Indirect price maintenance

As is well known in franchising practice, resale price maintenance is out of the question. The franchisor who obliges a franchisee to prescribe a sales price is therefore crossing the line. What about indirect price maintenance, where price maintenance can also arise through indirect measures and/or sanctions?

Forms in which indirect price maintenance can be expressed include the following: a franchisor can price certain products in advance by means of a bar code, with the product being settled at the cash register at the predetermined price by means of scanning the product. Furthermore, in general, a binding recommendation can be made to use a certain selling price. The franchisee is expected to determine the sales price independently, but must focus on the pricing policy of the franchise organization in question. Another form of indirect resale price maintenance can arise through communicating directly with consumers over the heads of the franchisees about the sales prices in question, for example through advertising. If practice means that the franchisee then has no choice and must charge the sales price communicated by the franchisor, resale price maintenance has also arisen in this way.

All these and similar forms of indirect price fixing are inadmissible and prohibited. The sanctions for absolute price maintenance can be far-reaching, both on the part of the Netherlands Competition Authority (NMa) and on the cooperation between franchisor and franchisee itself. Under certain circumstances, the contested provision and even the entire franchise agreement may become null and void. Franchisor and franchisee would therefore be wise to adjust their contracts on this point in good time if necessary and to hold good consultations in general.

Ludwig & Van Dam franchise attorneys, franchise legal advice