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09 March 2021
May a franchisor provide financial support to its franchisees through loans or payment periods? This question is of interest as this type of financial support is often provided to franchisees in order to help them set up and run their outlets. In a 15 January 2020 decision, the Supreme Court had the opportunity to rule on this question in a lawsuit between Speed Rabbit Pizza and Domino's Pizza France.
Speed Rabbit Pizza is a French pizza restaurant chain which offers takeaway and delivery service. It operates its own restaurants as well as a franchise network. Domino's Pizza France is the French subsidiary of Domino's Pizza, the US multinational pizza restaurant chain. It operates through a franchise network.
Between 2003 and 2012, Speed Rabbit Pizza reported the closure of 26 outlets and therefore a drop in revenue. It attributed this to unfair competition practices by Domino's Pizza France. Speed Rabbit Pizza asserted that the latter had granted its franchisees excessive payment periods, unjustified debt waivers and loans in violation of the legal provisions on the banking monopoly, which had given its franchisees an unfair advantage over Speed Rabbit Pizza's outlets.
On 20 March 2012 Speed Rabbit Pizza filed suit against Domino's Pizza France before the Paris Commercial Court. However, on 7 July 2014 the Paris Commercial Court dismissed the case.
Speed Rabbit Pizza therefore appealed to the Paris Court of Appeal. For these unfair competition practices and other alleged anti-competitive practices, Speed Rabbit Pizza claimed €75.8 million in damages.
On 25 October 2017 the Paris Court of Appeal upheld the Paris Commercial Court's decision as regards Speed Rabbit Pizza's claim of unfair competition practices.
Speed Rabbit Pizza ultimately appealed on points of law to the Supreme Court. It argued that under French law:
On 15 January 2020 the Supreme Court overturned the Paris Court of Appeal's decision as regards Speed Rabbit Pizza's claim of unfair competition practices. In particular, the Supreme Court considered that the Paris Court of Appeal had erred in concluding that:
The Paris Court of Appeal must now re-examine the case in light of the Supreme Court's decision. In particular, it must address the following issues:
In 2015 a new derogation from the banking monopoly law was introduced to French law. The banking monopoly law no longer prevents commercial companies from granting loans to companies with which they have economic links which justify such loans. The existence of a franchise agreement between the companies is considered to evidence such economic links. For this derogation to apply, certain conditions must be met – in particular:
Domino's Pizza France cannot invoke this derogation as it was not in force when this case arose. However, subject to meeting the applicable conditions, it could be applied by franchisors which seek to grant loans to franchisees.
For further information on this topic please contact Raphael Mellerio or Bertrand Baheu-Derras at Aramis Law Firm by telephone (+33 1 53 30 7700) or email (email@example.com or firstname.lastname@example.org). The Aramis Law Firm website can be accessed at www.aramis-law.com.
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