The Legal Side: When a dealer isn't an authorized dealer

QUESTION:

Ken, I had a manufacture make the dumbest statement I had ever heard and I want your opinion. The manufacturer claims that while they sell products via distribution (ADI, Tri-Ed, etc.), the resellers of those products (dealers) MAY NOT represent themselves as authorized dealers, resellers, etc. (anything related to the manufacturer), UNLESS they have entered into a contractual program from the manufacturer which provides them those rights.

I would argue that the distributor, when selling the products to me as a dealer, provided an implied authorization to represent myself as an authorized dealer for the manufacturer based on the fact that my distributor has entered into a contract with the manufacturer to resell their goods, and thus promotes and sells that product to me to represent and promote to my clients. Do you agree?

Signed,
Not sure I'm authorized

ANSWER:

Sorry, but I don't agree. Manufacturers have a right to control the flow of distribution of their products, and they have a real incentive to ensure that those representing them will do so in the way the manufacturer believers most beneficial to the manufacturer.

There are several factors that come to mind. A manufacturer may think that a particular distributor will have greater incentive if it has an exclusive territory. Another manufacturer may think that offering the product through all possible distribution networks, perhaps even to dealers or end users directly, is the way to go.

Manufacturers may expect distributors or authorized dealers to have certain training so that customer support is properly administered.

Manufacturers may require its authorized distributors and authorized dealers to sign an agreement which address many issues, such as training, and may include minimum purchase obligations and additional royalties or sharing of certain expenses related to marketing.

So clearly, the fact that you purchase the product from a distributor or even another authorized dealer does not make you authorized. The fact that you may sell or use particular products does not mean you have a relationship with the manufacturer or that you have the right to hold yourself out as a representative. You see advertisements all the time by "authorized" factory reps; they have been trained and more than likely have paid the manufacturer for the privilege of advertising that status.

You probably can, however, advertise that you use or sell particular products. Just be careful not to use any trademark without permission. Thinking about it, I am not so sure you can advertise "We use genuine Honeywell products" without obtaining Honeywell's consent to use that name in your advertisement or marketing materials. You can ask for permission and see what happens; let us know.

About the author: Ken Kirschenbaum, Esq., is a New York-licensed lawyer practicing with Kirschenbaum & Kirschenbaum PC, a Long Island legal firm with a rich history of assisting clients in security and alarm related matters. Ken can be contacted via email at ken@kirschenbaumesq.com. His website, www.kirschenbaumesq.com, features a great supply of legal information and court rulings relevant to the security industry. You can also sign up for Ken's discussion list from his homepage.

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