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Do dealers qualify as franchisees under the Franchise Act? A must-read for dealers and franchisers.

Introduction

On January 1, 2021, the Dutch Franchise Act (DFA) entered into force, aiming to provide protection to franchisees in the Netherlands. Prior to the DFA, franchise agreements were considered “unnamed agreements” governed by general contract law. However, the introduction of the DFA transformed franchise agreements into “named agreements” with their own legal regime, prioritizing the protection of franchisees. While the DFA is mandatory and cannot be set aside by choice of law, its interpretation is subject to the development of case law.

The Distinction: Named and Unnamed Agreements

Before the DFA, franchise agreements were classified as “unnamed agreements” governed by general contract law. In interpreting such contracts, the agreements between the parties were given precedence, as long as they did not conflict with statutory provisions or principles of reasonableness and fairness. However, with the implementation of the DFA, franchise agreements became “named agreements” subject to a specific legal regime that prioritizes the protection of franchisees. Consequently, the DFA prevails over any conflicting provisions agreed upon by the parties.

It’s important to note that not all commercial agreements are considered named agreements. For example, distribution contracts are still governed by general contract law and do not have a specialized legal regime protecting distributors.

Dealer Contracts and Franchise Agreements

Determining the applicable law for a given agreement requires the correct classification of the agreement. Qualification is based on the factual circumstances surrounding the agreement (the obligations of parties), rather than the name given to it by the parties involved.

The DFA defines a franchise agreement as an agreement in which a franchisor grants a franchisee the right and imposes the obligation to operate a franchise formula in exchange for a fee.

Several dealer organizations, such as the Bovag (bond of automobile dealers and garage owners), advocate that dealer contracts should fall under the scope of the DFA. In response to the internetconsultation of the draft DFA Vakcentrum (an independent representative of independent retailers in food, non-food, fast-moving consumer goods and of franchisees) argued that the term “franchisee” should also include dealers. T. de Mönnink and J. van Till published an article that is worth reading (“Valt exclusive of selectieve distributie ook onder de (aankomende) franchisewet?”, NJB 2020/17). They conclude that the assertion that dealer and distribution agreements, with an exclusive and selective nature, qualify as franchise agreements does not withstand scrutiny.

The Stellantis Ruling: Seeking Legal Certainty

Recently, the categorization of dealer contracts as franchise agreements under the DFA was put to the test in a court case involving Stellantis-dealers (Opel, Citroën, and Peugeot). These dealers sought clarification from the Amsterdam court regarding the qualification of their agreement under the DFA. The court’s decision would determine whether they were protected by the DFA or subject to general contract law, significantly impacting their rights and obligations.

In its ruling, the Amsterdam court referred to the parliamentary history of the DFA, which emphasized that a franchisee must pay a direct or indirect fee to the franchisor for the exploitation of the franchise formula. The dealers argued that the payments they made to Stellantis, such as high(er) prices and mark-ups, qualified as franchise fees under the DFA.

However, the court concluded that the dealers failed to sufficiently prove that the payments they made should be classified as franchise fees and, for example, not as Stellantis’ profits. The court distinguished the right to be a dealer from the right to operate a franchise formula, stating that the dealers did not adequately demonstrate why the payments qualified as franchise fees. Consequently, the Stellantis-dealers were deemed not to be protected by the DFA.

Conclusion

The introduction of the Dutch Franchise Act aimed to provide protection to franchisees in the Netherlands. However, the recent Stellantis ruling has created legal uncertainty regarding the scope of the DFA. This ruling has raised questions about the interpretation of the DFA and its application to dealer contracts. If the Stellantis ruling is strictly applied, it is possible that dealer contracts may not be protected by the DFA. However, it is unknown whether the ruling applies universally to all types of dealers or solely to the specific dealership involved. Moreover, it raises the question of how it can be substantiated that a franchise fee is in fact due. The possibility of an appeal further complicates the situation, as it may take years before a final decision is reached. Both Stellantis and its dealers have the opportunity to seek legal certainty by appealing the Amsterdam court’s decision. Until a final judgment is reached, the legal status of dealer contracts remains uncertain, impacting the rights and obligations of the parties involved.

You are welcome to contact Angela Schwegler in case of any questions (a.schwegler@valegis.com).

Angela Schwegler-Veldstra

Angela studeerde cum laude af aan de Vrije Universiteit in Amsterdam en is sinds 2016 advocaat. Zij heeft zich bij een middelgroot advocatenkantoor in Amsterdam gespecialiseerd binnen het ondernemingsrecht in brede zin.

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