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International Marketing Law: Sales Representatives,

Advertising and Ethical Issues

International Marketing Law: Sales Representatives,

Advertising and Ethical Issues

Chapter 16

© 2005 Thomson/West Legal Studies In Business

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Sales Representatives, Advertising and Ethical Issues

Sales Representatives, Advertising and Ethical Issues

• National law plays a major role

• Seek local counsel where appropriate

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Why Have a Foreign Representative?

Why Have a Foreign Representative?

• Regulation of 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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United States LawUnited States Law

• 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

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Outside the United StatesOutside the United States

• 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• Supersession (local law superseded contract)• Tax consequences: once hired a “dependent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”“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

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Electra- Amambay v. Comania Antarctica

Electra- Amambay v. Comania 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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Regulation of AdvertisingRegulation of Advertising

• Very country specific: difference between France and Saudi Arabia

• But some universality - regulation of deceptive advertising

• Case example - Carlill v. Carbolic Smoke Ball

• Content specific regulation - aimed at children

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Foreign Corrupt Practices Act: US law that applies extraterritorially

Foreign Corrupt Practices Act: US law that applies extraterritorially

• 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 provision- system of controls but no reference to materiality

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Foreign Corrupt Practices Act: US law that applies extraterritorially

Foreign Corrupt Practices Act: US law that applies extraterritorially

• Routine government action exception

• “corruptly”

• “knowing”

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Adler v. Federal Republic of NigeriaAdler 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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International responseInternational response

• Feb. 1999 OECD Convention on Combating Bribery of Foreign Public Officials

• Encouraging after 20 plus years

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DOJ ReviewDOJ Review

• What?

• Why not used by more businesses?

• What alternatives does a business have?

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Other Countries?Other Countries?

• Some even make bribes outside the country tax deductible

• Some progress with OECD Antibribery Convention- but countries still have to implement into national law

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Implications for Business?Implications for Business?

• Care and selection of agents

• Supesession problem

• Actions of agents may be imputed to principal in FCPA context