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Vol 8 (2010) - Issue 3

Indonesia's franchise regulations

Richard Cornwallis, Senior Foreign Legal Consultant and Norma Mutalib, Associate, Makarim & Taira S., Jakarta

This article examines in detail the franchise regulatory regime which has been in force for the last few years, during which both international and local franchise systems have grown considerably in Indonesia. In addition to the many and varied requirements set out in the regulations, separate rules govern the application of antitrust laws to franchise agreements. It remains to be seen whether effective enforcement will improve compliance with a time-consuming and inefficient regulatory regime, which has caused many businesses to opt for licensing or related schemes.

Italy – Can a franchise network be qualified as a group of companies?

Alessandra Sonnati, Associate, Frignani e Associati, Turin

An Italian court for the first time addressed the question whether a franchise relationship can be regarded as a “group of companies” in view of the contractual control the franchisor exercises over the franchisee. This has potentially far-reaching consequences in terms of liability on the part of the controlling company or franchisor for damages caused by the controlled company or franchisee. Though the court held the franchisor was not liable in the case in question, it did confirm that a franchise relationship could be treated as a group of companies depending on the circumstances. The impact on franchise relationships and regulation of franchise contracts could be significant.

UK – The carbon reduction commitment and its impact on global franchisors

Babette Märzheuser-Wood, Partner, Field Fisher Waterhouse LLP, London

The CRC Energy Efficiency Scheme (CRC Scheme) is a new UK-wide mandatory emissions trading scheme. All participants must register and report on total energy used in their organisations by 30 September 2010. The scheme applies to franchisors, including those based overseas, as long as the UK electricity consumption of the franchised network in the UK exceeds 1000 MWH. This article sets out the detail of the new scheme and the compliance obligations of both franchisors and franchisees.

Consumer protection in South Africa – Risks and challenges for franchisors

Alexia Christie, Partner, Webber Wentzel and Candice Meyer, Partner, Webber Wentzel, Cape Town

Until the promulgation of the Consumer Protection Act, there was no legislation that specifically regulated franchising in South Africa. The Act is a comprehensive codification of a range of consumer rights with the primary purpose of promoting and advancing the social and economic welfare of consumers in South Africa. In addition, recognising the need for legislation to protect the interests of franchisees, the Act specifically governs franchise agreements and the activities of franchisors generally, and affords significant protections to franchisees.

New competition rules for vertical agreements

Cathy McKenna, Associate, Field Fisher Waterhouse LLP, London

The final texts of the new Verticals Block Exemption Regulation and accompanying Guidelines were published on 20 April 2010 and came into force on 1 June 2010. These are unlikely to herald a brand new era for the treatment of vertical agreements. However, it does reflect the changes over the past decade in the way products and services are sold and marketed – particularly in the online arena. It is this area which is most likely to attract the Commission’s attention and where we could see some interesting cases testing the lawfulness of Internet selling restrictions.

Maximum price setting and new franchise legislation in North Carolina

David W. Oppenheim, Partner and Felicia A. Nadborny, Associate, Kaufmann Gildin Robbins & Oppenheim LLP, New York

A recent case involving Burger King and its franchisees highlights the tension that exists when a franchisor imposes an obligation on its franchisees that is not necessarily aligned with the franchisees’ financial interests. In this particular case the court affirmed Burger King’s right to impose maximum prices on products sold by its franchisees. This Report further provides an overview of new franchise legislation under consideration in North Carolina. The proposals would introduce a range of compliance obligations for franchisors and have met with stark opposition from the franchise community.