Franchisor wrongly hinders internet sales by franchisee – dated September 19, 2018 – mr. AW Dolphin

On 15 June 2018, the Amsterdam District Court rendered a judgment, ECLI: NL: RBAMS: 2018:5372, in a dispute between a franchisor and a franchisee about whether a franchisee can use Social Deal, as well as Groupon (both online platforms), to provide its services. has been able to offer.

The franchise agreement stipulated that regional actions by the franchisee were permitted. Nor does the franchisor propose to prohibit passive sales outside the franchisee’s territory. The franchisor also indicates that it does not generally prohibit promotions via the internet, provided they are aimed at potential customers within the franchisee’s district. However, the franchisor believes that the franchisee’s promotions on “bargain sites” such as Social Deal and Groupon damage the image of its formula.

The Court considers that it follows from the Judgment of the Court of Justice of the European Union of 6 December 2017, ECLI: EU: C:2017: 941 (Coty) that for luxury products a prohibition on sales via online marketplaces is permitted under certain circumstances on the basis of competition law rules. Franchisor and franchisee seem to agree that the formula is a luxury product.

The question at hand is whether the restriction imposed by the franchisor on its franchisee goes beyond what is necessary. The Court considers it important in this respect that the promotional campaigns of the franchisee are aimed at customers from the district of the franchisee itself, which is permitted. The franchisor cannot prohibit these promotions on the basis of the franchise agreement. The Court then notes that a restriction on the franchisor is only considered possible if the promotional activities detract from the luxury image of the product. However, now that the franchisor itself also uses Social Deal for national promotions, the franchisor cannot claim damage to the image that the formula would suffer from the use of Social Deal by the franchisee. This means that the restriction imposed by the franchisor with regard to the use of Social Deal has turned out not to be necessary. According to the Court, this means that the franchisor has committed an unacceptable infringement of the right of the franchisee. This failure of the franchisor justifies the dissolution of the franchise agreement by the franchisee.

Competition law aspects of franchise relations are complex and require the necessary attention, as this judgment once again shows.

mr. AW Dolphijn – franchise lawyer
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