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

According to Regulation No 2022/720 of 10 May 2022, which has been applicable to motor vehicle distribution since 1 June 2013, a selective distribution system is “a distribution system where the supplier undertakes to sell the contract goods or services, either directly or indirectly, only to distributors selected on the basis of specified criteria and where these distributors undertake not to sell such goods or services to unauthorized distributors within the territory reserved by the supplier to operate that system” . The guidelines define qualitative selection as a system which “limit[s] the number of distributors indirectly, by imposing conditions that cannot be met by all distributors, for instance, relating to the product range to be sold, the training of sales personnel, the service to be provided at the point of sale or the advertising and presentation of the products. Qualitative criteria may refer to the achievement of sustainability objectives, such as climate change, protection of the  environment or limiting the use of natural resources” . 

The courts have always accepted that candidates to a qualitative selective distribution network can be rejected due to previous breaches of contract or for non-compliance with the selection criteria.

Thus, a manufacturer may refuse to authorize a distributor due to the existence of a legal dispute between them , due to the application being in bad faith or abnormal , because of contractual breaches the candidate committed as a former distributor  even if it otherwise meets all the other qualitative criteria . Likewise, the refusal to authorize a former dealer's entry to the network is justifiable on the grounds of clear and objective reasons based on quantifiable factors such as the dealer's insufficient results when compared to those of other dealers of the brand or his lack of organizational skills .The wrongful act attributed to the former distributor must however be sufficiently serious . The refusal to authorize a dealer who sold vehicles to a third party having a mandate , or who has carried out non-network reselling but without such sales having been established as unlawful  has been held to be abusive. A manufacturer who relies on the authorization clause against a distributor in respect of whom no misconduct has been established, may be ordered to accept the distributor within the network .

Traditionally, the courts attached a lot of importance to the non-discriminatory application of the selection criteria. It has thus been held in the past that although a manufacturer is not required to authorize the first of the candidates who meet the selection criteria, it cannot a priori exclude from the authorization process a candidate who appears to meet them without incurring liability for discrimination . Opting for selective distribution obliges the manufacturer to review all applications, even from former distributors . Under the case law prior to the repeal of the prohibition of discriminatory practices, the selection procedure had to be transparent and non-discriminatory  and uniformly implement objective and precise selection criteria . By contrast, a candidate who refused to be subject to the procedure set up by the manufacturer but insisted on using the results of an audit carried out by an external firm could not complain if authorization was refused . 

The courts were however balanced in their interpretation. Thus, courts rightly ruled that the supplier is not required to organize an official tender bid for applicants . The case law therefore invalidated the thesis according to which the supplier is obliged to launch a tender bid before constituting its network. In a market economy, a supplier must be able to freely hire distributors of its goods and specify the conditions for their sale.

Likewise, the courts have held that a manufacturer may select a distributor who does not meet the selection criteria on the date of authorization, if it is fully able to guarantee that it will meet them on the expiry date provided for in the contracts . Late notification of the criteria to a candidate does not further incur the manufacturer's liability where a distributor who meets the required criteria has already been appointed , when the party complaining had publicly announced its irrevocable intention of leaving the network  or had little chance of being authorized due to being a former terminated dealer . Apart from such scenarios, certain courts had no hesitation in finding the manufacturer liable .

With the repeal by the LME Law of 4 August 2008 of the per se ban on discriminatory practices, the rulings upholding the admission to qualitative selective distribution networks of any candidate fulfilling the selection criteria, or be guilty of discrimination, have now lost their legal authority . Refusal to authorize a candidate is no longer regarded as an unlawful refusal of sale or a prohibited discriminatory practice. A claim of abuse of dominant position is also excluded, especially if we proceed from the assumption that such refusals are against operators on the upstream market for the supply of and demand for distribution or repairer contracts. Recourse to the rules on anticompetitive agreements is also largely futile. If a supplier has less than 30% of the market, even in the case of an agreement with the other members of the network, the selection criteria and their possible discriminatory application are exempt as of right . Where operators do have a share of the market of more than 30%, a unilateral refusal to authorize would not constitute a restrictive agreement in any event. Even if the courts have not followed this reasoning in all cases, most now will not accept claims for forced entry to qualitative selective distribution networks.

