DISTRIBUTION Why distribution agreements Distribution v direct sales

DISTRIBUTION - Why distribution agreements ? Distribution v. direct sales (crossborder (incl. own website) or with representative office/establishment) Practical reasons Commercial reasons (eg efficient marketing, use network effects, . . ) Financial reasons (eg less capital) Legal reasons (advantage of a separate entity, etc …) I. a. division of risks and profits, management of stocks, …. But: conflict agency costs … - NB. for ‘direct investment’, see Ch. 8 n Vice-versa: why do business buyers buy foreign goods or services domestically (from importers, distributors) rather than import them (or buy them directly cross-border)? n -

FORMS OF DISTRIBUTION n - Forms of distribution (general): Sales representative = employee with an employment contract (receives wage plus commission) - Distributorship ( « concessionaire » ) or dealership*: distributor itself buys and resells; chooses in principle its price for selling; difference of price is his income - * the term dealer is normally used for distributors that are retailers (selling to the public), whereas distributors are rather wholesalers. - Franchising: basically a specific form of distributorship, see infra. - - Commercial agency: agent sells or buys in the name of and on behalf of the principal (see infra forms of agency); principal determines the price; income of the agent = commission on sales; manufacturer has more control over agents than over distributors, and is also more liable. Alternative: «commission agent » (acts in his own name for the principal) Alternative: platform operator organising P 2 P contracts (‘sharing economy’) - Occasional intermediary - Distribution via online platforms (information society services): in principle, the platform is not concluding the contract, only facilitating dealings between the parties (but: case law on Uber as offering transport services and not merely an intermediary) -

FORMS OF DISTRIBUTION n n - - National law contains protective rules for distributors (dealers) & agents. But sometimes the weaker party is the (small) supplier dealing with big distributors (esp. when the distributor has stipulated exclusivity). As to the protection, there are big differences, e. g. agents are protected in all EU MS, distributors only in some (such as Belgium) Form is relevant also for vicarious liability: employer is liable for sales representatives principal liable for agents (including agents exceeding their mandate, if apparent agency) sometimes even in case of franchising (although franchisee not an agent) Beware of labour law: in many European countries the principal of an employer may be jointly liable for payment of the employees of that employer Comp. dispute in the US whether franchisor is to be qualified as joint employer of the employees of the franchisee (following 2015 NLRB rulings in Mc. Donald’s (and in Browning-Ferris, but not a franchising case)) Or whether the franchisor can be the employer of the franchisee (as in Cass. Fr. 4 Dec 2001)

DISTRIBUTORSHIP n n - (Also dealership) General characteristics: a concession to (re)sell with an obligation for the distributor to buy and for the supplier to supply/sell to the distributor; often further obligations related to resale, marketing etc. To be distinguished from sales contracts taking place within this framework Conflict of law rule: In the Rome-I-Regulation Art. 4 (1) f: choice of law, subs. country of the distributor Often mandatory rules in the country of the distributor , e. g. Belgian Statute of 1961 (now in Econ. Law Code) (for concessions on Belgian territory). They will be applied by courts of other countries only insofar as they render performance in the country of performance illegal (Art. 9, 3 Rome-I) Substantive law: No ‘global’ uniform law (DCFR contains a model in Book IV E) (uniform rules in OHADA) national law: usually general contract law + some specific rules

DISTRIBUTORSHIP n - Drafting a distributorship agreement (for competition law restrictions , s. further): Parties. Quid in case of change of parties ? Of change of control ? Possibly the general purpose (common intent) Which products. Including new products ? Adapted products ? Territory. Exclusivity ? May supplier sell directly (‘dual distribution’) in the territory and/or online ? May the distributor sell competing products ? Non-competition after termination of the distributorship ? (see below restrictions under competition law) Obligations of confidentiality Inform and assist the supplier in case of violation of suppliers IP rights Obligations concerning publicity and promotion Terms concerning the modalities for sale/supply to the distributor: price, period for delivery, payment modalities, warranties, possible technical assistance, …

