CACI 3409 Vertical Restraints—Termination of Reseller

California Civil Jury Instructions CACI

3409 Vertical Restraints—Termination of Reseller

A supplier, acting independently, may choose those resellers to which it wishes to sell or not sell. It may announce to those resellers the terms of resale, including resale prices, in advance. The supplier may terminate those resellers that do not follow these terms as long as the supplier acts independently in doing so.

However, if a supplier coerces a reseller to follow its suggested terms of resale, and the reseller does so, this conduct is an agreement to restrain competition.

Directions for Use

There are circumstances where the terminated party that has combined with the supplier, other than as a buyer, may have a claim. For example, a customer that leases the supplier’s product and then subleases it may also invoke this law. In such cases, this instruction should be adapted accordingly.

Sources and Authority

“If a seller does no more than announce a policy designed to restrain trade, and declines to sell to those who fail to adhere to the policy, no illegal combination is established. Also, a supplier may suggest policies and use persuasion to obtain adherence. At the same time, an illegal combination may be found where a supplier secures compliance with announced policies in restraint of trade by means which go beyond mere announcement of policy and the refusal to deal. If, for example, the supplier takes ‘affirmative action’ to bring about the involuntary acquiescence of its dealers, an unlawful combination exists.” (Kolling v. Dow Jones & Co. (1982) 137 Cal.App.3d 709, 721 [187 Cal.Rptr. 797], internal citations omitted.)

“[A] manufacturer’s announcement of a resale price policy and its refusal to deal with dealers who do not comply coupled with the dealers’ voluntary acquiescence in the policy does not constitute an implied agreement or an unlawful combination as a matter of law. An unlawful combination arises, however, if the manufacturer goes beyond those measures by seeking communication of a dealer’s acquiescence or agreement to secure the dealer’s compliance, such as by means of coercion, and the dealer so communicates.” (Chavez v. Whirlpool Corp. (2001) 93 Cal.App.4th 363, 372–373 [113 Cal.Rptr.2d 175], internal citations omitted.)

Secondary Sources

1 Witkin, Summary of California Law (11th ed. 2017) Contracts, §§ 602–621
6 Antitrust Laws & Trade Regulation, Ch. 105, California, § 105.02 (Matthew Bender)
3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts, § 40.168[3] (Matthew Bender)
49 California Forms of Pleading and Practice, Ch. 565, Unfair Competition, § 565.77 (Matthew Bender)