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

Article L. 134-1 of the Commercial Code defines commercial agents as “agents who, as independent professionals not bound by a contract for services, shall be permanently entrusted with negotiating and possibly concluding sale, purchase, rental or service provision contracts for and on behalf of producers, industries, traders or other commercial agents. Commercial agents may be natural or legal per …

Definition of agent, efficiency of function and inconsistencies under current French law.

Article L. 134-1 of the Commercial Code defines commercial agents as “agents who, as independent professionals not bound by a contract for services, shall be permanently entrusted with negotiating and possibly concluding sale, purchase, rental or service provision contracts for and on behalf of producers, industries, traders or other commercial agents. Commercial agents may be natural or legal persons” .

The agency contract relies on a mandate. Unlike exclusive distribution, selective distribution or franchising, which are based on a sale/resale mechanism, a supplier using a commercial agent concludes a contract with an independent representative in charge of developing his own business thanks to profit-sharing payments on the transactions completed through it. Each of the parties has an interest in the undertaking's rise through the creation and development of the customer base. Unlike commission agents, commercial agents have a duty to disclose to the principal the names and addresses of their customers, as well as details of the sales they complete. The supplier thus has an accurate customer list which it may use after the termination of the contract.

The agency contract is most often used to distribute consumer goods or equipment, more rarely for the provision of services. However, the French legislator has included services in the scope of application of Article L. 134-1 of the Commercial Code by using the freedom granted by Directive No 86/653 of 18 December 1986 to extend the system of protection of agents to the negotiation and conclusion of services agreements .

The status of commercial agent requires the fulfillment of various substantial conditions as access to the profession is regulated. Representatives who do not fulfill the conditions required to be protected by the status applicable to commercial agents are subject to the judicial rules which govern common interest mandates ("mandat d'intérêt commun") . 

Current French law on commercial agents is not fully adapted to the way agency agreements have developed. In effect, they are very protective of agents and very costly to the principal on termination as the agent is entitled to a practically automatic indemnity of two years' average gross commission, except in the case of extremely serious breach of contract on the agent's part, which is very difficult to establish as the courts are reticent to find it even where there have been repeated breaches of contractual obligations. This over-protection tends to deter suppliers from using agents in the organization of their networks whereas it could be a simple and flexible solution which is more advantageous than integrated distribution or independent resellers. It also leads to various attempts by suppliers to circumvent the rules.

This inconsistency between the economic needs and the rigidity of the agent's status is, paradoxically, also accompanied by a practical distortion in terms of the protection afforded between the French agents of French suppliers and of foreign suppliers. For domestic contracts, French suppliers cannot escape the rules on agents' status and therefore use of a network of agents may prove to be very costly in the event of termination or reorganization. Their foreign competitors can however use French agents and avoid the most part of the protective status by the stipulation of a clause conferring jurisdiction on a foreign court (or an arbitration clause stipulating a foreign arbitrator) and by choosing a foreign law which is more lenient than French law, such as German or Swiss law.

In terms of the economic analysis of law, the current French law relating to commercial agents seems very inefficient. Overall it discourages the use of commercial agency due to a system which is overly protective compared to the laws of other States of the European Union and creates a competitive disadvantage for French suppliers with regard to their foreign competitors, including on the French market, as foreign companies are not subject to the same constraints as French undertakings.

Case law prior to the Law No 91/593 of 25 June 1991, codified in Articles L. 134-1 et seq. refused the status of commercial agent to a company: CA Paris, 27 June 1961. 

The scope of application of the EU Directive initially covered only goods: Directive No 86/653 of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, OJEC L 382 of 31 December 1986, Article 1(2).

Along the same lines: CA Lyon 29 January 1993, LawLex200200004859JBJ; Cass. com., 14 March 1995, LawLex200200004860JBJ; 3 June 1997, LawLex200200004845JBJ.

Decree No 58-1345 of 23 December 1958 as amended by Decree No 92-506 of 10 June 1992 on commercial agents was the first to organize the status of agents in order to compensate for the inappropriateness of the rules on mandates, which were only adapted to the occasional activity of representation. The Decree of 23 December 1958 made the application of the status of commercial agent subject to the fulfillment of formal conditions, in particular the drafting of a written document, that the Court of Cassation applied strictly in an attempt to control the profession of commercial agents . Thus a distinction was made between representatives who had a written document and those who did not, with only the former being protected from ad nutum revocation of the mandate. The difference in treatment could however not be justified since they all exercised the same activity. These rules were withdrawn with the coming into force of the Community harmonization directive No 86/653 of 18 December 1986 (see No 7.01) , implemented under French law by the Law No 91-593 of 25 June 1991 on relationships between commercial agents and their principals and codified in the Commercial Code under the heading “Commercial agents” . All the formal conditions that were obligatory previously have disappeared in accordance with the European requirements. Decree No 92-506 of 10 June 1992 provides the conditions of implementation , and there is also the Order of 8 January 1993 which provides for the registration in a special register . All these regulations have been codified in Articles R. 134-1 to R. 134-17 and A. 134-1 and A. 134-5 of the Commercial Code.

Cass. com., 16 February 1999, LawLex200200005179JBJ.

Commercial Code, Article L. 134-1 to L. 134-17.

Decreee No 92-506 of 10 June 1992, OJ, 12 June 1992.

Order of 8 January 1993 on the registration of commercial agents, OJ, 10 March 1993.

Applicable provisions.

The classification as an agent results in the application of an advantageous set of legal rules and is therefore a much debated topic. Under competition law, the contract of an agent who does not bear the commercial and financial risk in relation to the activities for which his principal has appointed him is not covered in principle by the application of the law on restrictive agreements, hence this has led to a recurring debate on the concept of “true” or “false” agent.

Arguments as to classsification of the same kind exist under commercial law; the criteria of the agency agreement are subject to significant controversy in the case law. Thus, due to the lack of bargaining power of undertakings operating mobile phone stores, they have been excluded by the courts from the scope of application of the status of commercial agent. A contract which merely has the appearance of a commercial agency contract may even be re-classified as an employment contract.

French Distribution Law

443. Definition of agent, efficiency of function and inconsistencies under current French law.

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443. Definition of agent, efficiency of function and inconsistencies under current French law.

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Les décisions de justice citées dans ce paragraphe :

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