FRANCE Law and Practice Contributed by: François-Xavier Awatar and Lina Lahlou, Osborne Clarke
2022/720 on vertical agreements, to a maximum dura - tion of five years. 6.4 Channel Reservation Under both EU and French competition law, a fran - chisor is prohibited from imposing an outright ban on passive sales by members of its network. Accordingly, a franchisor may not prohibit its franchisees from uti - lising the internet as a channel for the resale of the contract goods and services (see 6.1 Treatment of Competition Restrictions in Franchise Agreements ). The franchisor may, however, impose certain restric - tions on online sales by its franchisees, provided that such restrictions do not amount to a prohibition on the use of the internet as a sales channel. 6.5 Vertical Agreement Block Exemptions As a member state of the European Union, France is directly subject to EU Regulation 2022/720 of 10 May 2022 on the application of Article 101 (3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted prac - tices (the VBER). The VBER is directly applicable in the French legal order and does not require transposition into national law. Accordingly, vertical agreements entered into in the context of franchise arrangements benefit from the block exemption provided for by the VBER, provided that the conditions set out therein are satisfied, in par - ticular the market share thresholds and the absence of hardcore restrictions. The practical implications of the VBER for franchise agreements, including with respect to exclusivity obligations, non-competition clauses, exclusive sourcing obligations, resale price mainte - nance and online sales restrictions, are addressed in detail in 6. Restrictions on Competition in Franchise Agreements . 7. Joint Employer Risk and Vicarious Liability 7.1 Joint Employer Laws Under French law, a franchisee is an independent business owner and is therefore solely liable for his or her actions, particularly with respect to employees. In a franchise arrangement, these employees are, in
fact, employed within the franchisee’s organisation. Notwithstanding the foregoing, where the franchisor is found to have interfered in the management of the franchisee’s business, such conduct may give rise to the franchisor’s liability. In more serious cases, such interference may result in the reclassification of the franchise agreement as an employment contract, in particular under the provi - sions governing the status of branch managers pursu - ant to Article L. 7321-2 of the French Labour Code. 7.2 Vicarious Liability As noted in 5.2 Franchise Renewal , the franchisee operates as an independent undertaking and is not a subordinate of the franchisor. Accordingly, the fran - chisor does not bear vicarious liability for the acts or omissions of the franchisee. Notwithstanding the foregoing, the franchisor may incur liability towards third parties where a risk of con - fusion exists between the activities of the franchisor and those of the franchisee, in particular where the franchisor has created a misleading appearance or has interfered in the management of the franchisee’s business. The franchisor may further be held liable on the ground of its own fault ( faute propre ) where it has directly contributed to the damage suffered, for instance by disseminating erroneous information to consumers through the franchise network. 8. Choice of Governing Law 8.1 Possibility of a Franchisor Stipulating Non-Local Law Pursuant to Article 3 of Regulation (EC) No 593/2008 on the law applicable to contractual obligations (the “Rome I Regulation”), the parties enjoy full freedom to designate the law governing their contractual relation - ship. Accordingly, the franchisor is at liberty to stipu - late the application of the law of its own jurisdiction within the franchise agreement. Nevertheless, irrespective of the law designated by the parties to govern the franchise agreement, the
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