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

Most motor vehicle distribution contracts often contain a target clause pursuant to which the distributor undertakes to comply with a certain sales volume. Such a clause is valid only if it does not constitute an abuse by the supplier, which may consist in the latter setting its distributor unrealistic  or excessive targets or applying them in a discriminatory fashion . In particular, the supplier …

Fixing of targets.

The Plenary Assembly of the Court of Cassation has recognized the supplier's right to unilaterally fix the sale price of goods supplied to the distributor, subject to abuse of right . The reform of contract law applicable to agreements concluded after 1 October 2016 has now enshrined this case law . In motor vehicle distribution, the discussion has mainly related to the allegedly discriminatory character of the price differences found by certain distributors between the various Member States of the Union. The trial courts have underlined that the supplier is free to charge prices that are different according to the territories concerned , and furthermore price differences are often explained by social, fiscal, commercial and monetary factors (before the introduction of the single currency) that are beyond its control. Generally they rightly dismiss that type of claim . The Court of Cassation fully approves that analysis .

See inter alia Cass. ass. plén., 1 December 1995, LawLex200200004345JBJ.

Civil Code, Article 1164: In framework agreements, [the parties] may agree that the price will be set unilaterally by one of [them], on whom it is incumbent to justify the amount in the event of a dispute. In the case of abuse in the fixing of the price, a claim may be made to the court for damages and if necessary for the contract to be rescinded.

TGI Metz, 26 October 2004, LawLex200400002599JBJ.

TGI Paris, 27 November 2002, LawLex200300000640JBJ approved by CA Paris, 26 January 2005, LawLex200500003766JBJ; CA Metz, 16 January 2008, LawLex200800000105JBJ.

Cass. com., 20 February 2007, LawLex200700000227JBJ; 6 November 2007, LawLex200700001778JBJ.

Unilateral setting of prices.

Although suppliers are bound by the provisions of motor vehicle distribution contracts, they retain a certain margin of maneuver in the organization and management of their networks and remain free to review their commercial strategy in the course of the contract in order to adapt it to economic circumstances, without the distributors being able to claim the intangibility of the contractual conditions. Suppliers may at any time make changes to supplier credit arrangements  or the bonus system which is not of a contractual nature , unless by doing so it drastically undermines all the financial terms of the contract while at the same time protecting the supplier from unfavorable market developments  or, in a difficult general environment, they require distributors to make considerable sacrifices while paying handsome dividends to their shareholders . Similarly, while case law accepts that a manufacturer may legitimately decide to cease a business activity, it must respect a notice period and carry it out faithfully . This is not the case when, following the announcement of the brand's withdrawal from Europe, the manufacturer only provides essential services and takes orders, in deteriorated stock conditions, while requiring distributors to order new models in view to present them and build up their own stock. According to the courts, such behavior alters the contractual balance in such a way as to make it impossible to continue the contractual relationship . Apart from these cases, a distributor's refusal to accept simple network management measures, such as using of the online network to replace the obsolete communication system , is wrongful. Likewise, where it has chosen a quantitative selective distribution network, a supplier is not guilty of wrongdoing in offering a limited territory to a former dealer where the latter remains free to carry out active or passive sales . Lastly, a car manufacturer may legitimately decide to cease an activity, subject to compliance with a notice period and the faithful execution thereof .

Sometimes, the conduct of a distributor is in itself at the origin of the unilateral changes adopted by a supplier. Thus, large outstanding payments may lead the supplier to freeze supplies and establish a cash payment system . However, changes imposed on the dealer must not relate to an essential condition of the contract. A change in the brand in particular requires its consent . Likewise, a unilateral change in the contract terms by the supplier may constitute a “manifestly unlawful disturbance” where it comes as a result of a breach for which other measures are provided in the contract . The assessment of the legitimacy of changes made by the supplier sometimes results in excessive interference by the court in the management of undertakings: the unilateral withdrawal of an outstanding debt facility has been regarded as a source of a manifestly unlawful disturbance .

