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 protection of the franchisor's distinctive signs and know-how relies on the provision in the franchise agreement of clauses which may fall within the scope of the ban on restrictive agreements . Although entered into between non-competitors, a franchise agreement may constitute an unlawful restrictive agreement both on the basis of Article 101(1) TFEU  and of Article L. 420-1 of the Commercial …

Principle.

The protection of the franchisor's distinctive signs and know-how relies on the provision in the franchise agreement of clauses which may fall within the scope of the ban on restrictive agreements . Although entered into between non-competitors, a franchise agreement may constitute an unlawful restrictive agreement both on the basis of Article 101(1) TFEU  and of Article L. 420-1 of the Commercial Code , but may benefit from exemption under certain conditions.

The lawfulness of the franchise contract with regard to the rules of competition assumes that the competitive restrictions imposed on franchisees are offset by beneficial effects proportionate to the objective sought. In other words, these restrictions must not exceed what is necessary to protect know-how and to safeguard the network's identity . The agreement in question will also be favorably assessed where it complies with the Regulation on Vertical Restraints that the French competition authorities apply as part of the rule of reason, as a guide for analysis, even when European law does not apply .

Vertical restraints that most often give rise to debate in the context of franchising concern imposed prices, exclusive sourcing, and non-compete and post-contractual non-reaffiliation clauses. The limitation of passive and active sales by network members outside their catchment area, resulting from rules relating to the solicitation of professional clients that lead to an allocation of these clients among franchisees, has also been held to constitute a restriction by object . Online sales restrictions seem to have given rise to fewer legal disputes. Legal debate relating to selective distribution can be extended, mutatis mutandis, to franchising. It is now established that franchisees may not be subject to online selling prohibitions. The development and implementation of a centralized online sales system around the franchisor's national website constitutes a restriction of competition by object, which involves restricting the ability of its franchisees to resell the contractual products on a website operated by the franchisor itself . Such a restriction does not appear to be justified by the size of the investments made by the franchisor for the creation of its website, in the absence of a time limit . Furthermore, in such a configuration, the franchisor, who relies on his dual capacity as supplier and competitor of the franchisees on the retail market, to steer their commercial outlets through his centralized online sales system while maintaining a competitive advantage over them, commits another restriction by object . While the illegality of the ban on online sales appears to be well established, it remains possible for such sales to be subject to compliance with the qualitative criteria and the requirement of a physical store which must achieve a minimum turnover, for the purpose of preventing access to the network of purely online operators. In addition, the 2022 guidelines on vertical restraints offer new possibilities for regulating these sales since they enshrine, for all types of networks, the ability to simply prohibit resellers from using marketplaces , as well as the right to provide for differentiated remuneration for sales in physical stores to compensate for the cost of specific services only rendered by them, by reversing the former prohibition on dual pricing practices .

Finally, in a context of fierce competition between networks, some franchisors have attempted to argue that their competitors were adopting practices contrary to Article L. 420-1 of the Commercial Code by granting excessive payment terms and giving undue support to their franchisees. Most of those attempts have failed in the absence of evidence that the aid granted enabled the beneficiaries to offer unfair promotions aimed at ousting their competitors . However, the Court of Cassation later ruled that the granting of unlawful payment terms or loans in violation of the banking monopoly which provides an unfair advantage to the franchisees of a network, necessarily causes harm to franchisees of the competing network without it being necessary to determine whether or not they are in the same catchment area .

Without limitation, it is possible to mention price agreements, exclusive supply clauses, the ban on cross-supplies or passive sales or non-compete clauses.

Case 161/84 Pronuptia [1986] ECR 353, LawLex200500004110JBJ: the requirements of protection of the network reputation cannot justify a prohibition for the franchisee from obtaining products from other franchisees.

Guidelines on vertical restraints 2022/C 248/01, pt 209.

CA Versailles, 30 January 2018, LawLex201800000224JBJ, upheld by Cass. com., 29 January 2020, LawLex202000000158JBJ; CA Paris, 12 December 2018, LawLex201800001994JBJ.

Cass. com., 15 January 2020, LawLex202000000073JBJ.

CA Paris, 10 March 1989, LawLex200200005737JBJ: price lists sent to franchisees characterize a resale price maintenance where they are introduced as mandatory standards; Competition Council decision No 89-D-43 of 5 December 1989, LawLex200200002448JBJ approved by CA Paris, 7 June 1990, LawLex200200002668JBJ: a clause preventing franchisees from making passive sales has an anticompetitive object; Competition Council decision No 93-D-43 of 19 October 1993, LawLex200200002447JBJ.

Cass. com., 10 January 1995, LawLex200200000316JBJ; Competition Council decision No 96-D-36 of 28 May 1996, LawLex200200002670JBJ, indicating that the franchise agreement must not impose competitive restrictions which are disproportionate in relation to the objective sought; No 97-D-51 of 24 June 1997, LawLex200200002656JBJ, holding contrary both to the block exemption regulation on franchise agreements and to internal rules the exclusive supply obligation relating on equipment for which it is possible to apply objective specifications and the non-compete clause not indispensable to the protection of the franchisor's know-how.

Competition Council decision No 03-D-39 of 4 September 2003, LawLex200300003480JBJ.

Competition Authority Decision No 24-D-02 of 6 February 2024, LawLex202400001357JBJ.

Competition Authority Decision No 24-D-02 of 6 February 2024, LawLex202400001357JBJ, cited above.

Guidelines on vertical restraints 2022/C 248/01, OJEU C 248 of 30 June 2022, pt 208. See also on selective distribution, Case C-230-16 Coty Germany GmbH, Judgment of 6 December 2017, LawLex201800000317JBJ.

French Distribution Law

338. Principle.

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338. Principle.

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Les décisions de justice citées dans ce paragraphe :

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Les notions juridiques connexes

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