A franchisor is not allowed to impose fixed and minimum prices of goods on their trading partners. Unfortunately, Sfinks Polska was applying this practice in the Sphinx chain of restaurants. Consequently, the undertaking was imposed a fine exceeding PLN 464 thousand

Franchise agreements constitute a form of cooperation between undertakings. Upon a payment, one of parties is given the right to use e.g. a trade name of another company, its trade or service mark, methods of running a business activity or specific technical knowledge. A franchisor may give its partner instructions on how to operate, however franchisees act on their behalf and take the risk involved. In practice, it is not allowed to impose fixed or minimum resale prices of products on them, as in the case of vertical agreements between business entities. Such practices are recognised as hardcore infringements of competition law. Negative effects of prohibited agreements concluded by undertakings influence behaviours of competitors and the position of consumers, but most of all, they limit the access to offers of varied prices.

In December, 2012, the President of UOKiK instituted the proceedings which examined both agreements applied by Sfinks Polska and rules for operation of the chain of Sphinx restaurants managed by the company. There are 91 establishments operating under this brand, including 45 franchise restaurants run by independent undertakings. The conducted proceedings revealed that the company obliged its franchisees to apply fixed sale prices for products on offer in the Sphinx chain of restaurants. Moreover, they were forbidden to introduce promotion campaigns without a prior consent of Sfinks Polska. The agreement was still in force starting from the year 2000, and all the time undertakings couldn’t adopt other prices that those agreed with Sfinks Polska. For acting against this agreement, undertakings might be imposed contractual penalty, or this could even result in terminating the contract.

The effects of prohibited agreement affected the consumers as well - they had a limited access to purchase at the Sphinx chain of restaurants at prices below the imposed level.

For participation in a competition-restricting agreement, undertakings can be imposed a fine of up to 10 % of revenue gained in the year preceding the decision. For entering into a competition-restricting agreement, Sfinks Polska was imposed a fine exceeding PLN 464 228.92. Added to that, the President of the Office ordered to discontinue the prohibited practice. The decision is not final, and may be appealed against to the court.

This decision of UOKiK in relation to price fixing in franchise agreements is one of very few issued to date by European antimonopoly authorities. It is worth noting this does not challenge such a form of cooperation between undertakings. It is allowed, however under the antimonopoly law, any business entities running their business activity on their own account should shape the pricing policy at their discretion. For this reason franchisors must not determine minimum and fixed rates to be applied by their trading partners. On the other hand, it is allowed to recommend applying specified prices, as long as they are not obligatory to a franchisee. Furthermore, it is permitted to fix the maximum rates whenever the seller is free to provide consumers with cheaper products or services.

Additional information for the media:
Małgorzata Cieloch, Spokesperson for UOKiK
Department of International Relations and Communication
Pl. Powstańców Warszawy 1, 00-950 Warszawa
Phone: +48 22 827 28 92, 55 60 314, 55 60 430
Fax: +48 22 826 11 86
E-mail: [SCODE]bWFsZ29yemF0YS5jaWVsb2NoQHVva2lrLmdvdi5wbA==[ECODE]