DISTRIBUTORSHIP n Drafting a distributorship agreement (cont. ): - Terms concerning the modalities of (re)sale; fixation of resale price usually contrary to competition law Minimum sales quota ? Obligations concerning stocks, after sales service, qualified staff, etc. Who takes cares of required permits? Duration of the distributorship: definite period / indefinite period with a certain period of notice to terminate & grounds for immediate termination Effects of termination (indemnities, stock, etc. ) Choice of law, choice of forum - Overriding mandatory provisions on the effects of termination, e. g. Belgian statute of 1961, next slide n Other continental systems: abusive termination. Eg Italian C. Cass. In Renault Italia spa n

DISTRIBUTORSHIP n n n a) b) c) n Overriding mandatory provisions on the effects of termination in the Belgian Distributorship Statute of 1961 (now integrated in the Economic Law Code 2014) Scope of application: 3 conditions Exclusive, quasi-exclusive, serious investments Belgian territory Indefinite period or after 3 x definite period Effects of termination except for fundamental breach by distributor: Termination giving notice with a reasonable period (or compensation corresponding to that period); length of period not determined by statute Equitable additional compensation for: goodwill (remaining to supplier), investments profiting to supplier, and severance (costs incurred for employees dismissed). Jurisdiction of Belgian courts (but: Brussels-I-Reg. has priority if defendant resides in the EU or the designated court is in the EU) (for arbitration, see Chapter on arbitration)

Termination of distributorships contracts under Belgian law notice period granted by courts . 18 16 14 12 10 8 6 4 2 69 912 12 -1 5 15 -1 8 18 -2 1 21 -2 4 24 -2 7 27 -3 0 30 -3 3 33 -3 6 36 -3 9 39 -4 2 36 0 13 Number of distributorships 20 Notice period granted by Courts

FRANCHISING n General characteristics/types - special type of distributorship, but not necessarily goods, also possible for services, combined with a licensing contract - Right of a franchisee to sell goods or services under the distinctive sign of the franchisor; make use of the uniform sales presentation; exploit the IP rights and know-how of the franchisor; and/or commercial & technical assistance by franchisor (eg collective publicity and promotion) Sometimes a mere license to manufacture using the IP rights of the franchisor: such contracts are contracts for transfer of technology (see next chapter) - - Thus different degrees: business format franchise, product franchise, manufacturing franchise But always at least a (license of) bundle of IP rights and the use of know how of the franchisor by the franchisee

FRANCHISING n General characteristics/ types - Whether or not territorially exclusive (contract will contain provision on Whether or not territorially exclusive (contract possible competition or prohibition of competition) (better clarify whether franchisor may itself sell online); whether a single establishment or the right to have establishments in a certain are (area developer agreement) - International franchising can be direct or indirect (with a master franchise and subfranchising) - In exchange, franchisor stipulates « front money » , royalty and/or consultancy fee; plus usually a duty of the franchisee to make investments

FRANCHISING n Conflict of law rule: Rome-I Art. 4(1)e: choice of law, subs. country of the franchisee; – sometimes overriding mandatory provisions n Substantive law: – International models: § Uncitral Model Franchise Disclosure Law 2002; § ICC model international franchising contract; DCFR IV E. – In the USA, federal Franchise rules are made by the FTC – In the EU: mainly member state law, but see - infra competition law - harmonised rules on IP rights

FRANCHISING n Some typical rules in substantive law: - Many statutes impose on the franchisor a precontractual duty to disclose, often in the form of a PID or DPI (precontractual information document, FDD = Franchise Disclosure Document). - Eg Belgium (in the Economic law code), France, Sweden, Italy, USA (federal franchise rule by the FTC since 1978, but only administrative sanctions), Art. 3 ff. Uncitral Model Franchise Disclosure Law 2002, … - New French law 2015 (Loi Macron) provides that termination implies termination of related contracts (other than the lease of the premises) - See also infra competition law

IP RIGHTS n Intellectual property rights are ‘territorial monopolies’ (national or multinational). Protection is determined by the law of the territory for which protection is sought (lex loci protectionis, art. 8 I Rome-IIReg) (for jurisdiction, see Ch. 11) Especially relevant for distribution are: n Trademarks n Designs (in the US either trade dress protection or design patent) n Geographical indications & appellations of origin n See also in next ch. : patents, know how, copyright. n Trade name n Domain name - ICANN & WIPO have developed a Uniform Domain Name Dispute Resolution Policy (UDRP) (and in 2014 an Uniform Rapid Suspension (URS) system)

