DENMARK Law and Practice Contributed by: Dan Bjerg Geary, Rasmus Otterstrøm Helleland Boisen and Laura Sloth Olesen, Bech-Bruun
6.3 Requiring Franchisees to Purchase Specific Goods and Services The franchisor can require the franchisee to purchase certain products and services only from the franchisor or its nominated suppliers. This is a common practice for Danish franchise arrangements. A purchasing obligation may constitute a non-com - pete obligation, as it requires the franchisee to buy goods exclusively from the franchisor or nominated suppliers, thereby preventing other suppliers from competing for the contract goods. A purchasing obli - gation must therefore be objectively necessary for the operation of a franchise system to comply with EU competition law. Requiring the purchase of certain products and servic - es only from the franchisor or nominated suppliers is typically necessary to maintain the franchisor’s quality standards for the products and services offered under the franchise concept, as well as to uphold the brand’s integrity and high level of service for consumers. 6.4 Channel Reservation A franchisor is allowed to impose certain restrictions on the franchisee’s online sales. This can include limi - tations on the use of specific e-commerce platforms, and can set out specific quality requirements regard - ing the content and layout of an e-commerce platform. However, these restrictions must not prevent the fran - chisee from effectively utilising the internet as a sales channel. Additionally, a franchisor may reserve cer - tain territories or customer groups for the franchisor or other franchisees, provided that the franchisee is not prohibited from passively selling to these areas or customer groups. 6.5 Vertical Agreement Block Exemptions When operating a business in Denmark (an EU mem - ber state) as a franchisor or franchisee, it is important to consider whether the franchise agreement is cov - ered by the VBER, which plays a crucial role in shap - ing how vertical agreements are handled. The VBER provides a framework that makes permissible certain agreements which might otherwise be considered ille - gal under competition law for being anti-competitive.
If the franchise agreement is covered by the VBER, the parties do not need to conduct an individual assess - ment of whether the franchise agreement complies with the rules on competition. For the VBER to apply, the following general condi - tions must be met: • each of the parties’ market share must not exceed 30% of either the sales or purchasing market for the goods or services in question; • the franchise agreement must constitute a vertical agreement; • the franchise agreement must not contain so- called “hardcore restrictions” – eg, fixed prices or minimum prices (ie, resale price maintenance) and market-sharing restrictions such as restricting pas - sive sales (ie, internet sales); and • any provisions relating to IP rights must be ancillary to the main purpose of the franchise agreement and must be directly related to the use, sale or resale of goods or services by the franchisee or its customers. The VBER also contains rules on various aspects rel - evant for franchising, including online sales, exclusiv - ity, distribution systems and pricing. If the foregoing conditions are not met, the franchise agreement requires an individual assessment. 7. Choice of Governing Law 7.1 Possibility of a Franchisor Stipulating Non-Local Law The franchisor is permitted to stipulate the laws of its jurisdiction as the governing law of the franchise agreement. This is a consequence of the principle of freedom of contract under Danish law. The choice of governing law may be influenced by various factors, such as the franchisor’s familiarity with the franchisee’s legal system, perceived advan - tages in terms of legal protections, or strategic busi - ness considerations. Ultimately, the decision on which jurisdiction’s laws will apply is a matter of negotiation between the parties.
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