courts in the Western District of Washington and the Northern District of Illinois have concluded that the quick-look rule may apply because there were at least some horizontal facets to the franchise no-poach agreements at issue. [12]
Is a no poach required in franchise agreements?
It also argued that no-poach provisions are not reason ably necessary to the proper functioning of franchise agreements, so the ancillary-restraint exception should not apply. The Stigar case settled before the court issued an opinion, but other courts that have weighed in are split over the applicable test.
Is a franchise no-poach agreement per se?
Even if the per se rule does not apply under federal law, several states seem determined to pursue franchise no-poach agreements as per se violations of state law. California Senior Assistant Attorney General Kathleen Foote has stated publicly that franchise no-poach agreements are probably per se violations of California’s Cartwright Act. Moreover, the Washington AG’s office, which has investigated more than 100 franchise no-poach agreements, recently convinced a state court that the per se rule may apply to claims under Washington’s consumer protection law, apparently because the franchisor and franchisee were potentially competing for the same employees and because the agreements inured to the benefit of franchisees. [16] Therefore, franchises operating in those and other states with similar laws should avoid no-poach language in franchise agreements subject to their jurisdiction.
Is antitrust vertical or horizontal?
First, courts appear to view them as predominantly vertical even if they have some horizontal effects on hiring. Second, they commonly restrict only intra-brand hiring, while the Supreme Court has long held that “the primary purpose of the antitrust laws is to protect inter-brand competition.”.
Can franchisees sue for poaching?
A court in the Southern District of Illinois suggested that the per se rule may apply, depending on how independently the franchisees operated, where a franchise no-poach agreement contained an enforcement provision allowing franchisees to sue for poaching violations. [13]
Should franchisors avoid no-poach agreements?
Franchisors should steer clear of no- poach agreements with other franchisors, and franchisees should avoid similar agreements with other franchisees. These horizontally oriented no-poach agreements are likely per se violations of federal law, not to mention state laws, and the DOJ may be inclined to prosecute them as criminal violations. [17]