The Legality of Full Line Forcing

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In a full line forcing arrangement, distributors are contractually obligated to sell a supplier’s product line in its entirety. Importantly, though, distributors are able to carry the products of competing sellers as well. See Colorado Pump & Supply Co. v. Febco, Inc., 472 F.2d 637, 640 (10th Cir. 1973). This characteristic distinguishes full line forcing from other tying arrangements and effectively insulates it from per se illegality, provided the arrangement does not have a substantial effect on competition. See Michael Denger and Willard K. Tom, Relationships with Suppliers, Customers and Franchisees, 606 PLI/Corp 255, 355 (1988).

A Different Kind of Tying Arrangement

Without question, courts are loath to uphold any trade agreement that forces consumers to purchase unwanted products against their will. It is therefore foreseeable that requiring a consumer to buy an extraneous good in order to procure a second desired good is not only a disfavored practice, but an unlawful one. See Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 461-62 (1992). Both Section 1 of the Sherman Act and Section 3 of the Clayton Act prohibit sellers from implementing these types of tying arrangements, deeming them per se illegal. See id.; Bepco, Inc. v. Allied-Signal Inc., 106 F. Supp. 2d 814, 825 (M.D.N.C. 2000); Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 9 (1984) (overruled on other grounds.)

Despite courts’ reluctance to uphold such agreements – particularly when a seller can abuse his “control over the tying product to force the buyer into the purchase of a tied product that the buyer either did not want at all, or might have preferred to purchase elsewhere…” – a special breed of tying arrangement remains alive and well, namely full line forcing. See Jefferson Parish, 466 U.S. at 12.

Full line forcing, the milder and more pro-competitive cousin to the traditional tying arrangement, can afford merchants bargaining power without “run[ning] afoul of the antitrust laws.” Bepco, Inc., 106 F. Supp. 2d at 826. At its core, full line forcing requires dealers to stock a manufacturer’s entire product line, but importantly, these provisions are not scrutinized unless an additional anticompetitive harm occurs, such as “a requirement that the dealer must obtain inventories of the products at certain minimal levels.” W. Michael Garner, Franchise and Distribution Law and Practice, 2 Franch. & Distr. Law & Prac. § 11:31 (2011) (citing Miller Motors, Inc. v. Ford Motor Co., 252 F.2d 441 (4th Cir. 1958)).

Evaluating Full Line Forcing Provisions

Courts look to any of the three following factors to determine whether a full line forcing provision will cause anticompetitive harm in the marketplace:

  • No Minimum Purchase Requirements: First, if “the supplier couples full line forcing with minimum purchase or inventory requirements that effectively preclude distributors from handling competing lines,” courts will find that competition is not restrained in the market. Denger & Tom, 606 PLI/Corp at 355; see Smith Mach. Co. v. Hesston Corp., 878 F.2d 1290, 1297 (10th Cir. 1989) (stating that “a foreclosure of choice to an ultimate consumer appears to be the principal key to a tie that is illegal per se. No such foreclosure occurs or is threatened in a typical line forcing situation.”).
    • No Traditional Tying: Second, agreements are subject to per se scrutiny and invalidated if the products actually emanate from two separate manufacturing lines, as in a traditional tying arrangement. See Earley Ford Tractor, Inc. v. Hesston Corp., 556 F. Supp. 544 (W.D. Mo. 1983) (preliminary injunction preventing supplier from providing machinery to distributor that refused to sell supplier’s tractors in addition to machinery already stocked by distributor).
    • No Market Power: Third, if “the seller had economic power in the market for the forcing item and … a substantial amount of commerce relating to the forced item was foreclosed,” courts will invalidate the full line forcing provision. Pitchford v. PEPI, Inc., 531 F.2d 92, 100-01 (3rd Cir. 1975).

    In practice, courts are remiss to strike down full line forcing on per se grounds, instead choosing to apply the rule of reason and – often – upholding the provision. See Arthur Cantor, Tying, Exclusive Dealing, And Franchising Issues, 1738 PLI/Corp 433, 496-99 (2009). Courts conclude as much both by framing full line forcing as distinct from and more pro-competitive than tying arrangements and by defining the arrangement as a “vertical nonprice restraint.” See e.g. Smith Mach. Co., Inc., 878 F.2d at 1295 (stating that courts need only employ rule of reason analysis for vertical nonprice restraints)).

    Indeed, in order to condemn full line forcing as per se illegal, the questioned provision would need to be so egregious and “manifestly anticompetitive” that it would almost invariably restrict competition in the market. Bus. Elec. Corp. v. Sharp Elec. Corp., 485 U.S. 717, 723 (1988). On the contrary, full line forcing may actually “enhance interbrand competition” by increasing the number of products available – far from hurting market output or consumer choice. Smith Mach. Co., Inc., 878 F.2d at 1296. As a result, courts tend to give these provisions the benefit of the doubt, requiring plaintiffs to “prove an anticompetitive effect of the defendant's conduct on the relevant market, and that the conduct has no procompetitive benefit or justification.” Southern Card & Novelty, Inc. v. Lawson Mardon Label, Inc., 138 F.3d 869, 876 (11th Cir. 1998).

    Conclusion

    Unlike tying arrangements, which essentially reduce or eliminate consumer choice by forcing customers to purchase not only their desired products, but also superfluous goods, full line forcing appears to have a much weaker anticompetitive effect, if any at all. In its purest form, full line forcing is a contractual tool that requires a distributor to carry an entire line of a manufacturer, but says nothing about the distributor’s ability to carry competing brands. In that case, it is difficult to establish how such a provision threatens competition or output, particularly because consumers may actually be exposed to greater product choice and diversity.

    *The views expressed are solely those of the author and do not reflect the views of the State of Missouri, the Attorney General of Missouri or those of any other state or state official. This article is not a product of the Office of the Attorney General of Missouri.

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