Exclusive dealing and tied selling (franchise)

Ontario’s and Alberta’s disclosure rules require obligations to buy from the franchisor or approved suppliers to be described; section 77 is a separate federal test.

What section 77 says

Section 77 includes, as exclusive dealing, a supplier requiring a customer, as a condition of supply, to deal only or primarily in products supplied or designated by the supplier or its nominee. Tied selling includes requiring the customer to acquire another product from the supplier or its nominee. Both include inducing the customer by more favourable terms. On application by the Commissioner or a person granted leave, the Tribunal may make an order where exclusive dealing or tied selling, engaged in by a major supplier or widespread in a market, is likely to impede entry or expansion or have another exclusionary effect, with the result that competition is or is likely to be lessened substantially. Subsection 77(4) lists exceptions, including reasonable technological ties, and no order applies between affiliated entities; subsection 77(5) treats some trademark grantors and grantees as affiliated.

What to ask

• Which purchases the franchise agreement ties to the franchisor or its nominees
• What the disclosure document says about those obligations
• Whether the franchisor receives a supply chain rebate on them