Is this legal?

[Dustbak]

I am looking around for another MFDB and looking at all available options. I heard from one Phase dealer that they aren't allowed to sell DB's outside their designated region by contract.

As far as I know in Europe we have laws to make sure we have free movement of people, services and goods. I am wondering whether a system of forcing clients to only buy their goods from specified dealers is legal. You should be able to buy goods from any European dealer you decide, it appears to me that any contract that prevents this, is in conflict with European law.

My legal education has been awhile ago, can anyone with more knowledge shed some light on this issue?

For instance in the case of Nintendo. Nintendo had the agreement with 7 of its importers to make sure they only sold in their own region. This way they could prevent any parallell import and keep idiotic price differences. Eventually the EU handed out a fine of 168Million Euros (about 200M USD). This seems to have similarities with the Nintendo structure.

Volkswagen got a 90M Euro fine for a similar thing.

[James Russell]

I don't understand how this could be inforced, especially since most people travel and work everywhere.

I live in NY and buy from everywhere, though I  bought my Phase from Capture Integration in Atlanta because in my view they offered the best service.  I know a lot of others who have done the same.

I guess every company has rules, but iI doubt if this is viable in an internet/fedex world and how can the manufacturer keep us from buying from who we chose?

JR

I am looking around for another MFDB and looking at all available options. I heard from one Phase dealer that they aren't allowed to sell DB's outside their designated region by contract.

As far as I know in Europe we have laws to make sure we have free movement of people, services and goods. I am wondering whether a system of forcing clients to only buy their goods from specified dealers is legal. You should be able to buy goods from any European dealer you decide, it appears to me that any contract that prevents this, is in conflict with European law.

My legal education has been awhile ago, can anyone with more knowledge shed some light on this issue?

For instance in the case of Nintendo. Nintendo had the agreement with 7 of its importers to make sure they only sold in their own region. This way they could prevent any parallell import and keep idiotic price differences. Eventually the EU handed out a fine of 168Million Euros (about 200M USD). This seems to have similarities with the Nintendo structure.

Volkswagen got a 90M Euro fine for a similar thing.
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[feppe]

I am looking around for another MFDB and looking at all available options. I heard from one Phase dealer that they aren't allowed to sell DB's outside their designated region by contract.

As far as I know in Europe we have laws to make sure we have free movement of people, services and goods. I am wondering whether a system of forcing clients to only buy their goods from specified dealers is legal. You should be able to buy goods from any European dealer you decide, it appears to me that any contract that prevents this, is in conflict with European law.

My legal education has been awhile ago, can anyone with more knowledge shed some light on this issue?

For instance in the case of Nintendo. Nintendo had the agreement with 7 of its importers to make sure they only sold in their own region. This way they could prevent any parallell import and keep idiotic price differences. Eventually the EU handed out a fine of 168Million Euros (about 200M USD). This seems to have similarities with the Nintendo structure.

Volkswagen got a 90M Euro fine for a similar thing.
[a href=\"index.php?act=findpost&pid=116107\"][{POST_SNAPBACK}][/a]

IANAL, but it appears you are correct. Such contracts were quite common before, but are almost always illegal these days.

The most obvious solution would be to contact Phase directly and inform them of this, and demand they annul such contracts within the EU. Please note that this might not be the case for EEA countries (Norway, Switzerland, etc.). Companies are generally very accommodating when a customer contacts them on such matters, and no further action is needed. Please let us know how it goes.

[Graham Mitchell]

Yes, it is generally illegal. See Article 4B: http://eur-lex.europa.eu/smartapi/cgi/sga_...999&nu_doc=2790

[KAP]

I think it goes further than that. I believe you can't give an exclusive to one supplier. If I opened a shop next door to a supplier and asked Phase to supply me, under the law as it stands, they would have to supply me. I think that's how it works.

Kevin.

[Sisyphus]

I think what this dealer is referring to is a no competition contract. A supplier may guard their business and customers with such a contract in the following situation.

I open a shop selling Phase equipment, three months later a guy opens across the street selling the same Phase equipment cheeper. Now the questions and lawyers start flying. How can the second store sell the same equipment cheeper, are they getting a better deal from Phase? How can Phase do this to me I'm a loyal retailer of their equipment? Customers start returning equipment and writing nasty letters to me. That's about the time the lawyers come in.

So to avoid all this trouble Phase has it's retailers sign a contract agreeing only to sell equipment in a given geographic area. By the way I do not sell for Phase or anyone else and I have no knowledge that Phase requires such contracts of it's retailers.

Brian

[Dustbak]

I think what this dealer is referring to is a no competition contract. A supplier may guard their business and customers with such a contract in the following situation.

I open a shop selling Phase equipment, three months later a guy opens across the street selling the same Phase equipment cheeper. Now the questions and lawyers start flying. How can the second store sell the same equipment cheeper, are they getting a better deal from Phase? How can Phase do this to me I'm a loyal retailer of their equipment? Customers start returning equipment and writing nasty letters to me. That's about the time the lawyers come in.

So to avoid all this trouble Phase has it's retailers sign a contract agreeing only to sell equipment in a given geographic area. By the way I do not sell for Phase or anyone else and I have no knowledge that Phase requires such contracts of it's retailers.

Brian
[a href=\"index.php?act=findpost&pid=116426\"][{POST_SNAPBACK}][/a]

That is one of the reasons why it is illegal as far as I understand it at the moment (at least in Europe it is). It is cutting up the market, protecting prices & margins and that way undermining fair competition.

[Graham Mitchell]

So to avoid all this trouble Phase has it's retailers sign a contract agreeing only to sell equipment in a given geographic area.

Contracts do sometimes contain provisions which are contrary to the current law. In such cases, the provisions are unenforceable.

[feppe]

I think what this dealer is referring to is a no competition contract. A supplier may guard their business and customers with such a contract in the following situation.

I open a shop selling Phase equipment, three months later a guy opens across the street selling the same Phase equipment cheeper. Now the questions and lawyers start flying. How can the second store sell the same equipment cheeper, are they getting a better deal from Phase? How can Phase do this to me I'm a loyal retailer of their equipment? Customers start returning equipment and writing nasty letters to me. That's about the time the lawyers come in.

So to avoid all this trouble Phase has it's retailers sign a contract agreeing only to sell equipment in a given geographic area. By the way I do not sell for Phase or anyone else and I have no knowledge that Phase requires such contracts of it's retailers.

Brian
[a href=\"index.php?act=findpost&pid=116426\"][{POST_SNAPBACK}][/a]

If somebody sells the same product you are selling at a lower price, tough. You have no right whatsoever to reap profits, and anyone can step in and sell at a lower price. That's the whole idea of free markets.

The exception is predatory pricing, which has nothing to do with the matter at hand. Even in these situations the supplier can't guard their business; enforcing laws is the business of the police and other authorities.

And finally, no competition contracts between businesses and persons are unenforceable (and illegal AFAIK) in Europe, and in most jurisdictions elsewhere.

[Sisyphus]

In the United States this is  common practice and is the same as a contract granting exclusivity or right of refusal to a chain business operator (McDonald's). Lets say you own a McDonald's restaurant  and someone else wishes to open another franchise down the street from you. McDonald's will come to you (by contractual agreement) and ask your permission to allow this to occur. If you decide the new franchise is to near yours you may deny that permission. This guards your profits and McDonald's from lawsuits over unfair trade practices.
Now keep in mind, the contract goes both ways, it does not tie the hands of retailer, it helps him/her remain profitable in their market. At the same time the corporation stays profitable.

Before we go to much further I would check with this vendor to see exactly what they are referring to. Is the contract stating they can only sell within a certain area, or is this a false interpretation of the contract in order to keep from having to deal with customers out of their area. This to is not unheard of (I have a contract it's not my fault).

Brian

[pflower]

In terms of EU Community Law this is complicated stuff.  What follows is a very abbreviated summary ignoring lots of potential arguments and provisions.

Article 81 (1)  of the Treaty of Rome prohibits:

all agreements between undertakings...which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:

(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
( limit or control production, markets, technical development, or investment;
 
and a bit more.  

All contracts which contravene this Article are void (i.e of no effect).

However Article 81(3) provides that the Commission can exclude certain species of agreements from this prohibition.

We then go to Regulation 2790/1999 (“the Vertical Agreements Regulation”).  A vertical agreement is an agreement between 2 parties who are on different rungs of the supply/distribution ladder - i.e. a Manufacturer and a Distributor or Retailer.  Article 2 of the Regulation exempts vertical agreements from the prohibition (as long as they don't have a couple of features which are referred to as "hard core").

But where a vertical agreement has an exclusivity element (i.e. Manufacturer A will only sell to Distributor B or Distributor B will only buy from Manufacturer A) then the exemption only applies where the buyer has less than a 30% market share.

This is where the fun starts.  What is the market?  In the case of digital backs is it a market for digital cameras (which would include consumer cameras)?  Or is it only Medium Format Digital Backs regardless of size and cost?  Is it Medium Format Digital cameras (which would include the Mamiya ZD)?  Is it only Medium Format Backs which fit Hasselblad? Or Contax? Or LF cams?

Lots of potential arguments.

[Sisyphus]

It would seem that these provisions pertain to agreements to fix prices between manufacturers of similar items (two companies making car tires) in an attempt to keep profits high. This would be an Anti-Trust violation in the US.

The exclusions for Vertical Agreements seem to most closely apply here.

Brian

[Graham Mitchell]

We then go to Regulation 2790/1999 (“the Vertical Agreements Regulation”).

I provided a link to that Regulation above.

This is where the fun starts.  What is the market?

Correct, which is why I used the word 'generally'  I would argue that the medium format digital products are not a substitute for the consumer cameras, so they are competing in a different market.

[matt4626]

I think it goes further than that. I believe you can't give an exclusive to one supplier. If I opened a shop next door to a supplier and asked Phase to supply me, under the law as it stands, they would have to supply me. I think that's how it works.

Kevin.
[a href=\"index.php?act=findpost&pid=116323\"][{POST_SNAPBACK}][/a]

Not even close. In a free country a company can sell to who they want.