Abstract
In his review of the development of “exclusive dealing” and the administrative and judicial attitude towards such business arrangements under United States antitrust law, one of the greatest American authorities on this subject, Professor Milton Handler of Columbia University, expressed the view: “Exclusives are not of transcendent importance either legally or economically. There are other practices of infinitely greater antitrust concern. ”5 It is not unlikely that one will in due course be justified in repeating this statement in respect of the antitrust law of the E.E.C., but at the moment it seems that the control of exclusive distributorship contracts is one of the major concerns of the Commission. Having regard to the very wide range of the prohibition of such agreements under Article 85 (1) as expressed in the Announcement,1 it seems expedient to refer in some detail to the relevant legal position both in the United States and the Member States of the E.E.C., especially in Germany and France, in order to understand and appreciate the creation of this new rule in European commerce which to a considerable extent also affects enterprises in non-Member States. These agreements are, generally without any difference in meaning, also described as exclusive dealing contracts, exclusive dealing and tying contracts, exclusive agency contracts exclusive agency contracts made with commercial agents, exclusive representation contracts, exclusive distribution contracts, exclusive territorial distributorship contracts, exclusive concession contracts (or, in all these instances, agreements respectively).2
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References
Announcement on Exclusive Agency Contracts made with Commercial Agents of December 21/24, 1962, J.O. 1962, pp. 2921 ff.
See Federal Trade Commission v. Curtis Publishing Co., 260 U.S. 568 (1923) in which the Supreme Court said: “Judged by its terms, we think this contract is one of agency, not of sale upon condition and the record reveals no surrounding circumstances sufficient to give it a different character. This, of course, disposes of the charges under the Clayton Act.”
See e.g., Federal Trade Commission v. Curtis Publishing Co.,260 U.S. 568 (1923); Oppenheim, op. cit., pp. 685 f.
U.S. 476 (1926). The opinion of the Court was delivered by Taft, C. J. The case involved two issues, namely first, the sale of General Electric’s electric lamps and, secondly, the validity of a licence granted to the Westinghouse Lamp Company to manufacture and sell electric lamps protected by a patent in favour of General Electric Co. Although General Electric Co. was also the patentee of the lamp sold by it, the problem relating to agency is of a general applicability.
U.S. 265 (1942). For other aspects of this case, see infra, p. 99. On the other hand, when the same contracts which were the subject-matter of the aforementioned General Electric Co. case of 1926 became an issue in United States v. General Electric Co., 82 F. Supp. 753 (D.N. J. 1949), they were upheld as genuine and as such unobjectionable contracts of agency with reference to the previous decision (at p. 827).
This case also involved the sale by a patentee but, as in the General Electric case, the Court’s ruling and observations on the agency aspect are equally applicable to exclusive distributorship agreements, see Oppenheim op. cit.,p. 685, n. 19, p. 207 n. 38.
See to the same effect, United States v. General Electric Co., 80 F. Supp. 989 (S.D.N.Y. 1948) (the Carboloy case) where the Court said: “The agency arrangement, as applied to the manufacturing operations of the agents, was a pure sham, designed to invoke the rule of United States v. General Electric Co., 272 U.S. 476 (1926), but came short of falling within its protection because of the nature of the agents’ activities.”
See Federal Trade Commission v. Curtis Publishing Co., 260 U.S. 568 (1923); Oppenheim, op. cit., pp. 685 f.
Virginia Excelsior Mills v. FTC, 256 F. 2d 538 (4th Cir. 1958).
Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346 (1922).
Standard Oil Co. of California and Standard Stations, Inc. v. United States, 337 U.S. 293 (1949).
See for a similar case in which such agreements were also invalidated, Richfield Oil Corp. v. United States, 343 U.S. 922 (1952).
The lower Courts followed this practice, sometimes applying it even more rigorously, see Handler, op. cit., p. 38, 123, ns. 42–44.
