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

The sale outside the network is misconduct when the purchase is unlawful. What is meant by irregular sourcing constituting unfair competition? The answer to that question was given by the Court of Cassation.

A third party to a selective distribution network commits a misconduct when it purchases in full knowledge of the fact products from an authorized distributor  in breach of its contract obligations  and is the accomplice of the breach of the distributor's contract duties . This is the case, inter alia, if the third party is itself authorized by other brands because it necessarily knows the condition of imperviousness which is the characteristic of a selective distribution network . The transaction is also invalid where the parallel distributor uses a fake identity to purchase the products  or if it uses a shell company . In the absence of evidence of the existence of a prohibition on sale to third parties outside the network in respect of authorized distributors, the claim of unlawful purchase cannot succeed . The supply is lawful when the third party has procured the goods from another non-network third party  or by public auction after the winding-up by court decision of the former owner of the business . Similarly, a manufacturer who lawfully sets up a selective distribution network in France and another network in other Member States, cannot then sue a non-authorized French reseller for obtaining supplies abroad .

To find out where the contract goods come from and to uncover non-network resales, one solution suppliers sometimes use is to affix to their products the stipulation that they can be sold only by authorized distributors. A specific code can also be placed on the packaging of the products to identify the reseller to whom they have been supplied . Where the lawfulness of the network is established , the presence of one of the products individualized in such a way in the premises of a trader suspected of parallel sale is a presumption of misconduct and admissible between traders since all evidence is admissible in such cases . A distributor who destroys or changes the identification codes affixed by the supplier commits an act of unfair competition . This marking further enables the manufacturer to find and penalize any distributor who breaches his commitments .

An action for unfair competition may be introduced as a subsidiary claim at the same time as a legal action for the unlawful supply of goods, as long as the claim is not based on the same facts. Thus, a complaint relative to the conditions of acquisition of goods protected by trade mark law by a third party reseller cannot succeed where the facts pertaining to that claim are the same as those relied on in a claim for unlawful use of the trade mark .

Cf. CA Paris, 10 April 2013, LawLex201300000696JBJ validating the purchasing of supplies by one authorized distributor from another authorized distributor (cross supplies).

And this misconduct constitutes unfair competition: CA Paris, 1 October 1997, LawLex200200001219JBJ.

Cass. com., 12 April 1988, LawLex201000000506JBJ; 10 May 1994, LawLex200200004358JBJ.

Cass. com., 13 December 1988, LawLex200200001916JBJ: evidence of the lawfulness of a selective distribution network must be established by the manufacturer prior to any request for indemnification for unlawful resale outside the network; 24 November 1992, LawLex200200005955JBJ: the assessment of the lawfulness of a selective distribution network may constitute a serious claim exceeding the jurisdiction of the summary court.

CA Rouen, 8 December 1992, LawLex200200001682JBJ: the suppression of the elements identifying the origin of the supply of the products proves that the non-authorized reseller is acting in bad faith.

CA Paris, 4 April 1991, LawLex200200001818JBJ; 30 January 1992, LawLex200200005891JBJ; CA Montpellier, 4 January 1996, LawLex200200001398JBJ; CA Versailles, 4 July 1996; CA Paris, 7 May 1997, LawLex200200001261JBJ; Cass. com., 19 May 1998, LawLex200200001123JBJ: the sale outside the network by a non-authorized distributors of products unlawfully purchased is wrongful if the mention "sold only by authorized distributors" has been deleted; CA Paris, 7 November 2001, LawLex200200000598JBJ; T. com. Paris, 15 February 2007, LawLex200700000300JBJ.

CA Nancy, 16 January 2013, LawLex201300000153JBJ.

