Exclusivity Clause In Manufacturing Agreement
Manufacturers should be aware that trademark holders may be reluctant to accept an exclusivity clause such as this. While a brand owner would certainly appreciate reduced pricing for a larger volume, good collaboration with an experienced manufacturer and the usefulness of the know-how developed by the manufacturer, he might also want several sources for his products in order to minimize the risk of supply – which would limit this type of exclusivity clause. The parties may have to strike a certain balance between the two rules of exclusivity and a clear exclusion for the trademark holder if the manufacturer does not act properly. Apple has broken the shape with regard to the wireless supported software driven by controlling exactly the software that has been installed on its product. Att took a big risk in entering into this exclusivity agreement, as it lost a lot of control over the functionality and operation of the device. But the wireless company saw the success of the iPod and decided to give Apple control of the customer experience. The opportunity was taken advantage of this because every customer who wanted an iPhone had to sign a two-year service contract with AT-T. An exclusivity clause for a trademark holder could be as follows: exclusive contracts that require a distributor to sell the products to a single producer may have similar effects on a new manufacturer that prevents its products from being put in sufficient outlets to allow consumers to compare their new products with those of the first producer. Exclusive sales contracts can be antitrust-against by preventing newcomers from competing with sales. For example, the FTC found that a piper`s accessories producer had illegally maintained its monopoly on domestically manufactured ductile steel faucets by requiring its distributors to purchase domestic faucets exclusively from it and not from competitors attempting to enter the domestic market. The FTC found that this producer`s policy prevented a competitor from achieving the sales necessary for effective competition. In another case, the DOJ challenged the exclusive trade agreements of an artificial teeth manufacturer with a market share of at least 75%.
These exclusive contracts with major dealers have effectively blocked smaller rivals from selling their teeth to dental laboratories and ultimately being used by dental patients.