Competition Law

For both franchisors and franchisees, competition law in many cases seems to be a somewhat unknown territory, but the agreements they make must take competition law into account, in particular the cartel prohibition. After all, every franchise agreement contains provisions that may be sensitive in terms of competition law, such as clauses relating to:

  • non-competition; during and after the term of the franchise agreement;
  • exclusive purchase of more than 80%;
  • division of market areas;
  • pricing of products or services;
  • internet sales;
  • purchase option rights of the franchisor;

It is very important to take competition law into account, given the far-reaching consequences if a franchise agreement or certain agreements therein or the implementation thereof are not in accordance with competition law. This may result in the nullity of the provision or the entire franchise agreement, as a result of which it no longer applies in whole or in part between the parties. In addition, high fines can be imposed on franchisors and franchisees for (serious) violations of competition law.

The above risks can be prevented by considering competition law prior to entering into the franchise agreement. For example, for franchise agreements (and other distribution agreements), European legislation and guidelines provide safe frameworks for many agreements. If franchisors operate within these frameworks, the agreements are exempt from the cartel prohibition.

However, practice shows that not all franchisors (want to) remain completely within these frameworks, which does not necessarily mean that the agreements are null and void. In addition, the frameworks are periodically adjusted by case law and revisions of legislation and guidelines. It is therefore advisable for both franchisors and franchisees to be aware of this and to seek advice in case of doubt.