CHAPTER 16 International Marketing Law: Sales Representatives, Advertising, and Ethical Issues

1. CHAPTER 16 International Marketing Law: Sales Representatives, Advertising, and Ethical Issues

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.

3. Supercession of AgreementWith 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.

4. Supercession of AgreementWith 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 • Supersession (local law superseded contract).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.

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.

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.

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.

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

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.

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.

11. The Foreign Corrupt Practices Act • Routine government action exception. • 2003 – 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.

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 07-01 (DOJ, 2007).

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.

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?

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.