A draft green paper by the Commission on Industry, Tourism and Commerce provides that Parliament will review the draft Distribution Agreements Act, which will regulate the relationships between agents involved in the distribution sector. The act will apply to and protect any party involved in the commercial distribution sector and will regulate all types of distribution agreement, including franchising.
The government has recently modified the rules applicable to the Franchisors' Registry. The government aims to promote the registry as a tool to obtain accurate and updated information. It also aims to clarify the definition of 'franchise' and differentiate franchising activities from other commercial activities that are often confused with franchising.
Royal Decree 378/2003 on block exemptions, specific authorizations and the Competition Registry entered into force in April 2003. Among other things, the law authorizes certain agreements between two or more companies operating at different levels of the production or distribution chain that relate to the conditions under which the parties may purchase, sell or resell certain goods or services.
The franchising legislation has been criticized for, among other things, failing to enforce the obligations imposed on franchisors. Therefore, the government has proposed an amendment to the legislation. However, franchising experts believe that the proposal does not resolve any fundamental practical problems and creates even more confusion.
Most franchisors seek to protect their control over their business to the fullest extent possible and include numerous supervisory mechanisms in their contractual agreements with franchisees. When expanding their networks in Spain, franchisors must pay attention to domestic legislation, particularly if the franchisee is unable to negotiate the conditions of the agreement.
Spanish law requires franchisors and master franchisees to disclose certain pre-contractual information to potential franchisees. However, the parties to a master franchise agreement may be reluctant to provide sensitive information to parties who are not bound by any contract. Solutions to this problem include confidentiality agreements and the granting of indemnities.
Spain is set to implement European requirements on warranties for the sale of consumable goods. The new legislation will place vendors and manufacturers under an obligation of strict liability for such goods, and will have considerable consequences for goods-distribution franchise businesses.
Franchises of commercial traders are often affected by manufacturers' liability for damage caused by defective products. Even though neither the franchisor nor the franchisee manufactures the products that they market, they are the final suppliers. Therefore, they can be considered part of the chain of agents responsible and, thus, liable for defective products.
Compensation for loss of clientele is a difficult matter, which falls on the line between deserved compensation and unjust enrichment. This update discusses some of the issues involved.
A recent case has set a new precedent for franchising law. It makes clear that the success or failure of a business depends on the franchisee: success is not guaranteed in the franchise contract.
Two years ago a Franchisers’ Register was established to centralize information between autonomous communities. However, it has not simplified the system as it was intended to.
This update outlines the rise of franchising in Spain and the accompanying rise of specific case laws to deal with this unique type of contract.
Including: The Basic Law; Developing the Law; Franchisor Registry; Contracts; New EC Regulation