No non-compete violation by franchisee – mr. AW Dolphijn – dated February 4, 2021

On 20 January 2021, the District Court of Rotterdam, ECLI:NL:RBROT:2021:657, rendered a judgment in a case about whether a franchisee acted in violation of the contractual non-competition clause.

The franchisor and the relevant franchisees worked together under the formula of “Stoomauto”. The activities relate to: “car cleaning on location using steam cleaning suitable for the exterior and interior of the car”.

The additional activities of the franchisees consist of “car detailing”. This is a thorough cleaning and care of a car. The work includes “applying a transparent coating / resin layer over the paint of a car, which treatment takes several days in connection with the curing process and which can only be applied in a dust-free room”.

The franchisor believes that the franchisees are acting in violation of the non-competition clause in the franchise agreement and is demanding that the non-competition clause be complied with by the franchisees concerned.

The court considers that under the franchise agreements, franchisees may not, during the term of their franchise agreements, be directly or indirectly involved in, or have any interest in, activities that are the same or similar to the activities of the franchise network. The purport of this provision is that a franchisor wants to prevent a franchisee from using knowledge and know-how obtained from the franchise cooperation to develop competitive activities.

It must therefore be assessed whether the franchisees in question are involved in activities that correspond with the activities of Stoomauto or that correspond with them.

The court pointed out, among other things, that Stoomauto’s handbook states that Stoomauto offers an ecological alternative to the car wash, that it does not offer any specialist service or products that compete with car specialists, that the quality of the steam cleaning is higher than the car wash, but below that of the cleaning companies, that Stoomauto also offers the possibility to wash the interior of the car and that they offer paint sealing and leather treatment.

The court notes that Stoomauto also assumes in its handbook that cleaning companies also carry out steam cleaning. There is no competitive activity when cleaning is performed as a necessary part of “car detailing”, which in terms of car care goes one step further than cleaning by cleaning companies.

Moreover, with regard to paint sealing and leather treatment, Stoomauto has never objected to this. In addition, Stoomauto has previously allowed the relevant franchisees to apply a transparent coating/resin layer over the paintwork of a car.

The court concludes that there has been no violation of the prohibition of competition.

The formulation and interpretation of a non-competition clause is often not a simple matter, as the present case shows.