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| | The basics of franchise law | Contrary to what many candidates think, in many countries, there is no
specific law regarding franchising but there are laws that apply to franchising
just as to other forms of networks. These are the laws regarding:
- Competition,
- Brand name rights,
- Employment,
- Commercial leasing, etc
(Important : This should not
prevent you from checking whether your country has laws that just apply to
franchising)
This is why the European code of ethics, which is a code for “good conduct”
developed by franchisors to discipline franchising practices is often used as a
reference for the courts. This defines what professionals consider “normal” and well-balanced. In the absence of a law regarding franchising, the contract is therefore the
essential document in the relationship between the franchisor and the
franchisee. Typical contracts must be avoided and contracts are preferred that are
made-to-measure for a specific network, thereby avoiding the “approximations”
that one can end up regretting. Regarding France and Spain, (the Doubin Law and Law 2485/1998 respectively),
for instance, do not regulate franchising but instead pre-contractual
relations, aiming to assist candidates to know the information considered essential for
a potential franchisee to decide investing in a certain franchise with
full knowledge. Other countries are preparing such laws… Lastly, the European exemption regulation designed by the European Commission
is occupying an increasingly large space in the law and is gradually becoming the
most important text to regulate franchising in EC countries.
Regulation (CE) Nº 2790/1999 of 22 December 1999 on the application of
Article 81(3) of the Treaty to categories of vertical agreements and concerted
practices, benefits some vertical agreements (including franchising) of a block
exemption to those restrictions included in Article 81(1) of Rome Treaty, which
would have limited its application and current strengthening. This Regulation considers that franchising can improve economic efficiency
within a chain of production or distribution by facilitating better coordination
between the participating undertakings; in particular, it can lead to a
reduction in the transaction and distribution costs of the parties and to an
optimisation of the sales and investment levels. Thus, as per this block exemption regulation the above - mentioned Article
81(1) shall not apply to agreements or concerted practices entered into between
two or more undertakings each of which operates, for the purposes of the
agreement, at a different level of the production or distribution chain, and
relating to the conditions under which the parties may purchase, sell or resell
certain goods or services ("vertical agreements"). This exemption shall apply to the extent that such agreements contain
restrictions of competition falling within the scope of Article 81(1) ("vertical
restraints"). For complete text of Regulation (CE) Nº 2790/1999 of 22 December 1999 , see
http://europa.eu.int/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&type_doc=Regulation&an_doc=1999&nu_doc=2790&lg=EN |
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