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.

French Distribution Law

A supplier who appoints or supplies another distributor in the area granted to the exclusive distributor acts unlawfully and incurs its contractual liability , or justifies the termination of the agreement at its expense . Such may also be the case where the appointment of a new distributor near another network member, even outside the exclusivity area, is manifestly such as to considerably affect …

Appointment of new distributor

A supplier who appoints or supplies another distributor in the area granted to the exclusive distributor acts unlawfully and incurs its contractual liability , or justifies the termination of the agreement at its expense . Such may also be the case where the appointment of a new distributor near another network member, even outside the exclusivity area, is manifestly such as to considerably affect the customer flow of the distributor already in place . The appointment of a new distributor on the exclusive territory of another distributor has also been characterized as a sudden termination of the exclusive distribution contract . By appointing a new distributor in an exclusive area of one of its exclusive distributors, without informing that distributor of its intention to terminate, a supplier commits both a breach of contract and an abuse of the right not to renew the contract .  Lastly, the supplier's liability is incurred where he fails to act on the establishment of a parallel business selling the contract goods on the exclusive distributor's territory or indeed if he supplies to third-party resellers .

The duty to act in good faith makes it possible to get to grips with situations which, although not exactly corresponding to the contractual provisions, constitute a breach of the duty to comply with the exclusivity granted to the exclusive distributor. Thus, a supplier commits a fault where, in the territory of one of its distributors it installs a second-hand motor vehicle distributor which in fact sells low mileage vehicles , or where it enables a distributor to sell products of the range covered by the exclusivity granted to one of its distributors, regardless of their place of manufacture . A manufacturer cannot, within the area allocated to an exclusive distributor, deliver the contract products to an installer at lower prices  or permit a reseller to market his products from the stand at a trade fair organized in the exclusive distributor's territory . Given the harshness of the courts, the supplier needs to be particularly careful and rigorous. In effect, the mere mention of the existence of undertakings other than the distributor's one on the internet site of the grantor may incur the supplier's liability, even if the latter has not granted them any distribution contract .

By contrast, a supplier does not commit any breach where it allows a third party to represent its brand at a trade fair in the district in which an exclusive distributor is set up, where an opt-out clause is provided for in the contract , where products of the brand marketed in the distributor's exclusivity area belong to ranges that are different from those covered by the contract  or are not covered by the exclusivity clause and are different from the contract goods . 

The supplier may however be exempted from liability by establishing that the designation of a new distributor relies on objective justifications provided for in the contract , on condition that the contractual procedure is respected . These traditional solutions are still valid. In contrast, care must be taken to ensure that the changes do not constitute a partial termination of the established commercial relationship within the meaning of Article L. 442-1, II of the Commercial Code which imposes the compliance with a notice period except, as the law is interpreted by the courts, in the case of serious breach. Similarly, often during the notice period the territorial exclusivity of the distributor is undermined with the supplier appointing a second distributor in preparation for the replacement of the terminated distributor and to compensate for the latter's lack of motivation in promoting the brand products and contractual services. The Court of Cassation has found that “the reciprocal waiver of exclusivity in accordance with the contractual requirements does not amount to a partial termination of commercial relations” . The courts ruling on the merits  have held as valid a clause which “makes provision for the parties to mutually and concurrently waive their obligations of territorial exclusivity and exclusive supply” considering that it “constitutes a contractual arrangement of the performance of notice in the case of termination of the contract” and “that it does not have the effect of derogating from the mandatory provisions of former Article L. 442-6, I, 5° (now L. 442-1, II) of the Commercial Code and is not regarded as a partial termination of the established commercial relationship”. This solution is explained in this case by the existence of a contractual clause and by the bilateral nature of the renunciation of the exclusivity. Even in this scenario, however, caution is advised and it is important to ensure that the waiver does not lead to a termination or a reduction in the flow of trade which could be challenged by an allegation of sudden termination of an established commercial relationship. 

This prudent approach is needed particularly since this case law could be overturned. In effect, at the same time, the Court of Cassation stated very clearly that the notice period must be executed under the same terms as the contract and that a lifting of the exclusivity by the supplier is equivalent to at least a partial termination  of the established commercial relationship. Insofar as the rule governing the termination of an established commercial relationship is a mandatory public policy provision  and cannot in principle be excluded by a contract term to the contrary, even in the case of a term purporting to waive exclusivity during the notice period, it is not certain that it would be able to defeat the general legal rule of liability for termination of an established commercial relationship, except in the case of actual breach of a contractual obligation.

CA Paris, 19 April 2017, LawLex201700000737JBJ; 12 January 2021, LawLex202100000094JBJ.

CA Paris, 15 November 1991, LawLex200200001778JBJ; 10 September 1997, LawLex200200005041JBJ, approved by Cass. com., 27 October 1998, LawLex200200005147JBJ. See also Cass. com., 4 February 2004, LawLex200400000427JBJ: a supplier breaches its contractual duties by appointing new distributors, not designated in the list of its reserved customers, on the area granted to a dealer. 

CA Paris, 1 October 2008, LawLex200900001609JBJ: the reference on the website was such as to create doubt in the potential customers' mind as to the rights of the undertakings mentioned and to leave then unaware of the exclusivity granted to the dealer. Cf. T. com. Paris, 13 October 2003, LawLex200400003487JBJ: a grantor commits a fault by setting an agent on the territory of one of its dealers and by circulating advertisements in the region which only quote its branches established on neighboring territories.

CA Lyon, 31 May 2001, LawLex200200001737JBJ. 

CA Paris, 15 March 2007, LawLex200700001418JBJ; CA Paris, 19 March 2014, LawLex201400001705JBJ; CA Angers, 7 February 2017, LawLex201700000308JBJ.

CA Paris, 4 June 2014, LawLex201400000744JBJ.

Cass. com., 8 June 1999, LawLex200200004391JBJ. 

T. com. Paris, 9 April 1992, LawLex200200005908JBJ, upheld by CA Paris, 26 January 1995, LawLex200200005439JBJ.

Cass. com., 9 July 2013, LawLex201300001090JBJ.

CA Paris, 13 January 2016, LawLex201600000071JBJ.

Cass. com., 10 February 2015, No 13-26.414: “Except in special circumstances, the granting of a notice period requires the maintenance of the commercial relationship under the previous terms”. 

CA Paris, 9 February 1988, LawLex200200005713JBJ, approved by Cass. com., 19 December 1989, LawLex200200005764JBJ. 

CA Lyon, 9 November 1990, LawLex200200005807JBJ; see also, on the basis of the obligation of loyalty, CA Versailles, 18 March 2021, LawLex202100000874JBJ.

CA Toulouse, 1 March 1999, LawLex200200004636JBJ. 

Cass. com., 8 February 2011, LawLex201100000739JBJ.

T. com. Paris, 15 November 2001, LawLex200200004794JBJ. 

CA Paris, 9 December 1998, LawLex200200005157JBJ, upheld by Cass. com., 23 October 2001, LawLex200200005010JBJ. 

CA Toulouse, 27 March 2019, LawLex201900000499JBJ.

CA Paris, 31 July 2019, LawLex201900001000JBJ.

French Distribution Law

78. Appointment of new distributor

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

78. Appointment of new distributor

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise