Spain
Franchising is a fairly recent development whose vigorous growth from the mid-1980s is expected to intensify with the Single Market in view. In a 1987 Guidebook published by the Internal Trade Directorate for prospective franchisees under the title “Franchising, a formula for the future” it is identified as a system in which one company having some technical or other form of knowledge of its own agrees with one or more other economically independent companies to share that knowledge in return for financial compensation, entering into a set of agreements which can vary in their nature but also include a reciprocal exclusivity clause.
Although a franchising contract must be drafted in compliance with the ordinary Civil Code contract rules, franchising as such is not expressly regulated by any Spanish law141 but is affected by the provisions of competition law, at both national and EC level142.
The Restrictive Practices Act of 20 July 1963 was superseded by the Competition Act 16/1989 of 17 July. The change reflected a desire to apply competition legislation more strictly and in particular, Spain’s need to align itself with EC competition regulations. Title 1 of the new Act, “On free competition”, includes a part 1 headed “Prohibited practices and authorised practices”, which is of special interest to franchising.
Article 1.1 of that part bans any collective agreement, decision, recommendation, concerted practice or collusion having or potentially having the effect of restricting or distorting competition on the Spanish market or any part of that market, especially such practices as:
a) the direct or indirect setting of prices or other commercial or service conditions;
b) the limitation or control of production, distribution, technical development or investment;
c) the sharing out of markets or sources of supply;
d) the application in commercial or service relationships of unequal conditions for the provision of equivalent goods or services, thereby disadvantaging some competitors over others;
e) making the conclusion of a contract conditional upon the acceptance of additional goods or services which by their nature or according to the custom of the trade are not related to the subject matter of the contract.
Article 3.1 provides that the practices referred to in Article 1.1 may be authorised when they help to improve production or marketing of goods and services, or encourage technical or economic progress, provided that:
a) they allow the consumer or user a reasonable share in the resulting benefits;
b) they do not impose on the companies concerned any restrictions which are not essential to achieve those aims; and
c) they do not enable the companies participating to eliminate competition for a substantial proportion of the contracts or services concerned.
Article 5.1, which is clearly relevant to franchising, provides that the government may issue an exemption regulation, which must always be prepared in consultation with the Competition Tribunal, authorising the categories of agreement (etc.) referred to in Section 3.1, subject to the condition that:
a) only two companies participate and impose restrictions in the distribution and/or provision of particular products for their sale or resale, or regarding the acquisition or use of industrial or intellectual property rights, or secret industrial or commercial know-how; or
b) their only aim is the devising and uniform application of standards or patterns, or specialisation in the manufacture of certain specified products, or joint research and development; or
c) their aim or effect is to increase the rationality and competitiveness of companies, especially small and medium ones.
Since the legislation is so recent, and firms are waiting for some sort of exemption regulations for distribution agreements under article 5.1, the Competition Tribunal has authorised only two franchising agreements under article 3.1. In both cases authorisation has been granted after some modifications were made to the notified agreements.