Decree of the Office for the Protection of Competition No 5 / 2000 Coll.
Ordinance of the Office for the Protection of Competition for the Authorisation of a General Exemption from the Prohibition of Competition Agreements pursuant to § 3 (1) and § 4 (1) of Act No. 63 / 1991 Coll., on the Protection of Competition, as amended by Act No. 286 / 1993 Coll., on Certain Types of Franchise Agreements
Valid
Effective from 01.03.2000
5
DECLARATION
The competition authority
of 22 December 1999
authorising a general exemption from the prohibition of agreements distorting competition pursuant to Articles 3 (1) and 4 (1) of Act No. 63 / 1991 Coll., on the Protection of Competition, as amended by Act No. 286 / 1993 Coll., on certain types of franchise agreements
Pursuant to Section 6a of Act No. 63 / 1991 Coll., on the Protection of Competition, as amended by Act No. 286 / 1993 Coll., (hereinafter referred to as "the Act ') and under Section 1 (5) (e) of Act No. 272 / 1996 Coll., implementing certain measures in the system of central authorities of the state administration of the Czech Republic and amending and supplementing the Act of the Czech National Council No. 2 / 1969 Coll., on the establishment of ministries and other central authorities of the state administration of the Czech Republic, as amended, and amending and supplementing Act No. 97 / 1993 Coll.
(1) The Office for the Protection of Competition ("the Office") authorises a general exemption from the prohibition of Articles 3 (1) and 4 (1) of the Act by not applying the prohibition and the nullity of the anti-competitive agreements provided for in those provisions to franchise agreements with two competitors which contain one or more of the anti-competitive arrangements referred to in Article 3 of this Decree.
(2) This decree applies to distribution franchise (relating to the sale of goods and the provision of services), does not apply to industrial franchise (relating to the production of goods) and wholesale franchise.
For the purposes of this Order
(a) the franchise agreement is an agreement between competitors, under which one party, the provider of rights, provides the other party, the purchaser of the franchise, for a certain remuneration or other property value the right to use a set of industrial or other intellectual property rights or certain rights of that file relating to trade marks, trade name, designation of establishments, patents, utility models, designs, copyright, knownhow or other rights of a similar nature to be used for the sale of goods or services (hereinafter referred to as "franchise"), for the purposes of the disposal of certain types of goods or services, the agreement being at least obligations relating to:
1. the use of the common commercial name or designation of the establishment and the uniform overall external appearance of the premises or means of transport;
2. the transmission by the franchise provider of the knowledge-how to its acquirer;
3. the continuous provision by the franchise provider of commercial or technical assistance to the franchise acquirer;
(b) the principal acquirer of the franchise shall be the competitor to whom the franchise provider grants the right to use the franchise for a specific remuneration or other asset value for the purpose of concluding franchise agreements with other franchisees;
(c) the goods of the franchise provider shall mean the goods which are manufactured by him or under his instructions or bearing the trade name or trade mark of the franchise provider;
(d) contractual establishment means the area in which the franchise is used or, where the franchise is used outside that establishment, the base from which the franchise acquirer operates the means of transport intended for the use of the franchise;
(e) knowhow means a set of unpatented practical knowledge resulting from the experience and testing of the franchise provider, which is secret, substantial and identifiable;
1. classified means that know- how constitutes the exact composition and arrangement of individual parts which are not generally known and easily accessible; However, this cannot be interpreted in a narrow sense in such a way that each individual part of the know-how must be completely unknown and unattainable outside the business of the franchise provider;
2. Significant means that the knowledge-how contains information that is important for the sale of goods or services to end users and, in particular, for the presentation of goods sold, the processing of goods in connection with the provision of services, the methods of dealing with customers and the administrative and financial management of business activities; the knowledge-how must be useful to franchisees to improve their competitive position when the franchise agreement is concluded, in particular by improving their activities or facilitating access to the new market;
3. Identifiable means that the know- how must be described sufficiently clearly so that it can be verified that it meets the criterion of secrecy and materiality; a description of how know-how may be part of a franchise agreement or a separate agreement or may be recorded in another appropriate form,
(f) competitive goods shall mean goods identical to or deemed to be interchangeable with regard to their characteristics, price and intended use;
(g) competing services shall mean services identical to or deemed to be interchangeable to the consumer in view of their characteristics, price and intended use.
