1 International Marketing Law: Sales Representatives, Advertising and Ethical Issues Chapter 16 © 2005 Thomson/West Legal Studies In Business

2 Sales Representatives, Advertising and Ethical Issues National law plays a major role Seek local counsel where appropriate

3 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

4 United 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

5 Outside 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States Many countries disregard written contracts to protect agent/independent contractor Supersession (local law superseded contract) Tax consequences: once hired a “dependent agent” deemed to have opened an office in that country, subject to tax, considered an employee, trigger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

6 “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

7 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

8 Regulation 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

9 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

10 Foreign Corrupt Practices Act: US law that applies extraterritorially Routine government action exception “corruptly” “knowing”

11 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?

12 International response Feb OECD Convention on Combating Bribery of Foreign Public Officials Encouraging after 20 plus years

13 DOJ Review What? Why not used by more businesses? What alternatives does a business have?

14 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

15 Implications for Business? Care and selection of agents Supesession problem Actions of agents may be imputed to principal in FCPA context