1

Let's say I'm an international fruit distributor, and with at least a basic knowledge of economics I know I'm going to need to sell my fruit at a significant discount to less developed regions as opposed to more developed regions.

For example, I might sell pineapples to the French market for €1.20 each wholesale, while I might need to drop that down to €0.20 to sell to the Indian market. That's fine, I'm still making a healthy profit either way, but I run the risk that importers in either of the two countries are going to notice the discrepancy and ship my €0.20 pineapples from India to France, and compete with my €1.20 pineapples there.

Is there a way, as this supposed fruit distributor, that I can control ownership of the fruit I sell until they reach the final consumer? What if the good is intellectual over physical (e.g. music over fruit)?

I'm specifically referring to American and European law here, as I doubt restrictions on the cheaper regions' side are going to help much if at all.

  • So what you want to do is prohibit resale of your goods from cheap zone X to expensive zone Y, right? How do you define "final consumer"? – user6726 Nov 4 '17 at 23:51
  • Fair point. In which case, is there a way of controlling resale in perpetuity, or at least within the reasonable shelf life of the product? – TheEnvironmentalist Nov 5 '17 at 0:01
2

The US Supreme Court case Kirtsaeng v. John Wiley & Sons, Inc. appears to apply the First Sale Doctrine even to things imported from abroad. A textbook company was selling books at a discount overseas, and it was found that they couldn't prevent them from being imported even though it would be problematic for their pricing strategy.

European Union rules might be a bit different. There's a directive that has some similar language for computer programs.

  1. The first sale in the Community of a copy of a program by the rightholder or with his consent shall exhaust the distribution right within the Community of that copy, with the exception of the right to control further rental of the program or a copy thereof.
0

This is a much more slippery question than it appears at first glance.

It is common place for a seller of goods or intellectual property to enter into contracts with first tier distributors of the product assigning them territories, prohibiting them from competing in other markets, and only awarding them commissions on their sales if the sales are made to someone in their territory. Often there is a "suggested retail price" in these contracts.

But, restricting distribution further down the distribution chain implicates the "first sale doctrine" for patented goods, and common law or civil code created legal doctrines invalidating restraints on alienation for non-patented goods. So, your distributor in India might be hard pressed to sell wholesale to a wholesaler with a binding contract prohibiting distribution to Europe, although your first tier distributor could cease doing business with a wholesaler who was discovered to be doing so.

Also, fixing prices in a binding manner for secondary distributors can violate anti-trust laws.

The business model that affords the most control is vertical integration. If the orchard owner had divisions of the same company that directly sell to the public at brick and mortar stores around the world or via mail order, handles its own transportation and customs compliance, and does not sell the goods to intermediate distributors, it is possible to gain a great deal of control of where and at what price goods are distributed.

Historically, it hasn't been viable as a matter of technological and commercial reality for orchard owners to set up that kind of distribution network. The fruit producer needs to be very large to make that kind of setup viable, and really, would be better off if the portfolio of goods sold was larger. But, in this age of high speed air freight, refrigerated cargo ships, and the Internet, a direct to consumer retail sale model for a particular producer is a lot more viable than it used to be.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.