CA Paris, 18 January 2012, LawLex201200000309JBJ, upheld by par Cass. com., 4 June 2013, LawLex201300001401JBJ, specifying that the supplier may lower the dealer's margin on the sale of certain types of vehicles if that measure is offset by the granting of a additional margin which is at least equal where targets have been met; Cass. com., 15 March 2017, LawLex201700000541JBJ, holding that the supplier having made no commitment to grant a supplier credit to distributors is entitled to make such credit subject to the provision of a first demand guarantee.

TGI Paris, 25 November 2004, LawLex200500004026JBJ and LawLex200500004045JBJ; 20 February 2007, LawLex200700000343JBJ; CA Paris, 12 March 2008, LawLex200800001118JBJ and LawLex200800001119JBJ; 27 May 2010, LawLex201000000631JBJ: the supplier is free to adapt at any time its financial incentive system to its commercial strategy where it has taken out no commitment in this respect with regard to its dealers and that the new measures adopted do not imbalance the contract economy. Cf. CA Versailles, 10 November 2001, LawLex201100001852JBJ, ruling that a supplier cannot unilaterally amend aspects of the calculation of bonuses by adding further conditions during the course of the contract upon which their obtention is dependent.

T. com. Paris, 24 September 1999, LawLex200200004623JBJ.

CA Pau, 1 July 1999, LawLex200200004204JBJ.

T. com. Versailles, 29 December 2000, LawLex200400000225JBJ.

TGI Paris, 9 March 2004, LawLex200400000737JBJ.

Cass. com., 15 January 2002, LawLex200200005004JBJ.

CA Paris, 15 November 2017, LawLex201700001871JBJ and LawLex201700001889JBJ.

T. com. Paris, 23 March 2015, LawLex201500000748JBJ, LawLex201500000773JBJ, LawLex201500000813JBJ, LawLex201500000820JBJ, LawLex201500000964JBJ and LawLex201500000970JBJ.

CA Versailles, 19 June 2003, LawLex200300004300JBJ.

T. com. Paris, 4 August 2004, LawLex200400002135JBJ.

CA Paris, 15 November 2017, LawLex201700001871JBJ.

Cass. com., 18 June 2002, LawLex200200004194JBJ; CA Bordeaux, 7 September 2004, LawLex200400002136JBJ.

Unilateral changes in the terms of the contract.

Most motor vehicle distribution contracts often contain a target clause pursuant to which the distributor undertakes to comply with a certain sales volume. Such a clause is valid only if it does not constitute an abuse by the supplier, which may consist in the latter setting its distributor unrealistic  or excessive targets or applying them in a discriminatory fashion . In particular, the supplier may not set the distributor targets that are clearly higher than the penetration rate of the brand on the market . Nevertheless, merely setting targets which differ according to the geographical areas is not evidence of the implementation of discriminatory behavior . Moreover, a distributor cannot complain of unrealistic targets when it has sometimes achieved them  or, conversely, when it has not even reached the estimates deemed reasonable by the legal expert . Results well below the brand's regional penetration, demonstrating that the dealer is less efficient than neighboring dealers operating in less densely populated areas, also rule out abuse . Likewise, a 40% increase in sales targets does not have any discriminatory character where the registrations of brand vehicles for the year in question have reached a rate of growth of more than 38% . The fixing of specific sales targets in conformity with the requirements of the block exemption regulation in force on the basis of both the national and local performances of the brand and the past results of the dealer is not abusive . Lastly, the contesting of targets previously achieved by the distributor for failure to take into consideration a competing manufacturer's direct sales is irrelevant where the calculation basis has remained identical .

Moreover, targets subject each year to approval by the distributor cannot be considered as having been unilaterally fixed . A dealer who claims to have accepted targets under duress must give evidence thereof . In fact, the distributor, who has sometimes obtained a reduction in the objectives proposed by the licensor, cannot claim that these are non-negotiable . The distributor's consent delimits the frontiers of abuse: thus, a mode of calculation of the performance ratified by the dealer cannot be criticized by the latter afterwards . The non-achievement of targets freely granted and not found to be excessive in character justifies the termination of a distribution contract .

