Mark Abell
Partner, Field Fisher Waterhouse LLP, London
mark.abell@ffw.com
5-6 November 2008
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
 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 Kingdom
Franchisor’s duty to pay damages for precontractual 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
Germany
 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
Germany
 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No 16 O 412/07 Kart, unpublished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.
Spain
 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
 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
OUTLOOK
 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