The prohibition shall not apply to the following distortions of competition:
(a) an undertaking by the franchise provider not to be in the contractually defined territory
1. grant third parties the right to use franchise in whole or in part;
2. to use the franchise itself in a similar manner, or to sell goods or to provide services which constitute the subject of the franchise;
3. to supply the goods of the franchise provider itself to third parties,
(b) an undertaking by the principal of the franchise not to enter into franchise agreements with other franchise buyers outside its contractually defined territory;
(c) an undertaking by the franchise acquirer to use franchises only in contractual establishments;
(d) an obligation on the licensee not to seek, outside the contractually defined territory, customers for the goods or services which are the subject of the franchise;
(e) an obligation on the purchaser of the franchise not to produce, sell or use goods competing with the goods of the franchise provider subject to the franchise when providing services; This obligation shall not be extended to accessories or spare parts for such goods.
(1) The prohibition does not apply to one or more of the following contractual obligations of the franchisee
(a) maintain confidentiality regarding the know-how transmitted by the franchise provider, even after the end of the franchise agreement;
(b) communicate to the franchise provider and other franchisees all experience gained in the use of the franchise and conclude with them a non-exclusive contract on the use of the know-how resulting from such experience;
(c) inform franchise providers of any infringement of industrial or other intellectual property rights, take appropriate action against persons undermining those rights, or provide the franchise provider with synergies in legal proceedings against such persons;
(d) not to use the know-how transmitted by the franchise provider for purposes other than the use of franchise, even after the end of the franchise agreement;
(e) to participate or to send staff to training organised by the franchise provider;
(f) to use the commercial methods proposed by the franchise provider, including any subsequent modification thereof, and to use the industrial or other intellectual property rights which are the subject of the franchise;
(g) comply with the franchise provider's specified standards concerning equipment and the uniform overall external appearance of contractual establishments or means of transport;
(h) to allow the franchise provider to check the contractual establishments or means of transport, including the goods and services sold, the stocks of goods and the keeping of accounts;
(i) not to change the location of the contractual establishments without the consent of the franchising provider;
(j) do not transfer, without the consent of the provider, the rights and obligations arising from the franchise agreement.
(2) The prohibition shall not apply to the presence of one or more of the following contractual obligations of the franchise acquirer where they are necessary for the protection of industrial or other intellectual property rights of the franchise provider or for the maintenance of a common identity or reputation of the franchise network,
(a) to sell or use only goods corresponding to the minimum objective quality requirements laid down by the franchising provider when providing services;
(b) to sell or use goods produced only by the franchise provider or third parties designated by him when it is difficult to establish objective requirements for the quality of the goods due to the nature of the goods which are the subject of the franchise;
(c) not to engage, directly or indirectly, in any similar trade activity in the territory where it would compete with a member of the franchise network, including the franchise provider; the purchaser of the franchise may be obliged to comply with this obligation in the territory where he used the franchise even after the end of the franchise agreement for a reasonable period which may not exceed one year;
(d) not to acquire shares in the voting rights of competitors which would enable the franchise acquirer to influence the behaviour of that competitor;
(e) to sell to final consumers, other franchisees or distributors operating in other distribution systems supplied by or with the consent of the manufacturer of such goods;
(f) make efforts to sell the goods or to provide the services which are the subject of the franchise; offer a minimum range of goods for sale, achieve a minimum turnover, plan orders in advance, maintain minimum stocks and provide consumer and guarantee services to final consumers,
(g) to pay a certain part of the income to the franchise provider for advertising purposes and to advertise separately the content of which the franchise provider has approved.
