CHAPTER 16
International
Marketing Law: Sales Representatives,
Advertising, and Ethical Issues
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a part of South-Western Cengage Learning.
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.
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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.
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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• Supersession (local law superseded contract).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.
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“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.
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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.
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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.
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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
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Content-Specific Regulations
• Language Laws.
• Advertising Restrictions on “Sin” Products:
Tobacco and Alcohol.
• Other restrictions on Advertising.
• Marketing Considerations: the Nestle Infant
Formula Case.
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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 provisionsystem of controls but no reference to
materiality.
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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.
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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).
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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.
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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?
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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.
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