Column Franchise+ – “Prohibition of sales via internet platforms in franchise agreement exempt from cartel prohibition”

At the end of last year, Thuisbezorgd.nl incurred the wrath of many meal delivery companies by announcing another rate increase. The standard rate of Thuisbezorgd.nl thus reached a record high of no less than 13 percent. This cost item can be saved if you order directly from the meal delivery service or even via another internet platform. This is particularly possible in a franchise context, because franchise organizations often have excellent websites and apps that are not inferior to Thuisbezorgd.nl in terms of convenience and functionality. But may a franchisor prohibit its franchisees from using Thuisbezorgd.nl? 

On December 6, 2017, the Court of Justice of the European Union issued a judgment on the possibility of prohibiting the sale of products via internet platforms, which in my opinion answers this question. Although this judgment does not concern the delivery of meals, I believe that its outcome is applicable to this. 

This case concerned the question of whether a producer of luxury cosmetics ‘Coty’ (including Calvin Klein and Chloé products) could prohibit its authorized distributors from selling the luxury products via Amazon. According to Coty, sales via this platform were undesirable because it would detract from the luxury image. The Court of Justice has assessed whether such a prohibition is permissible on the basis of European competition law. 

According to the Court, systems of selective distribution for luxury products are permissible if certain conditions are met. In short, the conditions mean that the distributors must be selected on the basis of objective, qualitative, proportional and non-discriminatory criteria. The Court expressly confirms that maintaining a luxury image of branded products justifies the organization of a selective distribution system for those products. In doing so, the Court also justifies the ban on internet platforms. 

Where it gets interesting are the passages in which the Court considers that even if the above conditions are not met, it cannot be ruled out that a ban on internet platforms is exempt from the cartel prohibition under the block exemption for vertical agreements. This would mean that suppliers of more common products such as delivery meals could also make use of a prohibition on offering products via internet platforms if they meet the market share limit of the block exemption (maximum 30%). 

In my opinion, this judgment also confirms the admissibility of a prohibition on the sale of products via Thuisbezorgd.nl in a franchise agreement. In short, franchisors may prohibit their franchisees from selling their products via Thuisbezorgd.nl. The question is whether such a ban is commercially justified, given the large number of orders placed via Thuisbezorgd.nl. However, if that is the case, then there is nothing (any longer) in the way of franchisors to ban Thuisbezorgd.nl, which would allow them to boycott Thuisbezorgd.nl. 

mr. RCWL Albers – Franchise Attorney 

Ludwig & Van Dam Advocaten, franchise legal advice. Do you want to respond? Go to albers@ludwigvandam.nl .