Price maintenance takes many forms

The phenomenon of resale price maintenance has already been discussed several times in this section. In short, these are agreements, implicit or explicit, which mean that franchisees have no option to deviate from a sales price set by the franchisor, which is charged to their customers. Even though recommended prices are often used in practice, when it is actually impossible, for example as a result of cash register software, fixed advance prices, or such advertisements from the franchisors that the franchisee cannot reasonably deviate from them, then the contested price fixing. This is a prohibited behavior based on the Competition Act and the European Vertical Cooperation Block Exemption Regulation. In that regulation, resale price maintenance is regarded as a so-called hard-core restriction from which no exemption can be obtained. Violation of these rules may entail that the agreement in which the resale price maintenance takes place is null and void. Since the rationale of this regulation is, of course, to protect the consumer, the franchisor may impose maximum prices, albeit that the maximum prices may not be so low that the franchisee actually no longer has room to lower those prices. desire to deviate. Something similar is called indirect price maintenance.

When a franchise agreement or a handbook expressly states that there are, in short, fixed prices, price maintenance is easy to determine. Things become even more difficult when there is indirect price maintenance. In that case, it will have to be considered whether and to what extent, taking all circumstances into account, sufficient margin remains for the franchisee to be able to deviate from that maximum price. This proves to be quite difficult in practice, especially in a situation where the franchisee is not able to calculate his profit margins per product himself. The latter often occurs in organizations that do not allow franchisees to determine their purchasing independently. In many cases, such franchisees receive packages of products, the invoice for which does not show what price is paid for what product. Payment is made “package wise”. As a result, the franchisee does not know what his purchase prices are for each product and he cannot therefore control the sales price. After all, the margin per product is not known. Even if it has not been agreed between the parties in such situations that there is a fixed selling price, such purchasing systems can still result in indirect price maintenance, especially if in practice it turns out that the margin of the franchisee is broadly below pressure, which in general is an argument for raising such discussions.

The moral of this story is therefore that in general one should at all times be on guard against the emergence or initiation of a price maintenance discussion. However, this can arise in a way that is sometimes not immediately obvious. So vigilance is required.

Ludwig & Van Dam franchise attorneys, franchise legal advice

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