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
![](https://ludwigvandam.megaconcept.nl/wp-content/uploads/2020/12/232court-min-400x222.jpg)
Other messages
Transfer customer data to franchisor
In its judgment of 10 January 2017, ECLI:NL:GHAMS:2017:68 (OnlineAccountants.nl), the Amsterdam Court ruled, among other things, on the question of how customer data should be transferred.
Franchise Closing Sale – Who Gets the Sale Proceeds?
The judgment of the District Court of the Northern Netherlands dated 12 October 2016, ECLI:NL:RBNNE:2016:5061 (Administrator/Expert Group and Rabobank), focused on the question whether the franchisor, together with the bank,
Column Franchise+ – mr. Th.R. Ludwig: “Judge: franchisor’s duty of care comparable to that of a bank”
Various judgments in 2016 made it clear how high the standard of care for a franchisor towards its franchisees is.
Use of the internet and social media: court expands options for franchisees
In principle, the franchisee may not be prohibited from having its own website in order to also or even exclusively sell its products or services via the Internet.
Article in Entrance: “Plan damage”
“Because the municipality undertakes and renovates all sorts of things in the vicinity of my business, I have a disadvantage and I suffer damage. Can I tell those stories?"
Article in Entrance: “Rules of Fragrance”
“I am bothered by the smell that the adjacent catering business produces. Can I do something about this?"