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The Italian competition authority sanctioned with a fine of EUR 150,000 the advertising over the Internet of a franchising network of travel agencies as the advertised affiliation price did not include the price for all the services and equipment required by the affiliation network and did not specify that value added tax had to be added to the advertised price.
The Italian competition authority has jurisdiction on unfair commercial practices and misleading advertising whose regulations provide fines up to EUR 500,000 and this decision is interesting since it outlines the overlapping between franchising and advertising regulations.
Indeed, Italian franchising law requires the provision to the franchisee of the franchising network agreement at least 30 days prior to its execution and the defendant had complied with this obligation also disclosing in the agreement all information prescribed in details by Italian franchising law. But the Authority held that in order to preserve the freedom of choice of the recipients of advertising materials a full disclosure of information had to occur as part of the advertising message and it is not relevant that additional information could be gathered at a later stage. Since the advertising message contained only a summary of the costs to be borne by the franchisee, it has been deemed in breach of misleading advertising regulations.
A full disclosure of the information relevant for the franchising affiliation and a full transparency has to be adopted from the first contact with the potential franchisee that is meant to occur through the advertising material and the procedure set forth by franchising laws cannot be deemed exhaustive of the disclosure obligations. Franchising network providers shall be cautious in their relationship with potential partners given the potential fines.
As usual if you want to discuss the above, feel free to contact me, Giulio Coraggio.
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