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

A competing store may be opened with a different or the same sign. 
In principle, the franchisor may reserve the sale of its products on the reserved territory but with a different name. The question has given rise to a lot of differing views in the courts. The Court of Cassation initially ruled that the supplier breached the exclusivity clause where it opened another store with another sign on th …

Opening of competing stores.

A competing store may be opened with a different or the same sign. 

In principle, the franchisor may reserve the sale of its products on the reserved territory but with a different name. The question has given rise to a lot of differing views in the courts. The Court of Cassation initially ruled that the supplier breached the exclusivity clause where it opened another store with another sign on the territory devoted to the franchisee , in particular where there was a risk of confusion with the network set up . Such a solution seemed open to criticism insofar as the franchise is granted for the representation a given brand and not necessarily for distributing all the products manufactured by the franchisor. The Paris Court of Appeal has opposed the Court of Cassation , provided that the sector in question is highly competitive  and the trade names are quite distinct  or that the third party has not accessed the notice and the network's expertise . Likewise, the Court of Appeal in Rouen has held that a franchisor can, without breaching the exclusivity obligation, set up a franchisee belonging to the same group but exploiting a different brand and concept on the territory of another network member .

On the other hand, the setting-up of another distributor under the same name on the exclusive territory of a franchisee characterizes a clear breach by the franchisor of its non-compete obligation which may be penalized either by the termination of the contract against the franchisor , unless evidence is brought that the franchisee has given its consent to the opening of a new outlet on its territory , or by an action for unfair competition . The Court of Cassation strictly protects the franchisee's exclusivity by emphasizing that a clause by which the supplier undertakes not to set up a new store in an area without offering it to the nearest distributor covers both the opening of a new establishment and the authorization to take over an existing store . A franchisor thus  breaches its exclusivity obligation, by granting to another member of the network a territory on which using the brand name that encroaches on the exclusive zone of establishment of a franchisee, relying on an inoperative distinction between the zone of establishment and the catchment area . The granting of new licenses in the reserved zone  or the sale of the franchisor's products through another channel  have also been considered a violation of the non-competition obligation. In the same way, a franchisor seriously breaches its obligations and disrupts the balance of the contract when it opens two new stores in the franchisee's municipality without allowing it to exercise the  contractual option granted, even if these establishments are located at the distance stipulated in the event of the franchisee renouncing its right . However, the fact that a member of the network carries out one-off services in the area allocated to another franchisee does not characterize the violation by the franchisor of its obligation of exclusivity, since there is no effective establishment of a new point of sale in the territory in question . Furthermore, a franchisor who has granted the franchisee territorial exclusivity in a given municipality is not in breach of contract if it allows a service outlet of the brand to be set up 10 km from its establishment, in a neighboring municipality . These solutions could be called into question with the entry into force of the new vertical restraints regulation. Indeed, the guidelines indicate that in the presence of territorial exclusivity granted to the franchisee, his relationship with the franchisor is assessed in accordance with the rules applicable to exclusive distribution . However, the new regulation now allows for the same territory to be granted to up to five exclusive distributors .

A certain degree of caution is required on the part of franchisor even in the absence of exclusivity of territory when the opening of a new point of sale in the catchment area of a franchisee is likely to destabilize its business. The trial courts tend to broadly apply the principle of good faith in the performance of the contract in such cases , even if this principle is established as not authorizing the court to create new obligations or to adversely affect the very substance of the rights and obligations of the parties . The Court of Cassation, which is more rigorous, has ruled that when the franchisee has no territorial exclusivity, the franchisor is not obliged to inform him of the new establishments that he authorizes in his trading area . The Paris Court of Appeal seems to be initiating a return to greater legal rigor and now considers that when the franchise contract does not include an exclusivity clause, but an empirical division of sectors that does not exclude overlaps, the establishment of a franchisee two kilometers from the establishment of another does not constitute a fault on the part of the franchisor . In the same way, the Douai Court of Appeal considers that, in the absence of a territorial exclusivity clause, the franchisor is free to set its own distribution policy, and does not breach its contractual obligations by setting up a store of the brand in the territory of another franchisee, regardless of the good performance of the latter .

Cass. com., 16 June 1992, LawLex200200005931JBJ; Cass. com., 3 January 1996, LawLex200200004344JBJ.

Cass. com., 3 December 1991, LawLex200200005878JBJ; CA Paris, 10 September 2014, LawLex201400000920JBJ. 

Cass. com., 24 June 2020, LawLex202000001645JBJ.

CA Paris, 31 January 2024, LawLex202400000848JBJ.

CA Paris, 8 November 2000, LawLex200200004700JBJ; CA Lyon, 17 June 1994, LawLex200200005403JBJ.

CA Paris, 19 February 1998, LawLex200200005104JBJ.

CA Douai, 14 October 2021, LawLex202100005648JBJ.

CA Lyon, 7 February 2013, LawLex201300000011JBJ. See also CA Versailles, 24 January 2017, LawLex201700000224JBJ, ruling that when the franchise agreement provides for territorial exclusivity of the brand limited to the creation or acquisition of real estate agencies under the franchisor's brand without prohibiting active sales, the franchisee cannot complain about sales made by other members of the network in his territory.

CA Versailles, 12 October 2023, LawLex202300012430JBJ.

Guidelines on Vertical Restraints 2022/C 248/01, pt 167.

Regulation No 2022/720 of 10 May 2022, Article 1(1)(h). See already, following the reasoning of the regulation, CA Paris, 28 June 2023, LawLex202300008664JBJ, holding that the existence of another franchisee in the same city does not constitute a breach of the franchisor's obligation of exclusivity since the franchisor was already in business when the franchisee signed the contract and the locality in question provides sufficient potential customers to satisfactorily exploit the concept in each of the two sectors entrusted.

CA Versailles, 8 March 2016, LawLex201600000581JBJ, but see CA Paris, 14 December 2016, LawLex201700000017JBJ, holding that the installation, by the franchisor, of three new outlets of the franchise on the catchment area of a franchisee does not constitute a breach of its contractual obligations when it gives no exclusivity to its resellers.

See, inter alia, CA Paris, 13 July 1990, LawLex200200005793JBJ.

Cass. com., 16 July 2007, Bull. civ., IV, No 188.

Cass. com., 30 May 2018, LawLex201800000834JBJ.

CA Paris, 17 January 2024, LawLex202400000560JBJ.

CA Douai, 19 May 2022, LawLex202200002679JBJ.

CA Paris, 2 February 1994, LawLex200200005368JBJ.

See CA Paris, 30 May 2007, LawLex200700001415JBJ; 16 January 2019, LawLex201900000063JBJ; 8 June 2022, LawLex202200003160JBJ, emphasizing that a franchisee cannot blame the franchisor for having set up a competitor carrying out the same activity in its territory when the exclusivity only relates to the use of the brand and not to the activity itself.

CA Paris, 5 July 2023, LawLex202300009243JBJ.

CA Rouen, 24 October 2013, LawLex201300001518JBJ.

CA Paris 16 December 1992, LawLex200200005962JBJ.

Cass. com., 16 January 2001, LawLex200200004374JBJ.

CA Montpellier, 18 December 1997, LawLex200200005079JBJ.

French Distribution Law

400. Opening of competing stores.

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400. Opening of competing stores.

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Les décisions de justice citées dans ce paragraphe :

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