Use of the internet and social media: court expands options for franchisees

What is allowed and what is not allowed?

In principle, the franchisee may not be prohibited from having its own website in order to also or even exclusively sell its products or services via the Internet. This stems from European competition law. Restrictions thereon are not legally valid.

The Den Bosch Court of Appeal recently ruled that a bicycle dealer who closed his physical shops and still sold his bicycles exclusively via the Internet did not fail to comply with the dealer agreement, as collection points and service were now provided. The ruling does not alter the fact that the parties can agree that at least one physical location must be maintained.
Civil case law also recently ruled that if the franchisor operates a website for himself, he must facilitate his franchisees to do the same.  The duty of care can thus entail that the franchisor not only uses the Internet as a competitor, but also supports its franchisees in sales via the Internet.

The franchisor may, however, set conditions for the quality of the franchisee’s website. These conditions must be objective and known in advance. Naturally, these quality requirements must not go too far unnecessarily, as a result of which the free use of the internet is indirectly still made more difficult.

If there is district exclusivity in the franchise chain, the franchisee may be prohibited from making active sales efforts via the internet and/or social media in the districts of other franchisees. However, the mere use of a website is not seen as such, but sending e-mails or targeted acquisition is. If customers from one region want to make a purchase via the website from the franchisee from the other region, this cannot therefore be prohibited, because this customer would have to be forwarded. The number of sales via the internet may also not be limited to a maximum.

Case law also shows that the franchisee cannot be obliged to have a different pricing policy for internet sales. This too is regarded as an indirect restriction on the right to possibly market the goods and/or services via your own website in addition to the franchisor’s website.

The question of the extent to which the franchisor is acting contrary by competing with its franchisees by making internet sales itself cannot be answered in general. This is highly dependent on the agreements made by the parties and the franchisor’s duty of care towards its franchisees. The Dutch Franchise Code obliges the franchisor in any case to make agreements about e-commerce activities. In most cases, this also leads nowadays, within the frameworks mentioned above, to good cooperation that strengthens the formula.

mr.  J. Sterk – Franchise lawyer

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