Background

Economic theory of vertical restraints

Economic theory and competition law

Should distributors have more protection?

Vertical restraints put to the test of economic analysis

Structure of distribution law - Book plan

General bibliography

Introduction

Localizing the anticompetitive effects

Effect on trade between Member States

Scope ratione loci

Concept of an undertaking

Intra-group agreements

Scope ratione personae

Applicability of competition law to vertical agreements

Definition of the relevant market

Anticompetitive object or effect

Appreciability threshold

Concept of agreement and concerted practice

Prohibition of vertical restraints

Block exemptions

Individual exemptions and rule of reason

Exemption of vertical restraints

Control of vertical restraints

Prohibition

Exoneration

Restrictive agreements

Principle

Applications

Abuse of dominant position

Exclusive purchase/Exclusive supply

Resale outside network

International agreement

Exclusive distribution agreements

Manufacturer's guarantee

Protection of the brand

Protecting the network against third parties

Relations between the parties

Selective distribution

Hardcore restrictions

Individual exemptions

Rule of reason

Prohibition of restrictive agreements and individual exemptions

Distribution of new motor vehicles : Regulation No 330/2010

After-sales : Regulation No 461/2010

Block exemption

Motor vehicle distribution agreements

Merger control

Franchising

Commercial agency and competition

EU harmonization

International agency

Commercial agents

This book provides a wide-ranging review of the European rules relating to distribution: exclusive purchase and exclusive supply, exclusive and selective distribution, motor vehicle distribution, franchises, commercial agents.

European Distribution Law

Combining the laws of the Member States seemed necessary insofar as the differences between the systems appreciably affected the conditions of competition and the exercise of the profession, and undermined the certainty in commercial transactions. In the case of commercial agents, the divergences affected the agents' level of protection in their relations with the principals and constituted a restriction to the conclusion and application of commercial representation agreements between a principal and a commercial agent established in different Member States.

Directive No 86/653 of 18 December 1986 harmonized the laws of the Member States on the relations between self-employed commercial agents and principals . Article 1(2) of the directive defines the scope of the European regulation and describes the agent as, “a self-employed intermediary who has continuing authority to negotiate the sale or the purchase of goods on behalf of another person, hereinafter called the “principal”, or to negotiate and conclude such transactions on behalf of and in the name of that principal”. According to the Court of Justice, the concept of “sale of goods” encompasses the electronic supply to a customer, in return for payment of a price, of computer software which is granted a perpetual user license . Moreover, even though the directive only covers contracts for the sale of goods, it can also apply to an agency contract for the provision of services .

Commission agents, who operate on behalf of the principal but in their own name , commercial agents whose activities are unpaid or who operate on commodity exchanges or in the commodity market, or those persons whose activities as commercial agents are considered secondary (Article 2) are not caught by the directive. Article 1 requires continuing authority. The condition is met even though the agent has concluded a single contract where it has been conferred authority by the principal to negotiate successive extensions to that contract . In addition, putting an end to incessant debates, notably in France, the Court of Justice has clarified that the agent's power of “negotiation” does not necessarily imply that he has the power to modify the prices of the goods he sells on behalf of the principal. In fact, the agent's main tasks, which consist in bringing new customers to the principal and developing business with existing customers, can be carried out by means of information and advice, as well as discussions, likely to encourage the conclusion of the sale of goods on behalf of the principal, without the commercial agent necessarily having the power to modify the prices of these goods . Nor does the combination of agency activity with other tasks not covered by Article 1 of the directive cause the intermediary to lose his status as agent, provided that these tasks do not affect his independence towards the principal . The same applies to the performance of activities on the principal's premises . Lastly, the directive is only applicable if the activities of the agent are carried out on the territory of a Member State .

No condition of validity is expressly imposed by Directive No 86/653, which merely provides that each party is entitled to receive, on request from the other, a signed written document setting out the terms of the agency agreement and its subsequent amendments . However, by providing that the Member States may establish that a written document is a condition of validity of the agreement, the directive implies that the minimum requirement is the possibility for the parties to impose a written document, without it being a condition of the validity of the agreement. Moreover, since the directive does not indicate that the agents must be entered in a register, it cannot be established as a condition of validity by a Member State . However, the directive does not preclude national legislation from making registration of a commercial agent in the register of undertakings subject to that agent's enrolment in a register provided for that purpose, on condition that non-registration in the register of undertakings does not affect the validity of the agency agreement or does not adversely affect the protection which the directive confers on commercial agents in their relations with their principals . 

