To quote this paper: M. LEAUTAUD, “The application of the new regulation on vertical restraints to franchising agreements”, Competition Forum – Resources, 2023, n° 0010, https://competition-forum.com.

Abstract.

In the realm of competition law, a delicate balance must be struck between promoting free competition and providing legal certainty for businesses. This equilibrium is the driving force behind the establishment of a consistent exemption regulation. In this context, the European Commission’s new regulation on vertical restraints of 10 May 2022 acts as a guiding framework for companies involved in vertical agreements such as franchise agreements.

Past approaches involved specific regulations tailored for various agreement categories, including notable provisions for franchising. However, a shift towards a more comprehensive and global regulation is observed. This new regulation builds upon the foundation of Regulation 330/2010 and is accompanied by guidelines that facilitate interpretation and enhance clarity. Companies must distinguish between permitted and prohibited practices, requiring both franchisors and franchisees to understand the nuances of the regulation to leverage opportunities while adhering to its provisions. Clarity, readability, and simplicity in the text are essential to ensure seamless compliance and avoid potential competition law violations.

Given the context of globalization, the liberalization of internet-based distribution, and the surge in online sales, adapting the text to address digital challenges became essential to accurately reflect market realities. In summary, the new exemption regulation and its guidelines maintain the foundations of previous solutions, thanks to relatively unchanged exemption systems and application criteria. Nevertheless, the new text simplifies and clarifies the rules to address challenges posed by electronic commerce. The inclusion of numerous decisions in the text serves to improve predictability for economic players. Furthermore, a revision was deemed necessary to rectify past issues that hindered the effectiveness and scope of the regulation.

The future of the franchise system appears promising, with the potential for formal recognition hinging on the practical application of this updated text. For now, franchise agreements continue to operate within a legal framework characterized by flexible boundaries, in particular through the application of the theory of ancillary restrictions.

Marion LEAUTAUD