The Franchise Memorandum

The United States District Court for the District of Connecticut recently dismissed the third amended complaint of a convenience store franchisee who challenged the franchise system’s primary merchandise vendor for alleged violations of federal and state antitrust laws and the Connecticut Unfair Trade Practices Act. Bansavich v. McLane Co., Inc., No. 3:07cv702 (D. Conn. Oct. 31, 2008). Plaintiff Bansavich, a Mobil on the Run franchisee, challenged the requirement that franchisees participating in the system’s “Exclusive Product Program” purchase certain products from approved suppliers. Specifically, Bansavich alleged that defendant McClane, the only primary merchandise vendor that supplies the required merchandise in Connecticut, engaged in an illegal tying arrangement by refusing to sell to Bansavich any of McLane’s products unless Bansavich also agreed to purchase its tobacco products. 

Noting that dismissal of a tying claim is appropriate where a plaintiff has improperly limited a product market to exclude potential substitutes, the district court held that Bansavich’s alleged relevant market, the market for the “Required Products” and the “Exclusive Products,” “is facially unsustainable” and that plaintiff “has impermissibly limited the product market to exclude potential substitutes” without providing any plausible explanation as to why the market was limited. Moreover, citing Queen City Pizza v. Domino’s Pizza, 124 F.3d 430, 443 (3d Cir. 1997), the district court held that “particular contractual constraints assumed by a plaintiff are not sufficient by themselves to render interchangeable commodities non-interchangeable for purposes of relevant market definition.” Accordingly, the district court dismissed the plaintiff’s third amended complaint.