30.6.2022
EN
Official Journal of the European Union
C 248/41
(166)
Franchising (with the exception of industrial franchise agreements) has some specific characteristics, such as the use of a uniform business name, uniform business methods (including the licensing of IPRs) and the payment of royalties in return for the benefits granted.
In view of these characteristics, provisions that are strictly necessary for the functioning of franchising systems can be considered as falling outside the scope of Article 101(1) of the Treaty.
This concerns, for instance, restrictions that prevent the franchisee from using the know-how and assistance provided by the franchisor for the benefit of the franchisor’s competitors (96) and non-compete obligations relating to the goods or services purchased by the franchisee that are necessary to maintain the common identity and reputation of the franchise network.
In the latter case, the duration of the non-compete obligation is irrelevant, provided that it does not exceed the duration of the franchise agreement.
(167)
Franchise agreements can benefit from the exemption provided by Article 2(1) of Regulation (EU) 2022/720 where neither the supplier’s nor the buyer’s market shares exceed 30 %.
Specific guidance on the calculation of market shares in the context of franchising is provided in paragraph (174).
The licensing of IPRs contained in franchise agreements is addressed in paragraphs (71) to (87).
Vertical restraints contained in franchise agreements will be assessed using the principles applicable to the distribution system that most closely corresponds to the particular franchise agreement.
For instance, a franchise agreement that results in a closed network, where the franchisees are prohibited from selling to non-franchisees, must be assessed under the principles applicable to selective distribution.
By contrast, a franchise agreement that does not create a closed network but which grants territorial exclusivity and protection from active sales by other franchisees must be assessed under the principles applicable to exclusive distribution.
(168)
Franchise agreements that are not covered by Regulation (EU) 2022/720 require an individual assessment under Article 101 of the Treaty.
That assessment should take into account that the more important the transfer of know-how, the more likely it is that the vertical restraints create efficiencies and/or are indispensable to protect the know-how and thus fulfil the conditions of Article 101(3) of the Treaty.
(169)
The following is an example of franchising:
A manufacturer has developed a new format for selling sweets in so-called ‘fun shops’, where the sweets can be coloured on demand from the consumer.
The sweets manufacturer has also developed the machines to colour the sweets and produces the colouring liquids.
The quality and freshness of the liquid is of vital importance to producing good sweets.
The manufacturer made a success of its sweets through a number of own retail outlets all operating under the same trade name and with the uniform fun image (for example, common shop style and advertising).
In order to expand sales, the sweets manufacturer has started a franchising system.
To ensure a uniform product quality and shop image, the franchisees are obliged to buy the sweets, liquid and colouring machine from the manufacturer, to operate under the same trade name, to pay a franchise fee, to contribute to common advertising and to ensure the confidentiality of the operating manual prepared by the franchisor.
In addition, the franchisees are only allowed to sell from the agreed premises to end users or other franchisees.
They are not allowed to sell other sweets in their shops.
The franchisor undertakes not to appoint another franchisee or operate a retail outlet in a given contract territory.
The franchisor is also under an obligation to update and further develop its products, business outlook and operating manual and to make those improvements available to all franchisees.
The franchise agreements are concluded for a duration of 10 years.
Sweet retailers buy their sweets on a national market from either national producers that cater for national tastes or from wholesalers that import sweets from foreign producers in addition to selling sweets from national producers.
In that market, the franchisor’s products compete with a number of national and international brands of sweets, sometimes produced by large diversified food companies.
The franchisor’s market share of the market for machines that colour food is below 10 %.
The franchisor has a market share of 30 % on the market for sweets sold to retailers.
There are many points of sale for sweets in the form of tobacconists, general food retailers, cafeterias and specialised sweet shops.
(96) See judgment of 28 January 1986, Pronuptia de Paris GmbH v Pronuptia de Paris Irmgard Schillgallis, C-161/84, EU:C:1986:41, paragraph 16.