SPANISH LEGISLATION
Royal Decree 2485/1998 implements Law 7/1996 on Retail Trade and regulates duty free tariffs. It is defined as: a contract by which the franchisor gives the franchise, in exchange for financial compensation, the right to exploit a franchise in order to commercialize certain products or services, and includes, at least:
- The use of a common business name or sign
- Uniform presentation of premises or means of transport
- Communication of know-how from franchisor to franchisee
- Continuous provision of commercial or technical assistance
1.- Pre-contract Information:
20 days before signing the contract, the franchisor should give the franchisee:
– Personal identification details
– Proof of ownership or licence of the brand
– General description of the business sector
– Experience of the franchisor
– Content: business system, characteristics of the know-how, investments and necessary expenses to put the business on the road, etc
– Structure and extent of the network in Spain
– Essential elements: rights and obligations, duration, resolution and renewal, economic provision, exclusivities and constraints
2.- Registry of Franchisors
Those who intend to act as franchisors in more than one Autonomous Community should enroll in this Registry beforehand
II – COMMUNITY LEGISLATION
1.- Regulatory Developments
Art. 101.1 of the Treaty on the functioning of the EU prohibits agreements which establish (or have as a result) the following conducts:
-Fixing of prices
-Limited production
-Dividing up markets or supply sources
-Discrimination of third parties which would imply a competitive disadvantage
-Imposition of subordinate services to the principal
Art. 101.1 of the Treaty on the functioning of the EU itself waives the application of this rule on certain agreements if market competition is respected. Technically, it is called an exemption.
2.- The scope of application
This regulation is applied to agreements: 1) between businesses which operate on different levels in the distribution chain, and 2) on the conditions of purchase, sale or re-sale of goods or services
3.- Non-exempt anti-competitive agreements: prohibited
3.1.- Franchises are anti-competitive and non-exempt when (art. 3 of the Commission Regulation (EU) nº 330/2010)
- The franchisor’s market share exceeds 30%
- They contain obligations about exclusive supply and the franchisee’s market share exceeds 30%
3.2.- Agreements are anti-competitive which restrict (art. 4 of the Commission Regulation (EU) nº 330/2010):
a) the authority of the franchisee to fix the sales price. Maximum or recommended sales prices by the franchisor are allowed so long as they do not equate to imposing a fixed or minimum price.
b) the territory in which the franchisee can carry out his business activity. However, agreements which restrict sales are permitted
– In the territory or to clients reserved for the franchisor or another franchisor – but without limiting sales to the franchisee’s clients
– For end users of a franchisee who operates wholesale
– Unauthorised distributors in a selective distribution system
– Clients components who would use them to manufacture the same type of goods as those of the franchisor
c) Sales to end users of franchisees who operate in retail. But, prohibiting operating outside the establishment is allowed.
d) Sales of components, like loose pieces, by the franchisee to third parties who then incorporate them in other goods
3.3.- Non-competitive clauses are anti-competitive when:
a) their duration is indefinite, over 5 years or tacitly renewable. But, if the franchisee carries out his business activity in the franchisor’s premises, the non-competition clauses are allowed for a period of more than 5 years.
b) the franchisee is forbidden to manufacture, buy, sell or re-sell goods or services after the agreement has expired
This clause is accepted if: (i) the goods and services are referred to as the object of the contract, (ii) it is limited to the premises where the franchisee is operating during the contracted period, (iii) it is indispensable to protect transferred technical knowledge, and (iv) its duration is equal to or less than a year.
Clauses of an unlimited period are acceptable, if the technical knowledge used and given is not in the public domain.
c) The franchisee is forbidden to sell brands of certain competitors
The Commission could forbid (ex Art.7.1 of the Commission Regulation (EU) nº 1/2003) franchise agreements which produce effects incompatible with Art. 101.3 of the Treaty. If these effects are produced, the Competition Protection Service will intervene – only in Spain.
Santiago Nadal