CA Paris, 30 June 2000, LawLex200200005314JBJ. Provided that the complicity of the third party is established, CA Dijon, 19 September 1989, LawLex200200001901JBJ, such acts constitute unfair competition: CA Dijon, 16 October 1990, LawLex200200001850JBJ; CA Paris, 8 June 2005, LawLex200500009989JBJ; Cass. com., 4 July 2006, LawLex200600001751JBJ; T. com. Paris, 15 February 2007, LawLex200700000300JBJ; TGI Paris, 13 February 2008, LawLex200800001935JBJ; CA Paris, 18 April 2008, LawLex200800000573JBJ; See, also, CA Aix-en-Provence, 19 June 2002, LawLex200300000667JBJ: a third party who has knowledge of the prohibition on resale outside the network and however gets supplies from an authorized reseller, incurs its liability on the basis of Article L. 442-2, of the Commercial Code; CA Dijon, 18 October 2004, LawLex200500004041JBJ: an non-authorized reseller breaches Article L. 442-2, of the Commercial Code when he purchases products bearing the brand from an authorized distributor.

CA Aix-en-Provence, 6 May 2003, LawLex200300004024JBJ: the resale of contract goods by a former authorized reseller who gets supplies from authorized distributors is a misconduct constituting unfair competition and contrary to Article L. 442-2 of the Commercial Code, insofar as it could not ignore the particular mode for selling these products; 6 April 2006, LawLex200600001845JBJ; Cass. com., 4 July 2006, LawLex200600001751JBJ.

CA Lyon, 25 June 1990, 5 judgments, LawLex200200001860JBJ, LawLex200200001861JBJ, LawLex200200001862JBJ, LawLex200200001863JBJ, LawLex200200001864JBJ.

CA Lyon, 25 June 1990, LawLex200200001862JBJ: distributors who, through façade companies, purchase from members of a selective distribution network in breach of that network commit an unfair competition action; Cass. com., 27 October 1992, 2 judgments, LawLex200200001697JBJ and LawLex200200001698JBJ; 9 April 1996, LawLex200200001367JBJ: if the mere fact for a reseller outside the network to sell products which it knows are subject to selective distribution agreements does not constitute unfair competition, it is so where it is established that its supply is unlawful.

CA Nancy, 8 February 2006, LawLex200600001838JBJ.

CA Paris, 9 January 2019, LawLex201900000042JBJ.

T. com. Paris, 5 April 2002, LawLex200300001857JBJ.

CA Paris, 18 September 2013, LawLex201300001365JBJ; see also CA Paris, 27 March 2014, LawLex201400001770JBJ: purchase in Germany where selective distribution is not protected by the manufacturer.

Constituent elements.

In principle and according to the prevalent case law evidence of a third party's unlawful purchase cannot result from the mere prohibition on authorized distributors from selling to third parties outside the network . Non-disclosure of supply sources however reveals the unlawful character of the purchase . Failure to disclose sources prevents the supplier from having to precisely establish the supply sources, hence a reversal of the burden of proof by requiring the parallel distributor to justify a lawful supply .

In theory, a distributor outside the network thus has an interest from a legal standpoint in disclosing its supply sources in case of request from the network leader in order to avoid being considered as being in bad faith. In practice, the distributor will usually not give the information in order to avoid betraying its supply source and putting its partner in fraud in difficulty. Where a third party obtains supplies from network members in full knowledge of their contractual obligation duty to only resell to network members, this is an act of complicity of the breach of the ban on sale outside the network, penalized by Article L. 442-2 of the Commercial Code . In case of disclosure of its supply sources, the third party can claim the lawfulness of its supply only if it comes from a network member (and it is not established that it knew the ban on sale to non-members of the network ), an end-user not subject to a resale prohibition  or a branch of the supplier itself .

The bad faith of the non-network reseller is presumed where it refuses to justify the origin of the products . In other words, it is sufficient for the network developer bringing an action for unfair competition to bring evidence of the lawfulness of its network ; it is not necessary for it to show the imperviousness thereof or the unlawfulness of supply . The burden of proof of the lawful purchase is on the operator who has purchased the products for resale . The operator is thus held guilty of unfair competition only if it is not able to submit invoices justifying all its purchases  or at least contemporary to them . However, the third party does not have to demonstrate the lawfulness of the purchase by the seller whom it contacted , as such evidence falls to network members or the manufacturer .

A non-member third party who does not bring evidence of the lawful origin of its products, usually sold as part of a selective distribution network, may therefore not claim a possible right to be accepted into the network . On the other hand, where it is able to show that part of the supply is lawful, it cannot be suspected of carrying out an unlawful activity .

