Price maintenance: always void?

Court of Appeal in The Hague

The Court of Appeal in The Hague ruled some time ago that influencing the price level at which the franchisee sells the products to consumers can be susceptible to competition law infringement of the franchise contract if the franchisor intends to influence the price level for sales to consumers.

The franchise agreement between franchisor and franchisee stipulates that the franchisee has the obligation not to offer the products in question in a misleading manner, or to sell them at bottom prices, special prices and/or promotional prices. In principle, such a clause is not permitted. The Court of Appeal therefore considers that it can be deduced for the time being from this that the intention was apparently to influence the price level for resale. The court indicates that the European Commission has reached the conclusion regarding comparable restrictions in a case concerning exclusive distribution, even without explicitly establishing objectively at what level floor prices, special prices or promotional prices apply, the autonomy of the distributor( franchisee) to grant discounts is thereby limited, compared to a situation where it is completely free to set its price. Competition is thereby distorted or restricted.

Subsequently, the Court of Appeal considers what the effect of the agreement in question is on market forces. Remarkably enough, the Court finds that “no or hardly any substantive debate has been held on these points”. Since nothing has been stated in this regard, the Court of Appeal cannot reach a judgment with regard to the point, which is in itself very relevant.

Conclusion: if it had been made plausible that price influence would have led to disruption of the functioning of the market and/or the functioning of the parties, nullity would have been obvious. After all, price maintenance is not permitted in all cases, let alone if this has been laid down in the franchise contract. The injured party could also have invoked a per se prohibition, meaning that substantive assessment was no longer necessary, now that price maintenance had been agreed – and is not permitted.

Mr Th.R. Ludwig – Franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice Would you like to respond? Mail to ludwig@ludwigvandam.nl