The Federal Trade Commission (F.T.C.) which was created by the Federal Trade Commission Act of September 26, 1914 (c. 311, 38 Stat. 317), is an administrative agency of the United States Government with far reaching tasks and powers in the fields of antitrust and unfair competition. It cannot only prosecute or institute civil proceedings in the Courts but has also jurisdiction to act as a tribunal rendering judicial decisions, especially in cases of violation of s. 2, 3, 7 and 8 of the Clayton Act. If the F.T.C. issues a “cease and desist order” (i.e., one or more injunctions) which is not observed by the party concerned, the Commission can apply to a Circuit Court of Appeals for its enforcement. Correspondingly, the aggrieved party may apply to this Court (within a specified time) for the Order to be set aside. The F.T.C.’s finding as to the facts, if supported by evidence, shall be conclusive, subject however to the Court granting leave to adduce further evidence (s. 5(6) (c)). Its decisions are published.
Maico Co., Inc., Docket 5822, CCH Trade Reg. Rep. (9th ed.), par. 11, 577 (1953).
E.g., Harley Davidson Motor Co., Dkt. 5698 Trade Reg. Rep. 10th ed.), par. 25, 108 (1954); Revlon Products Corp., Dkt. 5685, ibid; par. 25, 184 (1954); Outboard Marine & Mfg. Co., ibid., par. 25, 594 (1955) and par. 26, 087 (1956); Beltone Hearing Aid Co., ibid; par. 25, 397 (1955). See on these cases Oppenheim, op. cit., pp. 715 f. and Handler, op. cit., pp. 38, 124–126 (n. 47–50).
E.g., Boco Corp. v. General Motors Corp., 124 F. 2d 822 (2d Cir. 1942), rehearing denied, 130 F. 2d 196 (2d Cir. 1942), cert. denied, 317 U.S. 695 (1943) (territorial limitation on establishing a used car outlet, lot or saleroom outside distributors’ “zone of influence,” but simple prohibition of resale outside thereof); U.S. v. Bausch & Lomb Optical Co., 321 U.S. 707 (1944) (limitation of resale by excluding sales of tinted glass or lenses to certain groups of customers, i.e., to manufacturers or members of the optical trade). The F.T.C. has recently, however, adopted a more hostile view of such restrictions, particularly if coupled with other restrictive practices, see Handler, op. cit., p. 129 n. 60.
U.S. 174 (1963). For a thorough discussion of this judgment see Milton Handler, “Recent Antitrust Developments” in 112 University of Pennsylvania Law Review (1963), pp. 159–189.
United States v. General Dyestuff Corp., 57 F. Supp. 642 (S.D.N.Y. 1944). In this case, the condemned agreement had been made by an American and a foreign firm, but the principle would probably also prevail in domestic cases.
United States v. General Dyestuff Corp., 57 F. Supp. 642 (S.D.N.Y. 1944); Fugate, op. cit., pp. 155 f.
and 384(1) of the German Commercial Code. For a detailed discussion of the general German law on Agents and Sole Distributors, see E.J. Cohn, “An Introduction to the German Law on Agents and Sole Distributors” in Commercial Agency and Distribution Agreements in Europe, The British Institute of International and Comparative Lazy, 1964, pp. 1–23.
See Würdinger in RGR Kommentar zum Handelsgesetzbuch,2nd ed., Vol. I (1953), s. 84, ns. 1 and 5, pp. 681/682. Such independent traders are often called “Generalagenten” or “Generalvertreter” (general agents or general representatives) or “Alleinvertreter” (sole agents or sole representatives), but such descriptions are legally without significance if they carry on their business in the manner described above, see Würdinger, ibid., n. 1, p. 681.
See Annual Report on the Activities of the Federal Cartel Office for the Year 1962, Bonn 1963, p. 28.
See Schwartz, op. cit., pp. 62 ff. W. Baruch, loc. cit., pp. 538 ff., and Würdinger, i4ruW 1960, pp. 313, 322 advance the opposite view. This question has so far not yet been decided by the Cartel Authorities or by a Court.
