No L .359/46. Official Journal of the European Communities 28. 12. 88 COMMISSION REGULATION (EEC) No 4087/88 . of 30 November 1988 on the application of Article 85 (3) of the Treaty to categories of franchise agreements THE COMMISSION OF THE EUROPEAN COMMUNITIES, > Having regard to the Treaty establishing the European Economic Community, Having regard to Council Regulation No 19/65/EEC of 2 March 1965 on the application of Article 85 (3) of the Treaty to certain categories of agreements and concerted practices ("), as last amended by the Act of Accession of Spain and Portugal, and in particular Article 1 thereof, Having published a draft of this RegulationA(z), Having consulted the Advisory Committee on Restrictive Practices and Dominant Positions, Whereas : M @ 3 “) Regulation No 19/65/EEC empowers the Commission to apply Article 85 (3) of the Treaty by Regulation to certain categories of bilateral exclusive agreements falling within the scope of Article 85 (1) which either have as their object the exclusive distribution or exclusive purchase of goods, or include restrictions imposed in relation to the assignment or use of industrial property rights. Franchise agreements consist essentialy of licences of industrial or intellectual property rights relating to trade marks or signs and know-how, which can be combined with restrictions relating to supply or purchase of goods. Several types of franchise can be distinguished according to their object: industrial franchise concerns the manufacturing of goods, distribution franchise concerns the sale of goods, and service franchise concerns the supply of services. It is possible on the basis of the experience of the Commission to define categories of franchise agreements which fall under Article 85 (1) but can normally by regarded as satisfying the conditions laid down in Article 85 (3). This is the case for franchise agreements whereby one of the parties () OJ No 36, 6. 3. 1965, p. 533/65. () OJ No C 229, 27. 8. 1987, p. 3. ) (€ Y supplies goods or provides services to end users. On the other hand, industrial franchise agreements should not be covered by this Regulation. Such agreements, which usually govern relationships between producers, present different characteristics than the other types of franchise. They consist of manufacturing licences based on patents and/or technical know-how, combined with trade-mark licences. Some -of them may benefit from other block exemptions if they fulfil the necessary conditions. This Regulation covers franchise agreements between two undertakings, the franchisor and the franchisee, for the retailing of goods or the provision of services to end users, or a combination of these activities, such as the processing or adaptation of goods to fit specific needs of their customers. It also covers cases where the relationship between franchisor and franchisees is made through a third undertaking, the master franchisee. It does not cover wholesale franchise agreements because of the lack of experience of the Commission in that field. Pranchise agreements as defined in this Regulation ean fall under Article 85 (1). They may in particular affect intra-Community trade where they are concluded between undertakings from different Member States or where they form the basis of a network which extends beyond the boundaries of a single Member State. Franchise agreements as defined in this Regulation normally improve the distribution of goods and/or the provision of services as they give franchisors the possibility of establishing a uniform network with limited investments, which may assist the entry of new competitors on the market, particularly in the case of small and medium-sized undertakings, thus increasing interbrand competition. They also allow. independent traders to set up outlets more rapidly and with higher chance of success than if they had to do so without the franchisor’s experience and assistance. They have therefore the possibility of competing more efficiently with large distribution undertakings.