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

Traditionally the courts considered that the maintenance of relations between the head of the network and authorized distributors constituted a vested right for them in the absence of any breach or a network reorganization. Thus, according to the Court of Cassation, a manufacturer could not refuse to renew a distributor's contract, unless the network was to be reorganized or the distributor had violated the selection criteria . The Paris Court of Appeal had also held that the renewal of the contract was a “right” for distributors meeting the selection criteria . 

Those solutions now belong to the past. The first was based on the prohibition of refusals to sell between traders, which could only be justified on legitimate grounds such as the non-compliance with of the authorization criteria. However, the Galland Law of 1 July 1996 repealed that prohibition: suppliers may now refuse to supply a distributor without having to justify that decision. The second solution came in a particularly interventionist era, which has since evolved. In conformity with the Vertical Restraints Regulation, suppliers are free to organize their networks as they see fit if they have a market share of less than 30% in the absence of any hardcore restrictions.

Anxious to ensure the efficiency of networks first and foremost, the Court of Appeal in Paris has challenged the traditional case law in three successive cases. First, it established the possibility of ordinary terminations of open-ended contracts, holding that the termination with notice of the contract of a distributor who continued to fulfill the authorization criteria could not be qualified in itself as a discriminatory practice.

Indeed, the existence of discrimination when implementing the selection criteria can only be assessed during the network authorization and the performance of the contract stages , but not at the time of its termination. According to the Court, the termination reflects only the exercise of the right to put an end to an obligation by virtue the principle of prohibition of perpetuity in contracts . It subsequently extended the principle of the freedom to terminate to the non-renewal of a fixed term contract holding that the option not to renew a contract does not require justification such that the issue of whether the distributor does or does not meet the conditions for authorization is inoperative .

In order to consolidate the scope of the ruling and prevent any circumvention on the basis of Article L. 442-1, II of the Commercial Code, the Court was careful to clarify that the use, by the supplier, of its option not to renew the distribution contract at its term does not constitute a sudden termination of the established commercial relationship .

These rulings are fundamental and clearly reinforce the right for suppliers to end selective distribution agreements without having to justify a reorganization of the network or a breach of contract by the distributor, as long as a period of notice is granted. To decide otherwise would deprive the operators of selective distribution networks of the possibility of ordinary termination or non-renewal of fixed-term contracts which exists for all other types of contracts, and which is equally justified for selective distribution contracts.

Cass. com., 27 April 1993, LawLex200200005989JBJ; see also CA Versailles, 21 March 1996, LawLex200200005554JBJ, sudden termination of a distributor continuing to comply with authorization criteria. 

CA Paris, 25 October 1991, LawLex200200004424JBJ.

CA Paris, 30 September 2015, LawLex201500001190JBJ.

CA Paris, 7 October 2015, LawLex201500001240JBJ; CA Paris, 14 October 2015, LawLex201500001312JBJ.

229. Principle of freedom to terminate