CA Dijon, 16 October 1990, LawLex200200005803JBJ.

CA Aix-en-Provence, 8 March 1990, LawLex200200001882JBJ, confirmed by Cass. com., 27 October 1992, LawLex200200001699JBJ: refusing to justify the origin of products sold in breach of a selective distribution network induces the fraudulent character of their purchase. See, also Cass. com., 15 March 1994, LawLex200200001589JBJ; CA Paris 7 November 2001, LawLex200200000598JBJ; CA Versailles, 10 June 2004, LawLex200500003777JBJ; CA Aix-en-Provence, 6 April 2006, LawLex200600001845JBJ.

See, by analogy in motor vehicle distribution: Cass. com., 26 January 1999, LawLex200200001015JBJ; 19 October 1999, LawLex200200000898JBJ; 4 December 2001, LawLex200200000586JBJ.

T. com. Paris, 3 June 2008, LawLex200900000737JBJ; CA Versailles, 17 May 2018, LawLex201800000768JBJ: the non-network reseller unable to justify the legality of a part of its supplies causes an "unlawful disturbance" to the brand, which justifies a marketing ban subject to penalties.

CA Paris, 21 January 2015, LawLex201500000087JBJ; TGI Paris, 12 February 2015, LawLex201500000554JBJ.

T. com. Bobigny, 12 September 2002, LawLex200300000816JBJ.

See, by analogy in motor vehicle distribution: CA Toulouse, 7 December 1998, LawLex200200001037JBJ; Cass. com., 19 October 1999, LawLex200200000898JBJ; 25 April 2001, LawLex200200000648JBJ; 9 October 2001, LawLex200200000613JBJ: if it is for the reseller who is not a member of the network to justify the lawful origin of the products it sells, it is for the dealer or the manufacturer to prove the unlawful supply of its supplier.

CA Paris, 24 January 2001, LawLex200200005329JBJ.

CA Colmar, 24 June 2008, LawLex200800001684JBJ.

CA Aix-en-Provence, 24 May 1989, LawLex200200005748JBJ; CA Versailles, 5 February 1991, LawLex200200001830JBJ; CA Caen, 15 December 1992, LawLex200200001677JBJ: refusal by a non-authorized reseller to justify the origin of products falling within a selective distribution network grants an unlawful character to the supply; CA Caen, 15 February 1994, LawLex200200001597JBJ; Cass. com., 15 March 1994, LawLex200200001589JBJ; CA Paris, 7 May 1997, LawLex200200001261JBJ; 7 November 2001, LawLex200200000598JBJ; T. com. Paris, 15 February 2007, LawLex200700000300JBJ, on appeal: CA Paris, 18 April 2008, LawLex200800000573JBJ, TGI Strasbourg, 8 January 2008, LawLex200800000223JBJ.

CA Paris, 24 May 2007, LawLex200700001447JBJ.

CA Toulouse, 7 December 1998, LawLex200200001037JBJ; CA Dijon, 19 September 1989, LawLex200200001901JBJ: the supply of a third party from a network member is lawful as long as its complicity in the breach by the member of its contract duty to resale only to another authorized distributor is not established. See, also, in motor vehicle distribution: Cass. com., 19 October 1999, LawLex200200000898JBJ.

See especially CA Toulouse, 7 December 1998, LawLex200200001037JBJ: the supply may lawfully be made from renters or branches of the manufacturer.

See CA Colmar, 24 June 2008, LawLex200800001684JBJ.

CA Rouen, 8 December 1992, LawLex200200001682JBJ: deleting elements used to identify the origin of the purchase of products, usually sold within a network, proves that the non-authorized reseller is unfaithful and its supply unlawful.

Cass. com., 7 March 1989, LawLex201000000503JBJ.

Cass. com., 9 April 1996, LawLex200200001367JBJ; 26 January 1999, LawLex200200001015JBJ: evidence that the supply is lawful is on the reseller.

French Distribution Law

218. Constituent elements.

219. Evidence.