Belgian Council of Ministers adopts decision to protect independent supermarket entrepreneurs

All-powerful supermarket organizations
Partly due to the recent privatization of (Ahold Delhaize) supermarkets and the associated problems, the Belgian government now recognizes the increasingly dependent and unbalanced position of independent supermarket entrepreneurs in relation to the now consolidated and all-powerful supermarket sector.

The draft Royal Decree aims to put an end to abuses in the sector by making the position of independent supermarket entrepreneurs less dependent on
supermarket organizations. To this end, restrictions are imposed on the franchisor in the franchise agreements for the benefit of franchisees. The aim is to reduce dependence and bonding with this. The draft is now before the Council of State.

In Belgium, there will be a so-called black list of prohibited clauses and a gray list of clauses that are suspected of being prohibited, unless evidence to the contrary is provided by the supermarket organization.

Blacklist of prohibited appointments
The following agreements are prohibited in the blacklist:

• Clauses that enormously reduce the responsibility of the supermarket organization with regard to its delivery obligation towards the independent supermarket operator;
• Clauses that prohibit the independent supermarket operator from making preparations or entering into negotiations during the notice period and the term of the
  non-compete clause;
• Clauses that oblige the independent supermarket operator to bear more than half of the costs for promotional activities;
• Clauses that oblige not to submit disputes to a judge, but to a specific arbitrator;
• Clauses requiring exclusive appeal to the territorially competent court of the person granting the right, or a court whose seat is in a language area other than the language area of ​​the seat of the person acquiring the right.

Gray list of suspected prohibited appointments
The following potentially prohibited agreements are mentioned in the gray list:

• Clauses that provide for a fixed valuation whereby a price is set that is clearly unreasonable compared to a normal valuation of a trading fund or the shares of a company (of the independent supermarket entrepreneur);
• Clauses that contractually oblige to continue the activities of a structurally loss-making company;
• Clauses that allow the person granting the right to terminate the commercial cooperation agreement with the application of an express resolutive clause.

What will this mean in practice?
Loosely translated into practice, this means:

• The obligation to purchase is no longer absolute. In the event of defective deliveries, foreign purchases may be made.
• There will be more freedom to negotiate cooperation with other formulas during the term.
• For price promotions, the franchisor must contribute at least half.
• Clauses that limit franchisees to access to the normally competent court or a mandatory appointment of a specific arbitrator are invalid.
• Goodwill agreements that are not in line with market conditions are presumed to be invalid.
• Franchisees cannot be required to continue a loss-making business.
• The franchisor cannot simply terminate the collaboration prematurely.

This makes Belgium the first country in Europe to introduce specific rules for franchise cooperation in the supermarket sector.

The same trend is also visible in the Netherlands and the independent supermarket entrepreneur is becoming increasingly dependent on his/her organization. Such rules could therefore also lead to more balanced cooperation in the Netherlands in the supermarket sector, where the Franchise Act has so far failed to achieve within the supermarket sector. By extension, this would also make consumers less dependent on only a few providers. With the evaluation of the Franchise Act in mind, politicians in the Netherlands should therefore pay attention to the developments occurring in Belgium and learn from them for the Dutch situation.

Ludwig & Van Dam maintains international relations in the franchise and supermarket sector. Further information can be obtained from our office.