Regulation No 2022/720 of 10 May 2022 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices, OJ L 134 of 11 May 2022, p. 4, Art. 1(1)(g).

Guidelines on vertical restraints No 2022/C 248/01, para 144.

Cass. com., 7 March 2006, LawLex200600000782JBJ.

CA Douai, 15 April 2004, LawLex200400001290JBJ.

CA Paris, 16 June 2010, LawLex201000000734JBJ: it cannot set aside the candidacy of the former distributor on the ground that the latter did not wish to have a long-term relationship, where this is not a previously defined qualitative selection criterion.

T. com. Arras, 24 October 2003, LawLex200300004058JBJ.

CA Paris, 21 April 2005, LawLex200500005499JBJ.

CA Versailles, 16 January 2008, LawLex200800000069JBJ.

T. com. Dijon, 25 September 2003, LawLex200300003998JBJ: the manufacturer cannot be blamed for not having organized a tender bid before the application of the criteria since this obligation does not result from any legal provision; Cass. com., 28 June 2005, LawLex200500006663JBJ, approving CA Dijon, 1 April 2004, LawLex200400000738JBJ: a manufacturer is not required to organize a tender bid for the creation of its network. See also CA Angers, 12 April 2005, LawLex200500005278JBJ; CA Paris, 11 September 2014, LawLex201400000977JBJ.

CA Dijon, 1 April 2004, LawLex200400000738JBJ; CA Angers, 12 April 2005, LawLex200500005278JBJ; CA Versailles, 28 May 2009, LawLex200900001968JBJ; CA Paris, 11 September 2014, LawLex201400000977JBJ; but see T. com. Lyon, 15 September 2006, LawLex200600002286JBJ.

CA Dijon, 1 April 2004, LawLex200400000738JBJ.

CA Paris, 21 January 2009, LawLex200900000112JBJ.

T. com. Paris, 26 May 2008, LawLex200900000119JBJ.

CA Versailles, 28 May 2009, LawLex200900001968JBJ.

T. com. Saumur, 27 January 2004, LawLex200400000504JBJ; TGI Metz, 19 October 2004, LawLex200400002840JBJ; more recently, T. com. Paris, 22 March 2016,  LawLex201800000607JBJ, holding that the builder who does not provide its selection criteria does not benefit from the automatic exemption and therefore cannot, without incurring liability, discriminate between candidates for entry to the network or ignore the obligations of good faith and transparency governing business relations.

For a complete overview of developments in case law, see Freedom to organize network.

Cass. com., 16 February 2022, LawLex202200001051JBJ and LawLex202200001052JBJ. See also Cass. com., 12 May 2021, LawLex202100002793JBJ.

Cass. com., 28 September 2010, LawLex201000001061JBJ; CA Versailles, 7 January 2014, LawLex201400000064JBJ.

T. com. Grenoble, 24 October 2003, LawLex200300004057JBJ. But see T. com. Versailles, 12 December 2003, LawLex200400000211JBJ, finding it discriminatory to refuse an authorization based on a previous misconduct of the candidate. The judgment has been confirmed but by substituting the grounds since the Court of Appeal considered that the misconduct claimed was not established: CA Versailles, 24 February 2005, LawLex200500004358JBJ.

CA Versailles, 4 June 2008, LawLex200900003222JBJ, upheld by Cass. com., 15 September 2009, LawLex200900003094JBJ.

CA Paris, 19 September 2012, LawLex201200002166JBJ.

T. com. Dijon, 25 September 2003, LawLex200300003998JBJ; TGI Metz, 19 October 2004, LawLex200400002840JBJ; T. com. Romans-sur-Isère, 24 May 2006, LawLex200600001286JBJ upheld by CA Grenoble, 4 October 2007, LawLex200700001517JBJ.

T. com. Dijon, 30 June 2003, LawLex200300004308JBJ. 

CA Grenoble, 31 March 2004, LawLex200400000748JBJ; CA Dijon, 1 April 2004, LawLex200400000738JBJ; CA Paris, 11 September 2014, LawLex201400000977JBJ: suspicions of non-network resale are not sufficient grounds for refusing approval.

246. Qualitative selection.