Franchising as a sales method is characterized, among other things, by the franchisee acting in its own name and for its own account. The franchisee is an independent, self-employed entrepreneur and is not an agent or representative of the franchisor. For this reason, the franchisee not only becomes the contractual partner of its customers and suppliers, but is also responsible for its own actions under liability law. In general, a franchisor cannot be held liable for the actions of a franchisee.
An important exception to this rule applies to competition law. According to the Federal Supreme Court, a franchisor can be called to account by third parties for acts by its franchisee in breach of competition or unfair advertising law(1).
According to Section 8(2) of the Unfair Competition Act, a claim for forbearance under unfair competition law against the so-called business owner (but no claim for compensation) can arise if the breach of the act was committed by an agent in the course of its business. According to case law, the terms ‘business owner’ and ‘agent’ must be interpreted widely. With regard to breaches of competition law, the aim and purpose of the act is to prevent the business owner from hiding behind third parties which are more or less dependent on it. The Supreme Court has justified this position by stating that the business owner benefits from an extension of the scope of its business through the agent and can control this risk area. Continue reading this article.