Franchise vs. distribution: The Dutch Supreme Court sets the test

On 17 July 2026, the Dutch Supreme Court (Hoge Raad) issued a decision that applies the simplified procedure under article 81 of the Judiciary (Organisation) Act, which means that it upheld the lower court's ruling without providing its own separate reasoning. As a result, the detailed opinion of Advocate General that preceded the decision is now the key reference point for practitioners and businesses navigating this issue.

The implications of this ruling reaches beyond the automotive sector where the case, concerning former Opel dealers and repairers and Stellantis Netherlands, arose, and will resonate with any business operating under a distribution, dealer, agency or similar commercial arrangement due to the legal question at its heart: when does such an agreement, whatever its label, cross the line into franchise territory under Dutch law?

Why this matters

Since the introduction of statutory franchise rules in the Dutch Civil Code, distribution, dealer and agency arrangements have come under close scrutiny. Courts now ask: does the agreement meet the legal definition of a franchise? The distinction matters. Franchise qualification triggers mandatory protections for the franchisee, including pre-contractual disclosure obligations, consultation rights and restrictions on unilateral amendments. Across all sectors relying on distribution networks, principals and distributors alike need certainty as to which regime applies.

The core test: substance over form

The Advocate General's opinion confirms a principle that Dutch courts apply consistently in contract qualification disputes: the label the parties give to an agreement is not decisive. What matters is the actual substance of the relationship between the parties. As the opinion cited from the parliamentary records: "what walks like a duck and sounds like a duck, is often also a duck." In other words, a business cannot avoid the statutory franchise regime simply by calling an arrangement a "dealer agreement," nor can a party invoke franchise protections merely because the relationship contains dealer obligations. Courts will look through the form of the contract to its true character.

Distribution versus franchise: drawing the line

Drawing on the European Court of Justice's long-standing Pronuptia judgment (C-161/84), the Advocate General identified the features that distinguish a franchise from a distribution arrangement: the use of a shared trade name, uniform commercial methods and a fee paid in exchange for the right to use that formula. These elements are generally absent in selective distribution arrangements whether in the automotive sector, consumer electronics, luxury goods or other industries commonly using selective distribution models.

The opinion clarifies that extensive requirements imposed on a dealer are not, by themselves, evidence of franchise. Many selective distribution systems impose significant obligations regarding facilities, staffing, processes and branding. The decisive question is: do these requirements create uniformity for the dealer's business as a whole or do they merely ensure consistency in how the branded product is presented?

This distinction is directly relevant for service standards. In the Stellantis case, requirements for uniform repair and maintenance services – regardless of which dealer a customer visits – were found to relate to the branded product, not to the dealer's own business identity. Quality control requirements, customer service protocols or after-sales standards that protect a brand’s reputation do not automatically convert a distribution agreement into a franchise.

Two-step qualification method

The Advocate General's approach follows the methodology from the Supreme Court’s Portaal judgment (31 January 2025, ECLI:NL:HR:2025:167). Qualifying an agreement involves two steps. First, the agreement is interpreted using the Haviltex standard. This means looking beyond the literal wording to what the parties could reasonably have expected, considering the surrounding circumstances although in commercial contracts between sophisticated parties, the text itself may carry significant or even decisive weight. 

Second, the agreement is assessed against the statutory definition of franchise. An "as a whole" test serves as a corrective. Even if individual clauses point in different directions, the overall character of the agreement is decisive.

In terms of the Stellantis dealer network, requirements such as house style, prescribed sales processes, mandatory training and "mystery shopper" audits did not, on their own, amount to a franchise formula. The key question was whether these measures projected a uniform identity for the dealer's business as a whole and not just consistency in the brand experience. This reasoning applies equally to distribution networks in other sectors.

Multibrand and multi-principal operations

The opinion offers useful guidance for multibrand or multi-principal operations. In the automotive context, where several brands are sold and serviced side by side, franchise qualification becomes difficult to sustain. A franchise requires that the business as a whole present the image of a single formula, which is hard to reconcile with a situation where the identities of several principals coexist under one roof. The same principle applies to distributors in other sectors who carry multiple product lines from different suppliers.

What this means for your business

The Supreme Court's decision confirms that the Stellantis dealer and repair agreements do not qualify as franchise agreements. This, however, should not be read as a blanket exclusion of franchise qualification for the automotive sector or indeed any sector. The threshold for franchise qualification remains high, but each agreement must still be assessed on its own facts and circumstances. There is no shortcut or industry-wide presumption either way.

For manufacturers, importers, principals and their distribution networks, the practical takeaway is clear: how a distribution agreement is drafted – and, more importantly, how it operates in practice – determines its legal qualification. 

Businesses reviewing or renegotiating such agreements should assess whether: 

• requirements target the branded product or the distributor’s business as a whole; 
• a shared trade name and uniform commercial methods are genuinely at play; and 
• any fee structure reflects a franchise-style formula fee.

Given how frequently this qualification question arises in practice, this remains a case-by-case, agreement-by-agreement assessment. Does your distribution arrangement quack like a duck? That answer requires careful analysis of the specific contractual terms and their practical operation.

For information on whether this ruling raises questions about the network or agreements of your Netherlands-based company, contact the CMS expert who wrote this article.