Franchise agreements are increasingly governed by competition law advancing from Europe. This is also not always sufficiently taken into account in day-to-day franchising practice. An example of this is the imposition of fixed prices.
The court recently confirmed in summary proceedings that the franchisor may not impose fixed (minimum) prices on its franchisees. This is against competition law. Advertising campaigns, provided they meet certain conditions, are excluded. In principle, it is irrelevant what the organization’s market share is. Small franchise organizations therefore also fall under this prohibition. The structural imposition of fixed prices is therefore always prohibited. This also applies if these minimum prices have been established in mutual consultation with the franchisees.
In principle, agreements on maximum prices are permitted because they do not restrict competition. Insofar as maximum prices are at such a low level that they actually constitute a minimum price because the franchisee can only sell at a loss if he sells below this maximum price, one could possibly also speak of a prohibited price agreement.
The consequence of such a prohibited agreement may be that the entire franchise agreement is declared null and void, which was also the case in the above-mentioned ruling. The consequences of this are often incalculable. For example, the non-competition clause often included in the franchise agreement is then also null and void and the franchisee may be able to submit a claim against the franchisor for undue payment.
In franchise relationships, the franchisee should in principle always be free to determine the minimum selling price of his products and/or services.
The above does not alter the fact that the franchisor may give price advice. However, it is advisable to always stipulate that the franchisee is free to deviate from this.
Ludwig & Van Dam franchise attorneys, franchise legal advice