New Block Exemption: Effects On Franchise Agreements

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The new vertical agreements block exemption has just been published. It will come into force on the 1 June 2010 and franchisors have a transitional period until 31 May 2011 in respect of agreements already in force on 31 May 2010 to satisfy the conditions of the new block exemption.

The great majority of franchise agreements in the UK are drafted so as to comply with the block exemption and we have no reason to believe that the changes proposed by the European Commission will alter that approach.

The new block exemption is very similar to the current version but, nevertheless, there are significant changes.

First, as with the existing block exemption franchisors with a 30% or more market share do not fall within the block exemption. Whether or not franchisors do have a market share in excess of 30% does, to a large extent depend on how the relevant market is defined but, in our opinion, adopting a common sense definition of relevant market, very few, if any, franchisors operating in the UK have a market share of more than 30%. Full article.

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