Avon Cosmetics vs Luna

Facts: Luna initially worked for Beautifont as franchise dealer then Supervisor. Later, Beautifont was acquired by Avon Cosmetics, in which Luna continued working.

Avon and Luna entered into a Supervisor’s Agreement which contained that Luna is an independent retailer of the company and is not an employee or an agent and that she shall sell, display or promote only the products of Avon.

Sometime in 1988, Luna became a Group Franchise Director of Sandre Philippines, a company which sells vitamins and supplements, while concurrently being a Group Supervisor of Avon. She consulted a law firm as to the legality of her agreement with Avon and she was advised that the same was contrary to public policy and unconstitutional as it restraints the trade and livelihood of the party.

Upon learning the connection of Luna to Sandre Phils., Avon terminated the exclusive dealership of the former. Hence, Luna filed complaint for damages against Avon.

RTC ruled in favour of Luna and ordered Avon to pay damages. The clause was held to be contrary to public policy as it limits the trade and livelihood of the party involved. It should be construed only as to not get involved in companies that are direct competitors of Avon.

CA affirmed.

Issue: WON the exclusivity clause was void for being contrary to public policy.

Ruling: NO.

The Supreme Court agreed with the petitioner that the clause was made to protect Avon from other companies, whether competitors or not, who would exploit the sales and promotions network established by Avon.

Apparently, Sandre Phils. made Luna one of its Franchise Directors to utilize her skills learned from Avon in the sale and distribution of its products. Hence, this is tantamount to unjust enrichment. Also, the goodwill established by Avon will be taken advantage by Sandre since the dealers may be the same, this will create beliefs in the minds of customers that both products are manufactured by the same company.