Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. CHAPTER 16 International Marketing Law: Sales Representatives, Advertising, and Ethical Issues

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 2 Regulation of Relationships with Representatives Agency- one party (agent) performs a variety of functions on behalf or on direction of another (principal). Independent contractors- perform general tasks but retain substantial discretion and independence.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 3 Supercession of Agreement With Representative In the U.S., a principal is generally liable for the acts of an agent but not those of an independent contractor. Can negotiate an arrangement. U.S tax law consequences. French Law: Voyageur Representant, et Placier.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 4 Supercession of Agreement With Representative Outside the U.S., many countries disregard written contracts to protect agent/independent contractor. Supersession (local law superseded contract). Tax consequences: once hired a “dependent agent” deemed to have opened an office in that country, subject to tax, considered an employee, trigger representation on Board.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 5 “Evergreen Contract” A fixed term contract in the EU that if continued beyond the stated term can only be terminated after that upon 3 month WRITTEN notice for any relationship that has lasted for three years or more. European Union (EU) Council Directive 86/653 requires each EU member state to pass consistent national laws on representatives.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 6 Electra- Amambay v. Compania Antarctica Paraguayan Law requires that if a Paraguayan national is terminated for other than just cause from a foreign company doing business in Paraguay, the company must pay a statutory penalty to the employee. The Supreme Court of Paraguay upheld the constitutionality of this law.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 7 Tax & Labor Regulation and Principal Liability: Dependent-Independent Distinction What is the difference between a dependent vs. independent agent? For tax purposes, a principal “opens an office” when he hires an agent. If an agent is dependent, the principal is vicariously liable to third parties. If independent, most likely there is no liability.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 8 Regulation of Advertising Abroad Very country specific: difference between France and Saudi Arabia. But some universality - regulation of deceptive advertising. Truth in Advertising: see the Carlill v. Carbolic Smoke Ball Co. case. Content specific regulation - aimed at children

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 9 Content-Specific Regulations Language Laws. Advertising Restrictions on “Sin” Products: Tobacco and Alcohol. Other restrictions on Advertising. Marketing Considerations: the Nestle Infant Formula Case.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 10 The Foreign Corrupt Practices Act Antibribery- corruptly offering something of value to a foreign official to obtain or retain business. Exception: facilitating or expediting a routine governmental action like a visa, mail or phone service, utilities. Accounting and record keeping provision- system of controls but no reference to materiality.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 11 The Foreign Corrupt Practices Act Routine government action exception – UN Convention Against Corruption. 2007– EU Criminal Law Convention. Structure: –Antibribery Provisions. Routine governmental acts must be non-discretionary. Payment must also be “corrupt.” –Accounting and Record-Keeping Requirement.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 12 DOJ Review Firms wanting DOJ review must be willing to give up all materials and documents in the transaction for inspection; no confidentiality. See the Foreign Corrupt Practices Act Review Opinion Procedure Release (DOJ, 2007).

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 13 Enforcement Actions FCPA Enforcement Actions. –Dramatic increases in recent years Foreign FCPA-like Enforcement Actions. –See the In the Matter of Statoil, ASA case in which both the U.S. and Norway imposed fines. International Refusal to Enforce Contracts Induced by Bribery. –2006 arbitration: Inceysa Vallioselenta, S.L. v. Republic of El Salvador. Refusal to enforce contract between government and contractor.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 14 Adler v. Federal Republic of Nigeria Adler ( a U.S. Citizen) paid over $2.11 million to Nigerian individuals in hopes of collecting $60 million. This turned out to be a scam and he never received the money. Adler sued but the Court barred Adler from pursuing his claim. Why? What did the appeals court do?

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 15 Prudent Behavior First, avoid making direct payments to government officials. Simplest course is to avoid doing business where extortion or bribery is the norm. Second, foreign agents should be carefully selected and even more carefully paid. Avoid “premium” transactions. Make appropriate inquiry where government officials have “discretion” in a transaction.