See Schwartz, op. cit., p. 65; decision of the Federal Cartel Office of June 26, 1959, WuW 1959, p. 756 (emphasising the significance of the “relevant market”). It may be mentioned in this connection that under s. 6 (horizontal) export cartels are, subject to certain safeguards, exempted from the general prohibition of cartels laid down in s. 1. If such an export cartel necessarily also encompasses inland trade, it shall be approved by the Cartel Authorities and vertical agreements incidental thereto shall not be affected by s. 15.
Cf. the judgment of the German Supreme Court of June 14, 1963, infra, p. 123. Although in that case the chief problem was whether the prohibition of re-import into Germany was incompatible with Art. 85, the decisions of the Frankfurt Court of Appeal of January 19, 1962 (WuW 1963, p. 313) and of the Supreme Court contain valuable observations on the subject of re-import under the German cartel law.
Directive of March 31, 1960, (French) Journal Officiel 1960, p. 3048 (known as Circulaire Fontanel).
Etat Françaisv. Nicolas and Société Brandt: Société Photo Radio Club v. Nicolas and SociétéBrandt,Juris Classeur Périodique, 1962 II, No. 12799; Dalloz (1962) Jurisprudence, p. 497; (1962) 1 C.M.L. Rep., p. 93.
See U.S. v. Imperial Chemical Industries Ltd., Opinion on Relief, 105 F. Supp. 215 (S. D.N.Y. 1952).
U.S. v. Timken Roller Bearing Co., 341 U.S. 593 (1951), at 596.
H. Desbois in La propriété industrielle et le Marché Commun, Colloque des Facultés de Droit, Lille, 1959: “Les problèmes juridiques et économiques du Marché Commun, pp. 199 if., 209, and the same in Dalloz 1960, p. 567.
E.g., Cour d’Appel d’Aise, October 14, 1958, JurisClasseur Périodique 1958, II, 10924; Tribunal de Commerce de Nice, March 30, 1960, Dalloz, Jurisprudence, 1960, p. 567 (with critical note by Desbois). On the other hand, in the (international) case Société Comptoir National de Contrôle v. Société Contrôle Typesales (a similar case of unfair competition), the Cour d’Appel of Paris in its decision of June 22, 1960 (Tunis Classeur Périodique, 1960, II, 11857) expressed the opposite view.
See, e.g., the publication by Soelter, Vertriebsbindungen im Gemeinsamen Markt, 1962, in which this subject is discussed under both economic and legal aspects. This opinion had also been expressed by lower French Courts, see Etablissements Consten v. U.N.E.F. (see (1963) 2 C.M.L. Rep., p. 176 n. 1) and Société Arlab Import-Export v. U.N.E.F. (both decided by the Tribunal de Commerce de la Seine), (1963) 2 C.M.L. Rep., p. 185) but as the first mentioned case has been overruled (see (1963) 2 C.M.L. Rep., p. 176) and a stay of proceedings by virtue of Regulation No. 17 Art. 9(3) ordered, the ruling of the Courts of first instance cannot be taken to represent the prevailing legal opinion in France.
Judgment of June 14, 1963 (Braun A.G. v. Ruhrland re “Braun Electric Razors”), (1964) 3 C.M.L. Rep., p. 59; Betriebsberater, 1963, p. 1393; NJW 1964, p. 152; WuW 1964, p. 175.
Declaration made according to s. 90(2) of the Cartel Law, see WuW 1961, p. 303.
As mentioned supra, p. 114 n. 3. This is the application which was determined by the Commission of the E.E.C. on September 23, 1964 (re-printed infra in Appendix E, p. 261).
Judgment of the German Supreme Court of January 22, 1964, A WD 1964, p. 122;
For an (unofficial) statement of the Commission’s policy, especially on sole distributorship agreements, see the Address of P. VerLoren van Themaat before the International Chamber of Commerce in Paris on March 14, 1963, WuW 1963, p. 557, at pp. 563 f.
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© 1965 Martinus Nijhoff, The Hague, Netherlands
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Graupner, R. (1965). Sole Distributorship Agreements. In: The Rules of Competition in the European Economic Community. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-9542-3_5
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