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 adoption of a regulation on vertical restraints, which set up an automatic exemption mechanism below the 30% market share threshold renders, in principle, the use of the rule of reason redundant where the agreement falls within its scope of application. However, the validity of certain obligations remains subject to the fact that they are indispensable for network protection. Thus, exclusive p …

Rule of reason.

The adoption of a regulation on vertical restraints, which set up an automatic exemption mechanism below the 30% market share threshold renders, in principle, the use of the rule of reason redundant where the agreement falls within its scope of application. However, the validity of certain obligations remains subject to the fact that they are indispensable for network protection. Thus, exclusive purchase clauses intended to preserve the identity and reputation of the network , non-compete clauses whose duration is proportionate to the objective of the protection of know-how , or the obligation for franchisees to take out a contract of rental of equipment and IT software  does not constitute a constraint that exceeds what is necessary to guarantee the proper running of the network. By contrast, an exclusive clause for the lay-out of a store in favor of the franchisor goes beyond what is necessary to protect the network's identity .

The French authorities use the regulation on vertical restraints as a guideline as part of the rule of reason where EU law is not applicable, particularly when trade between Member States is not affected . Thus, a post-contract non-compete clause has been held contrary to the Regulation on Vertical Restraints where it does not limit its scope of application to the premises or lands from which the franchisee has operated for the term of the contract  or where it exceeds one year and extends to the whole French territory . By contrast, an authorization clause is lawful where its aim is to prevent the franchisor's specific know-how being to a direct rival's advantage .

Cass. com., 10 January 1995, LawLex200200000316JBJ; CA Paris, 7 December 1999, LawLex200200002504JBJ: an exclusive supply clause is not anticompetitive where its objective is to guarantee the consistency of the operation of the franchise, certain homogeneity of the network and a proper dissemination of products; Cass. com., 20 December 2017, LawLex201700002131JBJ and LawLex201700002132JBJ.

CA Caen, 3 April 1997, LawLex200200002505JBJ: a post-contract non-compete clause is not anticompetitive where it is not an obstacle to the arrival of new suppliers in the specified sector; Cass. com., 6 April 1999, LawLex200200004393JBJ: a post-contract non-compete clause of a duration of three years is valid where the franchise contract does not produce any effect on trade between Member States, it is restricted to a defined geographic area, and only covers determined products.

Competition Council decision No 99-D-49 of 6 July 1999, LawLex200200003132JBJ. See also No 94-D-31 of 24 May 1994, LawLex200200003143JBJ.

Competition Council decision No 96-D-36 of 28 May 1996, LawLex200200002670JBJ.

CA Paris, 21 September 2005, LawLex200500010391JBJ.

Cass. com., 29 June 2009, LawLex200900002929JBJ.

CA Douai, 7 November 2000, LawLex200200005326JBJ; CA Paris, 14 April 1999, LawLex200200002501JBJ.

Regulation No 330/2010 of 20 April 2010  lays down a presumption of lawfulness of the agreements in question where the supplier and the distributor respectively hold a market share that exceeds 30% (Article 3), provided that the agreement contains no black or red clause. The regulation, which only applies in principle to practices likely to affect trade between Member States , does not include any provision specific to franchising which is mentioned only indirectly through the definition of know-how  and the system of the post-contract non-compete clauses in case of transfer of such know-how by the supplier to the purchaser . The provisions of the regulation are nevertheless frequently relied upon in the courts. Thus the Paris Court of Appeal has ruled that in application of Article 5 of the regulation, a non-affiliation clause, like a non-compete clause, is not exempted where it applies for a period of three years and/ or covers a radius of five kilometers around the franchisee's store . The Court of Cassation upheld this ruling . However the Paris Court of Appeal has also ruled that an exclusive purchase clause of a duration of more than the five years tolerated by the European regulation can benefit from an individual exemption where the goods to which it relates constitute an element of the transfer of know-how and participate in the development of the reputation of the brand and the trade name and where it is not established that it would not be essential to the protection of know-how and to the preservation of the identity and reputation of the network . It has also been held that an amendment to the franchise agreement which increases the duration of the non-compete clause to more than five years only has the effect of depriving it of the benefit of the block exemption . Further, it has also been held that the limitation to one year of the non-compete obligation laid down in Regulation No 330/2010 applies to the franchisee but not to the operator whose role consists in making its know-how available to the network in order to ensure its international development . On the other hand, a network leader does not commit any wrongdoing by allowing one of its members to make occasional sales in an area reserved to another franchisee, insofar as the regulation prohibits the prevention of passive sales .

Lastly, where trade between Member States is not affected, the conditions laid down for the exemption of certain clauses do not apply to a franchise agreement: this is the case notably of a clause limiting the scope of the post-contractual non-compete clause to the premises and land from which the franchisee operated . Likewise, below the 30% market share threshold, practices not constituting hardcore restrictions are automatically exempted. Thus an agreement between a franchisor and the members of its network allegedly giving franchisees abnormally long payment deadlines and providing for loans to help them oust the members of a competing network from the market is covered by the exemption .

Due to the expiry of the Vertical Restraints Regulation in 2022, the Commission has initiated an evaluation procedure (Evaluation Roadmap of 8 November 2018) in order to  determine whether it should allow the regulation to lapse, prolong its duration or revise it to take into account new market developments such as the increased importance of online sales and the emergence of new market players e.g. online platforms, brought to light in its May 2017 e-commerce inquiry report and by the case-law of the Court of Justice.

Regulation No 330/2010 of 20 April 2010 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, OJEU L 102 of 23 April 2010, 1-7.

CA Paris, 13 December 2017, LawLex201700002064JBJ, stressing that the regulation was applicable because the franchisor was present in a number of Member States, the clauses concerned were included in all proposed contracts and sought to eliminate a potential competitor in the internal market; 3 October 2018, LawLex201800001482JBJ.

CA Paris, 3 May 2017, LawLex201700000855JBJ.

CA Paris, 25 October 2017, LawLex201700001737JBJ.

CA Paris, 6 March 2013, LawLex201300000350JBJ and 3 April 2013, LawLex201300000516JBJ.

Cass. com., 23 September 2014, LawLex201400000967JBJ; 16 September 2014, LawLex201400000954JBJ.

CA Paris, 11 May 2016, LawLex201600000953JBJ and LawLex201600000956JBJ; 31 July 2019,  LawLex201900000962JBJ.

CA Paris, 20 March 2019, LawLex201900000437JBJ.

CA Paris, 28 January 2014, LawLex201400000178JBJ.

CA Lyon, 7 February 2013, LawLex201300000011JBJ.

French Distribution Law

347. Rule of reason.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

347. Rule of reason.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise