Antitrust Law Daily Wrap Up, ANTITRUST—D.N.J.: Authorized Omega watch dealership unable to show competitors received favored treatment, (Jul 24, 2015)

By Edward L. Puzzo, J.D.

A watch retailer who was an authorized Omega dealer did not have a valid claim under the Robinson-Patman Act because it could not show the existence of actual competitors receiving favored treatment, the federal district court in Newark, New Jersey has ruled. It also did not have a valid claim under the New Jersey’s franchise law in connection with its termination as a dealer, because it was not in a franchise relationship Orologio of Short Hills, Inc. v. The Swatch Group (U.S.) Ltd., Inc., July 23, 2015, Wigenton, S.).

Plaintiff Orologio of Short Hills was a retailer of high-end watches. They were an authorized dealer of Omega watches, a brand owned by defendant Swatch. In April 2011, after a 20-year relationship, Swatch terminated Orologio as an authorized Omega dealer because they planned to open an Omega boutique in the same mall where Orologio had a retail store. In November 2011, Orologio brought claims in federal court alleging violations of the Robinson-Patman Act and the New Jersey Franchise Practices Act.

Robinson-Patman Act. The Robinson-Patman Act (RPA) addresses price discrimination, the court explained, by assuring that all sellers regardless of size who are competing for the same customers receive evenhanded treatment from their suppliers. Sections 2(d) and 2(e) of the RPA require that purchasers be given an opportunity to participate in seller advertising and promotional programs on proportionally equal terms, such as making payments made or services furnished based on the dollar volume or quantity of product purchased during a specified period. Sections 2(d) and 2(e) require that the favored and disfavored purchasers stand in some competitive relationship with each other.

Orologio identified Omega dealers in a four-state area, including New Jersey, that received co-op assistance—which allowed dealers to apply for advertising support and other dealers that received free “tagging” in Swatch-initiated advertisements—but failed to show numerical or anecdotal evidence that these dealers were actual competitors under the RPA. Even if Orologio had been able to identify competitors, it was unable to show disfavored treatment by Swatch.

Orologio participated in the “Partner Plan” in 2004 and 2005 and accumulated credits; in 2007 it did not participate in the plan; and in 2008 and 2009, it participated in the plan but did not achieve the sales goals which would have triggered credits. Volume requirements are acceptable under the RPA, the court stated, because they properly allow for service adjustments based on the dealers’ capabilities. The co-op assistance and tagging programs also complied with the RPA because Orologio had adequate notice of the fact that all authorized dealers could apply for and present a co-op or media plan to Swatch, and could request tagging. Thus, Orologio claims under the Robinson-Patman Act failed, and the Swatch’s motion for summary judgment was granted.

New Jersey Franchise Practices Act. To maintain a claim under the New Jersey Franchise Practices Act (NJFPA), the court explained, Orologio must first establish that it had a franchise arrangement with Swatch. Under the NJFPA, a franchise is defined as a written arrangement granting a license to use a trade name, trade mark, service mark, where there is a “community of interest” between the parties in the marketing of goods or services.

Written arrangement. Orologio contended that the written arrangement requirement was met by various documents issued by Swatch to its authorized dealers, including a “Brand Policy Statement” detailing how to display and present Omega products at the retailer’s store, an “Internet Brand Policy” regarding the use of its proprietary images and products on the retailer’s website, a “Selection Distribution Program” which governed its selection of authorized dealers, and a “Partner Plan” administered by Swatch to enable dealers to obtain a credit on future sales in exchange achieving certain sales goals.

The court found that these advertising materials did not meet the NJFPA’s written arrangement requirement, because they did not contain a written grant of a license to use a use a trade name, trade mark, service mark. Simply selling goods or distributing materials which bear the manufacturer’s name or trademark does not license use of the trademark, the court explained; otherwise any business selling a name brand product would necessarily be considered as holding a license. The NJFPA license is one in which the franchisee wraps himself with the trade name of the franchisor, and where there is use of the trade name in the very business title of the franchisee, holding out to the public some special relationship or connection. Here, no indication was made to the public that a special relationship existed between the parties beyond Orologio’s straightforward advertising and selling of Swatch’s Omega watches. Indeed, Omega was not even its biggest seller of the brands it sold. The court ruled that the furnishing of advertising materials, coupled with Orologio’s lack of reliance on Omega’s brand, did not create a license under the NJFPA. On that basis alone, a grant of Swatch’s motion for summary judgment on the NJFPA claim was warranted.

Community of interest. Even if a license did exist, the court continued, there was no community of interest between the parties. Community of interest in New Jersey requires factors such as the licensor’s control over the licensee, the licensee’s economic dependence on the licensor, a disparity in bargaining power, and the presence of a franchise-specific investment by the licensee. Here, there was a lack of control and dependence because Orologio had the freedom to choose whether to conduct business with Swatch. Orologio was not economically dependent on Swatch as they relied on multiple high-end watch brands; in fact, their business actually increased after they were terminated. Thus, the absence of a community of interest also warrants summary judgment on Orologio’s NJFPA claim.

The case is Civil Action No. 11-6854.

Attorneys: Daniel D. Barnes (Chiesa Shahinian & Giantomasi PC) for Orologio of Short Hills Inc. and Orologio International Limited Inc. Michael J. Shavel (Hill Wallack, LLP) for The Swatch Group [U.S.] Inc.

Companies: Orologio of Short Hills Inc.; Orologio International Limited Inc.; The Swatch Group [U.S.] Inc.

Cases: Antitrust FranchisingDistribution Advertising NewJerseyNews