In the absence of provision on this matter in the agreement, a commercial agent is entitled to the remuneration that commercial agents are customarily allowed in the place where he/she carries on the activity and, if there is no such customary practice, to reasonable remuneration taking into account all the aspects of the transaction (Article 6). If the remuneration includes parts which vary with the number or value of business transactions, it is subject to Articles 7 to 12 on the right to commission. Commission is owed for all transactions concluded as a result of the agent's action during the period covered by the agency agreement, “where the transaction has been concluded with a third party whom he has previously acquired as a customer for transactions of the same kind”, “where he is entrusted with a specific geographic area or group of customers” or “where he has an exclusive right to a specific geographical area or group of customers, and where the transaction has been entered into with a customer belonging to that area or group”. These provisions are of a suppletive nature, so that, in particular, the commercial agent's right to receive a commission for a transaction concluded, during the term of the agency contract, with a third party whose clientele he has previously obtained for transactions of the same kind may be waived contractually . Where agents are responsible for a specific geographic area, they are not only entitled to remuneration for transactions concluded as a result of their intervention and with customers which they have found themselves, but also those concluded without having found the customers . The concept of “customer belonging to that area” depends on the place where the agent's commercial activities are effectively carried out. In the case of a customer having many establishments, the place where negotiations with the customer took place or should, in the normal course of events, have taken place, the place where the goods were delivered and the place where the establishment which placed the order is located will be taken into account . On the other hand, the commercial agent entrusted with a specific geographical area does not have the right to a commission for transactions concluded by customers belonging to that area with a third party without any action, direct or indirect, on the part of the principal as required by Article 10 . Further, under Article 11, the agent may lose his/her right to commission both in the case of non-performance and partial non-performance of the contract concluded between the principal and the third party . In the case of partial non-performance of the contract concluded between the principal and the third party, the agent may thus be required to refund a part of his commission if the non-performance is not due to a reason for which the principal is responsible .

The end of the agency agreement gives rise to compensation for termination to the benefit of the commercial agent. The directive offers a choice to Member States between indemnity and compensation for damage (Article 17). The parties cannot depart from the provisions relating to compensation to the detriment of the commercial agent before the expiry of the agreement. As a rule of public policy, the principle of compensation cannot be bypassed by an electio juris provision designating a foreign law, even within the framework of an international agreement . Where the Member State chooses the indemnity system, it must cover customers with whom the agent has established specific business relations even though those customers already had business relations with the principal in relation to other comparable goods but of a different brand . The amount must be equitable having regard to added value contributed by the intermediary as part of his activity (contribution of new customers and increase in the volume of business with existing customers) and which amounts for him to a loss of customers .  The amount of the indemnity may not exceed a figure equivalent to the annual remuneration calculated from the agent's average annual remunerations over the preceding five years and if the contract goes back less than five years, on the average for the period in question. The method of individual calculation of the indemnity proposed by the directive may be replaced by a method of calculation attaching more importance to the criterion of equity provided that the indemnity is equal or greater . Similarly, in the case of an international agreement, the law of a Member State which meets the requirement for transposing the directive which has been chosen by the parties to a commercial agency contract may be disregarded by the court before which the dispute has been brought, established in another Member State, in favor of the law of the forum on grounds of its mandatory nature, and the fact that the legislature of that Member State grants the commercial agent protection going beyond that provided for by the directive . The entitlement to indemnity cannot be automatically limited by the amount of the commission lost by the agent as a result of the termination of the contractual relationship, even though the benefits which the principal continues to derive have to be given a higher monetary value . According to the Court of Justice, the customer indemnity must include the agent's “resale royalty”, i.e. the commissions that the commercial agent would have received in the event of a hypothetical continuation of the agency contract, in respect of the transactions that would have been concluded, after its termination, with the new customers that he brought to the principal or with those with whom he substantially developed operations prior to the termination .

