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Resale Price Maintenance in Franchising: Hardcore Restriction of Competition or Necessary Element of Such Business Model?

EuCML, Issue 4, 2017

4 Pages Posted: 7 Nov 2017  

Konrad Kohutek

Faculty of Law at Cracow Frycz-Modrzewski Academy, Poland

Date Written: February 10, 2017

Abstract

Franchising is one of the most popular business models often used in many economic sectors. Main provisions of franchising agreements (essentialia negotii) have been developed in the commercial practice and many civil legal orders do not provide for any normative pattern of such contracts. Concluding franchising agreements is however perfectly legal on the general basis, i.e. freedom of economic activity (including freedom of contract). However, there are some restrictions of such freedom, which largely result from mandatory provisions of competition (antitrust) law.

Antitrust law prohibits (at least shall prohibit) practices (agreements) that restrict competition to the detriment of the economic interest of consumers. European and Polish competition rules are usually restrictive to agreements subject of which is setting or imposition of the price; this approach does not only concern horizontal agreements (between competitors) – which is not controversial – but also agreements concluded between undertakings operating on different levels of trade (vertical agreements). In the latter case, and in particular when the vertical agreements have the form of franchising, such approach raises serious doubts in the context of axiological accuracy (desirability) of adopting – for the entire category of such vertical restrictions or resale price maintenance (RPM) and independently of the circumstances of the case – severe antitrust qualifications (i.e. as the agreement with anticompetitive object within the meaning of Art. 101 (1) TFEU or Art. 6 (1) of Polish Competition Act). The norm essentially contains a per se prohibition of RPM, including RPM in franchising.

This paper contains a critical analysis of the current antitrust regime on RPM in franchising. It has been presented against the background of the Polish case against Sfinks, i.e. the company, which has been fined (ca. 110.000 Euro) for the use of a uniform price list in restaurants operated by its franchise network.

Keywords: Franchising, Resale Price Maintenance, Competition Law, Article 101 (1) TFEU, Restriction of Competition by Object or by Effect, Intra-Brand False Positive

Suggested Citation

Kohutek, Konrad, Resale Price Maintenance in Franchising: Hardcore Restriction of Competition or Necessary Element of Such Business Model? (February 10, 2017). EuCML, Issue 4, 2017. Available at SSRN: https://ssrn.com/abstract=3065850

Konrad Kohutek (Contact Author)

Faculty of Law at Cracow Frycz-Modrzewski Academy, Poland ( email )

30-705 Kraków
Poland

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