Termination of a dealer agreement in relation to price maintenance

At the end of 2007, the Court of Appeal in Arnhem issued an interesting ruling relating to termination of a dealer agreement in relation to resale price maintenance.

What was going on? A manufacturer of mattresses, box springs and bedroom furniture has terminated an indefinite dealer agreement with a local dealer (a home furnishing company) by a certain date. From the termination date, the manufacturer subsequently also no longer supplied products to this dealer.

The (ultimate) reason given by the manufacturer for the cancellation was that the local dealer was “undermining” the manufacturer’s dealer organization. The dealer had started selling products via his website at a standard discount of 20%. It should be clear that the other dealers saw this with sorrow. After all, they suffered a loss of turnover as a result. The manufacturer acknowledged that the other dealers pressured him to stop selling products at a 20% discount.

The Court concludes on the basis of the facts that the manufacturer has terminated the dealership solely to maintain the margin of the other dealers.

The interesting thing about this ruling is that the Court of Appeal then mainly approaches this issue from a practical point of view. Although the manufacturer stated that there was no resale price maintenance, indirectly this was indeed the case. After all, the dealer who did not conform to the manufacturer’s recommended price was eliminated by the termination of the dealer agreement. The Court of Appeal therefore rules that the termination is null and void and unlawful and has therefore had no effect. As a result, the Court of Appeal ordered the manufacturer to resume supplying the full range of products to the relevant dealer.

The general lesson that can be drawn from this judgment is that both direct and indirect resale price maintenance is out of the question and will not be tolerated.

Ludwig & Van Dam franchise attorneys, franchise legal advice