Lastly, contrary to the solution of the French courts, the Court of Justice has ruled that the termination of the agency contract during the trial period cannot deprive the agent of his right to indemnity provided by Article 17 of the directive . Furthermore, the termination indemnity does not prevent the agent from seeking damages (Article 17(2)(c)). National legislation may therefore provide that a commercial agent is entitled, on termination of the agency contract, to an indemnity for customers limited to a maximum of one year's remuneration and, if that indemnity does not cover all of the loss actually incurred, to the award of additional damages, provided that such legislation does not result in the agent being compensated twice for the loss of commission . The directive does not make the award of damages conditional on demonstration of the existence of a fault attributable to the principal which caused the alleged harm - it is for the Member States to determine the system of liability -  but does require the alleged harm to be distinct from that compensated for by the indemnity for clients . The compensation system must cover the damage resulting from the loss by the agent of the commission that he could have expected and/or from the inability to amortize the costs and expenses incurred for the performance of the agreement on the principal's advice. Regardless of the option taken, the agent loses his entitlement to indemnity if, within one year following termination of the contract, he/she has not notified the principal that he intends pursuing his entitlement (Article 17(5)). No indemnity shall be paid where default attributable to the agent justifies immediate termination of the agreement or where the agreement is terminated at the agent's initiative, unless the cause is attributable to the principal or is justified on grounds of age, infirmity or illness of the agent (Article 18). The fault committed after the termination of the contract does not deprive the agent of its indemnity .

Council Directive 86/653 of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, OJ L 382 of 31.12.1986, 17.

Case C-410/19 The Software Incubator Ltd c. Computer Associates (UK) Ltd, Judgment of 16 September 2021, LawLex202100005323JBJ.

Case C-215/97 Bellone v Yokohama [1998] ECR I-2191, LawLex200900001235JBJ; Case C-456/98 Centrosteel [2000] ECR I-6007, LawLex200900000903JBJ.

Case C-485/01 Caprini [2003] ECR I-2371, LawLex200900000975JBJ.

Case C-64/21 Rigall Arteria Management sp. z o.o. sp.k. c. Bank Handlowy w Warszawie S.A., Judgment of 13 October 2022, LawLex202200008847JBJ.

Case C-104/95 Kontogeorgas v Kartonpak [1996] ECR I-6643, LawLex200900000326JBJ.

Case C-19-07 Héritiers de Paul Chevassus-Marche v. Groupe Danone, Judgment of 17 January 2008, LawLex200900000767JBJ: national courts are nevertheless invited to consider whether the third party is not himself a representative of the principal. Case C-104-95 Les Domaines Michel Bernard (Sté) c. Socopral (SARL), Judgment of 12 December 1996, LawLex200900000326JBJ: the commercial agent, when entrusted with a geographical sector, is entitled to the commission relating to transactions concluded with customers belonging to this sector, even if they were concluded without his intervention. In French law, Cass. com, 24 November 1998, LawLex200005155JBJ, approving CA Paris, 4 October 1996, LawLex200005600JBJ: the exclusivity enjoyed by the commercial agent implies that he is entitled to commissions on all transactions concluded in his sector during the term of the contract, whether or not they were carried out thanks to his intervention; Cass. com, 23 January 2007, LawLex2007000001JBJ; CA Paris, 8 November 2000, LawLex200200004873JBJ.

Case C-48/16 ERGO Poist'ovna a.s., Judgment of 17 May 2015, LawLex201700002030JBJ.

Case C-48/16 ERGO Poist'ovna a.s., cited above, the circumstances attributable to the principal can stem from the loss of confidence by customers due to the poor quality of the services. 

Case C-381/98 Ingmar GB [2000] ECR I-9305, LawLex200900000602JBJ: the principle of compensation of the commercial agent is necessary to protect the political, social or economic organization of the European Union, so that it must be regarded as a public policy rule.

Case C-315/14 Marchon Germany GmbH, Judgment of 7 April 2016, LawLex201600000734JBJ.

Case C-3-04 Poseidon Chartering c. Marianne Zeeschip, Judgment of 16 March 2006, LawLex200900001442JBJ.

