Price maintenance always leads to nullity?
Pursuant to competition law, it is not permitted to include so-called resale price maintenance in franchise agreements, which means that the franchisor may prescribe to the franchisee the selling prices at which the products and/or services must be purchased by consumers from the franchisee. Going against this rule is considered a cardinal and mortal sin in competition law. If such a clause is nevertheless included in a franchise agreement, does this mean that the franchise agreement in question is actually null and void? And what about if the franchisor has issued a margin guarantee to the franchisee and the franchisee cannot or may not deviate from the selling prices? In court proceedings, a franchisee recently argued that there was no possibility whatsoever to deviate from the sales price indicated by the franchisor. It has been ruled in court that it must be verified whether there is actually price maintenance in practice; this is very decisive. This can arise in practice, for example, when the franchisee is not even formally given the opportunity to deviate from these prices and therefore has no leeway whatsoever to charge a different price for a certain product. This resale price maintenance can also arise from the pre-pricing of articles, which the franchisee cannot or may not deviate from when selling. If this is actually the case, then real resale price maintenance only arises, with all the consequences that entails.
Franchisor and franchisee would of course be wise not to include absolute resale price maintenance in their franchise agreement. This in itself can render the franchise agreement null and void. In addition, it is very important to concretely and practically avoid price maintenance in practice and to actually act accordingly. This can be achieved, for example, by the fact that the franchisee continues a certain (price) promotion longer than planned, independently conducts (price) promotions, gives discounts, uses different sales prices for larger (volume) purchases, et cetera. The practice offers countless possibilities for this. In this way, the actual resale price maintenance can be avoided, with all the associated legal and economic risks.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Article The National Franchise Guide – “Corona discount of 50% on the rent” – mr. AW Dolphijn – dated September 15, 2020
Disappointing turnover due to the corona crisis may mean that the rent is halved, even if the rent is partly turnover-related.
Article Franchise+ – “Franchisor uses “derivative formula” (without his knowledge)” – mr. AW Dolphijn – dated September 9, 2020
Many franchisors will not be aware of the fact that they use a "derived formula" as referred to in the Franchise Act.
Article Franchise+ – “Obligations and rights of the starting franchisee” – mr. AW Dolphijn – dd
What should you pay attention to as a starting franchisee, what are your obligations and what are your rights when concluding the franchise agreement?
Article Mr. C. Damen – Three conditions for the right to customer compensation for the agent upon termination of the agency agreement – dated August 26, 2020
In the agency relationship between an agent and a client (the principal), the parties record their cooperation agreements in an agency agreement. When the principal enters into the agency agreement
Article Mr. C. Damen – “When does the obligation to provide proof apply for the submission of the franchise agreement?” dated August 17, 2020
Does the obligation to produce information apply to showing a (franchise) agreement in proceedings if the parties to the proceedings do not have a legal relationship to the (franchise) agreement?
Article Mr. AW Dolphijn – “How do you value a franchise company with a discharge loan?” – dated August 14, 2020
A discharge loan is a proven means of franchisors to find long-term franchisees.