Prohibited market/area division in franchise agreements
Franchisees sometimes have more opportunities to break through market/area divisions than they think. This will create more problems for franchisors.
Many franchise agreements include a market division in the sense that each franchisee has been allocated an exclusive territory. Franchisees may then, for example, not make acquisitions in the territories of other franchisees. Such agreements aimed at sharing markets have an anti-competitive object and are, in principle, prohibited.
An exception to the prohibition may apply to franchise agreements, among other things. After all, franchise agreements can usually be seen as a “vertical” relationship in the relevant distribution chain. The franchisor is then the supplier and the franchisee the customer. In such a “vertical” relationship, a market division can also very well promote competition.
The fact that franchising does not always have to involve such a “vertical” relationship is apparent from the judgment of the Rotterdam District Court of 12 May 2016, ECLI:NL:RBROT:2016:3477, in which it was ruled that agreements on exclusive market areas (area distribution ) being forbidden. It follows from this ruling, in simplified form, that despite the fact that the parties refer to their cooperation as a “franchise agreement”, there need not be an exemption from the prohibition on market/area division. This applies if the cooperation under a franchise agreement can actually be qualified as a cooperation between the franchisees themselves.
The foregoing also raises the question of how franchise agreements should be assessed in which the franchisees are members of the same cooperative. In a cooperative, in particular, the franchisees work together and there is no vertical relationship. In that case, market sharing agreements would therefore be prohibited. Examples of such cooperative organizations are Primera, PLUS supermarkets and Coop supermarkets.
The danger is that franchisees can also be fined here by the AFM, which supervises competition law practices. Could this herald the end of the franchise organizations that aim to work together on a collective level? In any case, it seems that market sharing agreements in those situations are not without risk for the franchisee and for the franchisor.
mr. AW Dolphijn – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice.
Do you want to respond? Go to dolphijn@ludwigvandam.nl
Other messages
Franchising is “a bottleneck in tackling healthcare fraud” – dated 10 June 2020 – mr. AW Dolphin
According to the various supervisory authorities in the healthcare sector, franchise constructions can be seen as a non-transparent business construction in which the supervision of professional and
Article Franchiseplus: “Franchisors participate in franchisees” – dated June 3, 2020 – mr. AW Dolphin
Franchisors are increasingly participating in the franchisee's business. There are several benefits for both the franchisee and the franchisor.
Article The National Franchise Guide – “Corona discount on rent” – dated June 2, 2020 – mr. AW Dolphin
If a rental property is obliged to be closed due to corona, there may be a right to a rent reduction, according to the Northern Netherlands court.
Article Franchise+ – Franchisees enjoy the same protection as employees and commercial agents with regard to a non-competition clause – dated 7 May 2020 – mr. RCWL Albers
It often happens that, especially by franchisees, the validity of a post-contractual non-compete clause is considered too lightly.
The support agreement for the Retail sector in this Corona crisis – dated 15 April 2020 – mr. K. Bastian
On April 10, 2020, the Ministry of Economic Affairs, together with a number of landlords, retailers and banks, reached a support agreement.
Court rules that corona crisis does not constitute force majeure – dated April 10, 2020 – mr. AW Dolphin
If payment cannot be made due to a decrease in income, then there is not always a force majeure situation.