Case C-593/21 NY v. Herios SARL, Judgment of 13 October 2022, LawLex202200008833JBJ, holding that when the principal agent terminates the sub-agency contract due to the termination of his relationship with the principal, the payment of an eviction indemnity to the sub-agent may be unfair, if the latter continues his activities with regard to the same customers and for the same products in the context of a direct relationship with the principal, replacing the agent who had previously engaged him.

Case C-465/04 Honyvem Informazioni Commerciali [2006] ECR I-2879, LawLex200900000944JBJ.

Case C-184/12 United Antwerp Maritime Agencies (Unamar) NV, Judgment of 17 October 2013, LawLex201300001533JBJ.

Case C-348/07 Semen c. Deutsche Tamoil GmbH [2009] ECR I-2341, LawLex200900002342JBJ.

Case C-574/21 O2 Czech Republic a.s., Judgment of 23 March 2023, LawLex202400004559JBJ.

Case C-645/16 Conseils et mise en relations SARL, Judgment of 19 April 2018, LawLex201800000760JBJ: according to the Court of Justice relations between a commercial agent and a principal subsist as from the time when a contract, the purpose of which is either to negotiate the sale or purchase of goods, or to negotiate and conclude such transactions on behalf of the principal, irrespective of whether that contract provides for a trial period. It follows that the provisions of that directive are applicable as soon as such a contract is concluded between the principal and the commercial agent, even if that contract provides for a trial period. In addition, regardless of the time when the termination takes place, the agent must be indemnified for his past services from which the principal will continue to benefit beyond the termination of the contractual relationship or for the costs and expenses he has incurred in providing those services.  

Case C-338/14 Quenon K. SPRL, Judgment of 3 December 2015, LawLex201500001639JBJ.

Case C-338/14 Quenon K. SPRL, cited above.

Case C-203-09 Volvo Car Germany GmbH, Judgment of 28 October 2010, LawLex201000001253JBJ.

Case C-85/03 Mavrona [2004] ECR I-1573, LawLex200900001194JBJ: in any event, the Court underlined that the need for protection of those two operators is different. 

Case C-3/04 Poseidon Chartering [2006] ECR I-2505, LawLex200900001442JBJ.

Case C-828/18 Trendsetteuse SARL c. DCA SARL, Judgment of 4 June 2020, LawLex202100004218JBJ.

Case C-452/17 Zako SPRL c. Sanidel SA, Judgment of 21 November 2018, LawLex201800001781JBJ.

Case C-507/15 Agro Foreign Trade & Agency Ltd, Judgment of 16 February 2017, LawLex201700000367JBJ:  a commercial agent who carries out his activities in Turkey does not fall within the scope of application of Directive No 86/653 even if the principal is established in a Member State.

Directive No 86/653 of 18 December 1986

The fact that the Directive on commercial agents has been transposed in the internal law of the Member States does not mean that the law on commercial agents is now unified at the level of the Union. On the contrary, it remains very disparate.

The differences in the legal systems are in particular tied to the option provided in the directive between an indemnity originating in the customers brought by the agent (Article 17(2) of the directive) - inspired by German law - and compensation for the damage suffered by the agent as a result of the termination of his relations with the principal (Article 17(3) of the directive) - of French origin. The United Kingdom has chosen a third way and the parties may choose between either solution, with the Article 17(2) option applying if the parties have not chosen. The differences in the systems may result in variations in indemnity that are twice the amount or even more depending on the country. In addition to this fundamental difference, there are also others; the scope of the status of commercial agent is different depending on the Member States: insurance, real estate or travel agents may or may not be covered. The agent is sometimes recognized as a trader and sometimes not. The pre-contract information, the content of the good faith obligation or the obligation to inform vary from one country to another. Article 2(2) of the directive opens up the possibility for Member States to exclude the activities of commercial agent regarded as secondary under national law, and this is the case under French law. However, although the directive proposes a system of application or exclusion in case of secondary activity, Germany adopts an intermediary solution consisting in applying the status but with less protection. Not only are the options offered by the Directive on commercial agents inefficient, the harmonization-by-directive method appears itself to be inefficient as a means of unifying the national laws.

European Distribution Law

104. Directive No 86/653 of 18 December 1986

105. Transposition into national laws