Competition and brandability: recent developments

In summary proceedings, the president of the Arnhem District Court once again very recently examined a number of competition law issues, including whether an exclusive purchase agreement was validly concluded. The exclusive purchase agreement was entered into for a period of eight years, with the possibility of tacit renewal. As a result, the agreement did not comply with the current Block Exemption Regulation on vertical agreements, which lasted significantly longer than five years. However, the agreement dated from mid-1998, ie before the entry into force of the Block Exemption Regulation (1 June 2000). During the transitional period, which ended on December 31, 2001, the parties did not adapt the exclusive purchasing obligation to the new Block Exemption Regulation. However, all this was and is not very relevant, now that the exclusive purchase agreement went further than the old Block Exemption Regulation allowed, as a result of the tacit extension option, and therefore the transitional law would not have been applicable. In any case, the president is of the opinion that the exclusive purchase obligation is not allowed under competition law because of its long duration.

Finally, appreciability comes into play in this matter, now that the supplier has argued that its market share on the relevant market is 7%, which is well below the 15% limit as set out in the De Minimis notice. However, the president also tested the exclusive purchase agreement against the Dutch trivial provision of Section 7 of the Competition Act. The supplier turned out to have a turnover that exceeds the turnover threshold of 1.5 billion euros. On that ground, the president ultimately ruled the exclusive purchasing agreement null and void, albeit provisionally in preliminary relief proceedings.

In itself this is a remarkable statement, given that the turnover threshold in the Competition Act has been looked at rather one-dimensionally and no further assessment has been made to the extent to which the exclusive purchase agreement actually results in a noticeable restriction of competition. There is room for assessment, now that an exclusive purchasing obligation cannot in itself be qualified as a so-called hardcore restriction. In a recent ruling following on from this, the NMa ruled precisely that some non-hardcore restrictions in a franchise agreement were not noticeable, as they did not exceed the maximum limits of the European De Minimis notice, while the combined turnover of the concerned franchisor and franchisees did exceed the trivial thresholds of Section 7 of the Competition Act.

With this somewhat technical explanation of this recent judgment, it is once again argued that competition law is still developing and that care and caution are always necessary when shaping cooperative relationships.

Ludwig & Van Dam franchise attorneys, franchise legal advice