The European Commission Decision on franchising in the Charles Jourdan case

In 1988 the Commission decided the case of Charles Jourdan, which submitted their application for the exemption in Article 101(3) TFEU in 1985.¹ The Commission stated that, similar to the Pronuptia case and previous Commission Decisions we have reviewed before, the franchisor requires certain clauses in the franchise agreement to preserve the, “common identity and reputation of the network”² of the franchise system. Specifically, franchisors are not found to be in violation of European competition law because they are protecting their know how of the business.

The clauses that protect know how include but are not limited to, non-compete clauses, reasonably limiting the franchisees possibility of transferring the franchise, limiting the franchisees ability to sub-franchise the business or placing the franchise under the control of a third party, territorial restrictions, and an obligation for the franchisee to follow a uniform advertising policy. These are just some of the clauses that were deemed to be expectable for a franchisor to have in their franchise agreements in 1988.

What we can see from these Commission’s Decisions and the Pronuptia case, is that as long as the franchising business model benefits consumers, it is deemed not to violate competition law. The EU has a recurring theme of a consumer protection-oriented jurisprudence while applying EU competition law, and regulating franchising is no exception.³

The field of European franchise law is complicated and requires experience and expertise to navigate through all the requirements. That is why it is important to contact a professional who can assist you with your individual situation. Contact franchise attorney Mario Herman for more information.