Anti Trust

A1993 article in this Journal reported, without fanfare, a federal district court’s holding that a “franchisor and franchisee were legally incapable of conspiring” in restraint of trade. Since that time, two other district courts and two courts of appeals have echoed that decision. Franchisors and franchisees that have spent time and energy ensuring compliance with the antitrust laws may be pleasantly surprised to learn that many of these efforts may be unnecessary. Because Section 1 of the Sherman Act (the key antitrust statute under which franchisor actions have been challenged) proscribes only “contracts, combinations and conspiracies” in restraint of trade or commerce, if franchisors are, as a matter of law, incapable of conspiring with franchisees, then franchisors need not worry about such things as mandating the prices at which franchisees resell products, “tying” continuation of the franchise to required purchases, or otherwise restricting franchisees’ actions. Franchisors could require all franchisees to participate in promotions and sales pricing without any...