(1) The prohibition applies to restrictions on competition
(a) competitors producing competing goods or providing competing services shall conclude franchise agreements between themselves in relation to those goods or services;
(b) the franchise agreement is prevented from obtaining the goods which are the subject of the franchise from other franchise purchasers or from other distributors having a contract with the franchise provider;
(c) the franchise agreement is prevented from obtaining from other sources goods of the same quality as those offered by the franchise provider; the obligations arising from the provisions of Sections 3 (e) and 4 (2) (b) of this Decree are not affected by that provision,
(d) the franchise agreement obliges the franchise purchaser to sell or use the franchise in the provision of goods produced by the franchise provider or third parties designated by the franchise provider and the franchise provider, for reasons other than the protection of his industrial or other intellectual property rights, or in order to preserve the common identity or reputation of the franchise network, refuse to consent to the franchise acquirer to withdraw the goods from the producers proposed by the franchise acquirer; the obligation resulting from the provision of Section 3 (e) of this Order is not affected by that provision,
(e) the franchise acquirer is directly or indirectly limited by the franchise provider in determining the selling prices of the goods or services which are the subject of the franchise; the right of the franchise provider to recommend selling prices is not affected by this provision;
(f) the franchise acquirer shall be prevented from using the know- how after the expiry of the agreement if the know- how has become generally known or easily accessible in a way other than a breach of the know- how-how obligation by the franchise acquirer;
(g) the transferee is prevented from objecting to the absence of industrial or other intellectual property rights constituting the object of the franchise; the right of the franchise provider to terminate the franchise agreement in this case is not affected by this provision.
(2) The prohibition also applies to cases of franchise agreements where:
(a) access to and competition in the national market is substantially limited as a result of sets of franchise agreements concluded for competing goods or competitive services; a significant restriction means that more than two thirds of all sales of such goods or services on the national market are made through sets of franchise agreements;
(b) the goods or services which are the subject of the franchise are not exposed on the national market to effective competition from competing goods or services; goods or services which are the subject of a franchise are not exposed to effective competition if the share of sales of such goods or services on the national market exceeds 30%;
(c) the tenderers of the franchise act in agreement with regard to the prices of the goods or services forming the subject-matter of the franchise;
(d) the franchise provider shall exercise its right to control the contractual establishments and means of transport or refuse to give consent to the franchise acquirer to transfer the contractual establishments or to transfer the rights and obligations resulting from the franchise agreements for reasons other than the protection of his industrial or other intellectual property rights, to maintain the common identity or reputation of the franchise network or to check whether the franchise acquirer complies with its obligations under the franchise agreement.
The prohibition shall not apply to franchise agreements which contain distortions of competition other than those contained in Sections 3 and 4 of this Decree, and at the same time do not contain any distortions of competition contained in Section 5 of this Decree, provided that the parties to the franchise agreement submit the draft of this Agreement to the Authority for approval in accordance with the procedure laid down in Section 3 (5) of the Act and that the Authority does not decide, within two months of the date on which the agreement was received, that it does not approve the agreement. The authorisation of the Office not to approve the agreement under the terms of Paragraph 3 (5) of the Act is without prejudice to that provision.
The provisions of the Decree are also applicable to franchise agreements between the franchise provider and the main franchise acquirer and the contractual arrangement between the main franchise acquirer and other franchise buyers.
The administrative procedure for authorising an individual exemption for franchise agreements or approval of such agreements initiated before the entry into force of this Decree shall be completed in accordance with the relevant provisions of the law.
This Decree shall take effect on the first day of the second calendar month following its publication.
Chairman:
Ing. Bednář v. r.
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Regulation Information
| Citation | Decree of the Office for the Protection of Competition No 5 / 2000 Coll., authorising a general exemption from the prohibition of agreements distorting competition pursuant to Sections 3 (1) and 4 (1) of Act No. 63 / 1991 Coll., on the Protection of Competition, as amended by Act No. 286 / 1993 Coll., for certain types of franchise agreements |
|---|---|
| Regulation Type | - |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 20.01.2000 |
|---|---|
| Effective from | 01.03.2000 |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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