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Franchising in the EU . Mark Abell Partner, Field Fisher Waterhouse LLP, London [email protected] 5-6 November 2008. Current Position. The European Union 27 Member States Diversity of specific franchising laws; and developments on a national level Therefore:

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Franchising in the EU

Mark Abell

Partner, Field Fisher Waterhouse LLP, London

[email protected]

5-6 November 2008

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Current Position

  • The European Union

    • 27 Member States

    • Diversity of specific franchising laws; and developments on a national level

    • Therefore:

      It is difficult to define common trends and each Member State has to be examined independently.

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United Kingdom

  • Brand owner’s new right to object “bad faith” company name registrations

    • Company name that is the same as a name in which a brand owner has goodwill or

    • Is sufficiently similar to such name that its use within the UK would be likely to mislead by suggesting connection between company and brand owner

  • No overreaching duty of good faith in franchise agreements

    Jani King v Pula Enterprises Limited (2007) EWHC 2433 (QBD)

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United Kingdom

  • Franchisor’s duty to pay damages for pre-contractual misrepresentation

    • High Court in London ordered franchisor to pay £170.000 as part of a counter-claim in respect of fraudulently made pre-contractual misrepresentations about expected turnover and profit, level of franchisee failure in the business and availability of certification by relevant trade associations- Peart Stevenson Associates Limited v Brian Holland (2008) EWHC 1868 (QBD)

    • Non-reliance clause found to be unreasonable under Unfair Contracts Terms Act 1977

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  • Uniform presentation and the franchisor’s liability risk

    • Federal Supreme Court decision- X ZR 137/04, Dec 12 2007

    • Risk remains for franchisor to become contractually bound by contracts between franchisee and customer if the franchisee does not point out its legal independence

  • Exclusive purchase obligation under review

    • The Court has tightened requirements for admissibility under antitrust law of a 100% purchase tie lasting more than 5 years

      • OLG Düsseldorf, 11 April 2007 (‘Body Shop’)

      • ECJ ‘Ponuptia decision’, 1986

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  • Online Sales within franchising context

    • Court held that held that a manufacturer had no right to make the delivery of its products subject to the restriction of not selling them via an internet auction platform. A contractual provision to this effect was found to violate anti-trust law.

    • Judgment by the regional court of Berlin on July 24 2007, Case No 16 O 412/07 Kart, unpublished

    • Article 4 of the EU Regulation on Vertical Agreements (2790/1999): threshold for an exemption is a market share of 30% on the relevant market.

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  • Draft Distribution Agreements Act proposes compensation payment to franchisees

    • Will apply to all types of franchising but ‘industrial franchising’

    • Key provisions:

      • Authority to terminate franchise agreements against payment of 2 years earnings as liquidated damages

      • Entitlement of franchisees to same indemnity payment as commercial agents

      • Duty to put all amendments to franchise or distribution contracts in writing

  • Green Paper on the Draft Distribution Agreements Act

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    Italy and France

    • Italy

      • Uncertainty as to what happens in case of bankruptcy

      • Franchising and subcontracting in public tenders

      • Recent court decisions

    • France:

      • Franchisor ordered to compensate franchisee for non–renewal of a franchise agreement by the French Supreme Court

        • Franchisor owns national customer base, whereas franchisee owns local customer base

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    • Should franchising be regulated at an EU or member state level?

    • What should an EU Directive comprise?

      • Removal of all hindrances to enhance the efficient functioning of the market and to encourage free enterprise, without stifling innovation and competition

      • In order to do this an EU Franchise Directive should:

        • Maintain market confidence in franchising

        • Educate everyone about franchising, incl. encouraging companies and individuals to use franchising

        • Provide adequate franchise protection