Franchise, where the limit of canvassing is located

The Court of Cassation delivered an interesting judgment on the scope of a territorial exclusivity clause stipulated in a franchise agreement, in the event of action by canvassing carried out by a franchisee in the exclusive territory of another franchisee in the same network.

In a franchise network of gyms, a franchisee who benefited himself an exclusive territory, had set up communication actions via the affixing of advertising panels, and by distributing flyers in the mailboxes of the inhabitants, on the exclusive territory of another franchisee.

The latter considering himself unfairly competed had obtained an interim order from the president of the commercial court on the basis of tort ordering his opponent to pay a fine for “manifestly unlawful disorder”.

The Court of Appeal, however, overturned this order.

In order to justify their decision, the appeal judges noted that the prospectuses were limited to indicating the address of the point of sale and its prices, “without comparison” with the proposals of the franchisee thus competed, that canvassing was not “for specific customer use” (acquired) from the neighbouring franchisee, and that no disparaging remarks had been made in the communication.

This case thus raised the question on the part of the active sales in an exclusive territory and the characterization of acts of unfair competition.

The definition of passive sales and active sales was introduced almost 20 years ago, with the exemption regulation coming into force in 1999:

Passive sales are those that are not solicited, i.e. that are concluded spontaneously, following customer approaches.

On the contrary, active sales are  those that are triggered as a result of an action by the seller; they therefore positively assume that the distributor initiates an action, in particular advertising or communication, intended to reach the public and provoke

For the highest French court, this is indeed a “targeted prospecting for customers located in the  territory”
 exclusive of the neighbouring franchisee. And “it does not matter that it does not target its specific clientele” (but only its potential clientele).

On the unfairness of the Court of Cassation highlights that the judges of Aix-en-Provence noted that the contract “defines the franchisee territory » and also provides for “an internal ethics of the network that each franchisee undertakes to respect”, which induces“each franchisee is required, vis-à-vis the other franchisees, to respect the product distribution area attributed to it “, which could not lead them to rule out the manifestly unlawful disorder of the practice of depositing advertising leaflets.

For the Court of Cassation, the Court of Appeal “who did not draw the legal consequences of its findings”, reverses the judgment in all its provisions and refers the parties are before the Court of Appeal of Nîmes.