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
Transfer of business with ‘preferred supplier’ of franchisees
On 13 June 2017, the Amsterdam Court of Appeal ruled in interlocutory proceedings, ECLI:NL:GHAMS:2017:2144, on the question whether employees of a 'preferred supplier' of the
Late notification that no franchise agreement will be concluded
On April 11, 2017, EQLI:NL:GHARL:2017:3104, the Amsterdam-Leeuwarden Court of Appeal not only assessed the question of whether the negotiations on a franchise agreement to be concluded
Want to get rid of your franchise agreement in the meantime?
Franchise agreements are usually concluded for a longer period of time. How do you break open a franchise agreement?
HEMA in conflict with franchisees about e-commerce agreements
On 18 July 2018, the District Court of Amsterdam, ECLI:NL:RBAMS:2018:5098, rendered a judgment in proceedings on the merits in which the franchisees were largely ruled in favor of e-commerce.
mr. J. Sterk about HEMA conflict in the FD 18 July 2018
mr. J. Sterk about HEMA conflict in the FD.
Column Franchise+ – “Legal Franchise Statistics 2018”
The Legal Franchise Statistics have been compiled for 10 years by Ludwig & Van Dam attorneys on the basis of all published judgments of judges.