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Franchising in the EU . Mark Abell Partner, Field Fisher Waterhouse LLP, London 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

Franchising in the EU

Mark Abell

Partner, Field Fisher Waterhouse LLP, London

5-6 November 2008

current position
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.

united kingdom
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)

united kingdom4
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
  • 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
  • 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.
  • 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
italy and france
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
  • 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