(Partially) similar activities not in conflict with non-compete clause – mr. RCWL Albers – dated February 4, 2021

In recent proceedings, two (former) franchisees were sued by their franchisor, Stoomauto, for violations of (among other things) the non-compete clause. Despite the fact that the franchisees were engaged in activities that at first glance closely resemble those of Stoomauto, the court ruled that there had been no violation of the non-compete clause. The court reached this judgment on the basis of the definition of the words equal and similar in the Van Dale.

Stoomauto operates a franchise formula under the name “De Autostomerij”. In its own words, this is a formula in the field of “ car cleaning on location using steam cleaning suitable for the exterior and interior of the car .”

Stoomauto has established that two franchisees of the formula, in addition to the franchise establishment, also operate another company in the field of “card detailing”. Stoomauto argues that these activities would be equal or similar to the franchise formula and therefore in violation of the non-compete clause.

To assess this, the court takes the Van Dale in to assess whether there are indeed activities that are “the same” or “similar”. On the basis of the definition in the Van Dale , the court considers that it must therefore concern activities that correspond to those of Stoomauto or that correspond in main features .

The court concludes that this is not the case, now that the statements and documents put forward between the parties show that the Dry Cleaning formula is characterized by:

• on-site car cleaning using steam cleaning suitable for the exterior and interior of the car;
• offering an ecological alternative to the car wash;
• offering a lower quality than that of cleaning companies;
• not offering specialist service or products that compete with automotive specialists.

With regard to card-tailing activities, the court considers that:

• a statement from a supplier, the expertise of which is not disputed by the parties, shows that card detailing involves a combination of activities that follow one another and that a perfect condition of the car paint cannot be achieved if the paint is not clean down to the last detail;
• the franchisees carry out these activities in their own workshop;
• the cleaning of the exterior and interior are only a small part of the total and that the cleaning is necessary for the main activity, namely ‘card detailing’ in our own workshop.

It is not clear to me from the statement what ‘card detailing’ exactly entails, but presumably it goes further than just cleaning the car and it benefits the condition of the paint. Anyway; the court concludes that the activities do not qualify as equal or similar.

It is apparently important that the cleaning activities are of secondary importance to the ‘card detailing’ itself and that these activities are necessary for being able to carry out ‘card detailing’. The judge also attaches importance to the fact that the work is carried out in the company’s own workshop and not on location, as is the case with the car dry cleaning formula.

Conclusion

This judgment once again shows that a dispute about a non-compete clause is a special factual exercise in which it really comes down to a good factual substantiation of the positions and a thorough formulation of the non-compete clause.

In this case, the non-compete clause is interpreted quite restrictively and solely on the basis of the text of the clause. That does not seem entirely justified to me, in view of the Haviltex criterion, which has been in force for many years, whereby one must look not only at a linguistic interpretation of that provision, but that it also comes down to the meaning that the parties mutually have in the given circumstances. could reasonably attribute to this provision and what they could reasonably expect from each other in this regard.

With a well-substantiated appeal to this and a clear argument why the two services compete with each other, Stoomauto might have achieved more success. However, that too would have been quite a challenge for Stoomauto. In fact, for reasons that are inexplicable to me, it has included in its own handbook that it does not compete with ‘specialists’, which in my view could well include ‘card retailers’.

Franchise law

With the arrival of the Franchise Act as of 1 January 2021, even stricter requirements will be imposed on a (post-contractual) non-competition clause. In addition to stricter requirements regarding the wording, scope and duration of the clause, the Franchise Act also stipulates that a (post-contractual) non-compete clause is only valid if the clause is indispensable to protect the know-how of the franchisor.

In my experience, this will not always be an easy task. Time (and upcoming case law) will tell how high judges will set the bar. If these judges also take the Van Dale into account, then according to the definition of ‘indispensable’ included therein, it will have to be successfully substantiated that the non-compete clause is “ absolutely necessary / indispensable” . In short, franchisors who wish to invoke the (post-contractual) non-competition clause are subject to a strict motivation obligation.