Lastly, a dealer who does not resort to the contractual procedure of the appointment of a third-party expert in case of a dispute with the manufacturer, cannot then claim in court that the sales targets defined were unattainable  or argue that the manufacturer unfairly refused to negotiate . Where an independent expert sets the targets to be achieved, its assessment may be challenged only if it shows a lack of knowledge on the scope of application of the mission that the parties have entrusted to it  or is based on a gross error in the method used . It has been held that a third-party expert is not an arbitrator capable of issuing a ruling that is subject to appeal; the role of the expert is a purely factual and technical matter and has no legal effect .

CA Douai, 22 May 1997, LawLex200200005672JBJ: requiring unrealistic targets of a dealer despite its constant financial deterioration while increasing the supplier-credit.

CA Versailles, 16 June 1992, LawLex200200005932JBJ; 16 September 1999, LawLex200200004626JBJ. 

CA Versailles, 16 September 2004, LawLex200400002138JBJ. 

CA Paris, 15 June 2005, LawLex200500009935JBJ approved by Cass. com., 12 December 2006, LawLex200700000160JBJ; CA Paris, 18 January 2017, LawLex201700000114JBJ.

Cass. com., 13 May 1997, LawLex200200005666JBJ.

CA Paris, 29 October 1998, LawLex200200005149JBJ. 

CA Paris, 17 November 2005, LawLex200500010041JBJ: dealers who belong to a group of companies that manage some twenty concessions and know the market and the profession very well, cannot allege that they have accepted the sales targets proposed by the supplier under constraint.

T. com. Paris, 20 January 2021, LawLex202100000199JBJ

TGI Paris, 1 July 1993, LawLex200200006016JBJ. Add: Cass. com. 1 March 2011, LawLex201100000370JBJ, which considers that a distributor who has never contested the objectives set by the supplier, nor requested the appointment of a third-party expert, cannot subsequently claim that they are unrealistic.

CA Paris, 23 September 1998, LawLex200200005140JBJ approved by Cass. com., 3 July 2001, LawLex200200004367JBJ. See also Cass. com., 17 July 2001, LawLex200200004781JBJ.

CA Paris, 15 September 2004, LawLex200400002112JBJ; 16 September 2009, LawLex200900003084JBJ; CA Versailles, 31 January 2006, LawLex200700000273JBJ; CA Paris, 16 September 2009, LawLex200900003084JBJ, upheld by Cass. com., 1 March 2011, LawLex201100000370JBJ; CA Paris, 2 July 2014, LawLex201400000777JBJ; CA Paris, 7 February 2018, LawLex201800000254JBJ; T. com. Paris, 20 January 2021, LawLex202100000199JBJ.

CA Paris, 25 November 1998, LawLex200005156JBJ; 12 March 2008, LawLex200800001118JBJ and LawLex200800001119JBJ. See also CA Paris, 13 October 2003, LawLex200400000854JBJ: sales targets assigned to a concessionaire are abusive if they are applied in a discriminatory manner and if the concessionaire fails to meet them, the grantor has a market share higher than the national average; 24 June 2020, LawLex202000001620JBJ, emphasizing that the targets set by the grantor must be compared with the absorption capacity of the local market, taking into account the brand's penetration rate, in order to assess whether they are intentionally excessive or discriminatory.

CA Paris, 3 February 2016, LawLex201600000255JBJ.

CA Paris, 30 June 2010, LawLex201000000887JBJ.

Cass., 1re civ., 15 December 2010, LawLex201000001487JBJ, upholding CA Paris, 2 April 2009, LawLex201100000025JBJ.

CA Paris, 18 May 2016, LawLex201600000955JBJ.

T. com. Paris, 20 January 2021, LawLex202100000199JBJ.

TGI Paris, 25 November 2004, LawLex200500004026JBJ. See also CA Versailles, 10 November 2011, LawLex201100001852JBJ.

CA Paris, 12 March 2008, LawLex200800001118JBJ and LawLex200800001119JBJ.

French Distribution Law

271. Fixing of targets.

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271. Fixing of targets.

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Les décisions de justice citées dans ce paragraphe :

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