Trademarks - TRIPS n - - The TRIPS Agreement 1994 (Trade Related Aspects of Intellectual Property Rights ) (see next chapter) contains a minimum standard of protection to be granted by all member states (WTO) for a number of IP rights, incl. Trademarks: Minimum protection must be available as determined by the Paris Convention (1883 as amended 1967): Protection on registration, with a min. of 7 years, renewable an indefinite number of times Registration can be challenged in a procedure If protected: right to prevent any use that would result in a likelihood or confusion (presumption of likelihood or confusion in case of an identical sign) Combating counterfeiting, see next chapter (7).

Trademarks - (inter)national n Trademarks and Designs: - « national monopolies » (except Benelux: unitary for 3 countries); - alternative: Union Trade Mark (EUTM) (until March 2016 Community Trade Mark, now codified in Reg. 2017/1001) and Community Design: unitary and largely autonomous rights. Administered by the EUIPO in Valencia (formerly named OHIM). But many aspects left to national law - - Proprietary aspects (transfer of property, etc. ) Remedies other than injunction and seizure: law applicable under Rome-II : place where the main act at the origin of the violation is committed (ECJ Sep 2017 in C-24/16, Nintendo) In between: single application leading to a bundle of national rights: - For trademarks: Madrid Protocol. Possible for the ‘EC’ (EU minus Malta) or for the OAPI (African Intellectual Property Organisation) - Idem for design rights: Hague Agreement concerning the international registration of industrial designs, version Geneva 1999.

Trademarks - (inter)national n Some specific cross-border aspects n For the purpose of registering trademarks, a classification of goods and services – called NCL (Nice Classification) - is established by the Nice Agreement (1957, amended 1979). The ECJ decided in 2012 that registration of goods or services must be sufficiently precise (not too general a class) (IP translator case C 307/10), codified in new Directive n Risk of « trademark squatters » (registering another’s mark in a country where the trademark is not registered; or similar but hidden (eg in Chinese characters with the same sound)

Trademarks - harmonisation n Further international harmonisation by the Singapore Trademarks Treaty 2006. n In the EU: National trademark law to a large extent harmonised by EU Directive 2015/2436 (now also harmonising certification trademarks, i. e. collective trademarks by independent certification organisation) Unregistered trademarks not protected, unregistered designs enjoy some protection « Exhaustion principle » *: trademark is limited by EU case law to its specific object > right is in principle exhausted when goods put on the market in the EU with consent of trademark holder, unless an important or unreasonable modification has taken place (art. 15 Reg. 2017/1001, see infra). - - - * a principle first discussed by Josef Kohler in 1880. n In the US: State law Supplemented for interstate commerce cases by the federal Trademark Act (Lanham Act) -

Geographical indications & AO n n The TRIPS Agreement 1994 also contains a minimum standard of protection to be granted for Geographical indications: the Minimum protection as determined by the Paris Convention (1883 as amended 1967) incl. procedures to prevent the use of misleading geographical indications There also is a WIPO Convention of 1958: Lisbon Agreement for the protection of Appellations of Origin and their international registration (28 ratifications) (revised Treaty Geneva 2015): - member states may notify indications protected in their territory to WIPO; - WIPO will register them and notify them to the other member countries of the system and - those countries can issue refusals of protection within a certain time period

FROM CONTRACT LAW TO COMPETITION LAW n Contracts will often restrict possibilities of competition for one or both parties. This may conflict with competition law. n As soon as the interstate commerce in the EU is affected, EU competition law applies (if not, agreement may still be forbidden under national competition law). Idem for federal US law as soon as interstate commerce in the US is affected. n - - Basic rules: in EU law: Art. 101 ff. TFEU (formerly 81 EC Treaty). Main instruments: prohibition of cartels (infra); prohibition of abuse of dominant position; concentration control (merger control, Reg. 139/2004); prohibition of state aid (107 ff TFEU) similar in US law: Sherman Act 1890 as amended (now in 15 USC)

Background of EU competition law n competition is not a goal but an instrument – – – not “absolute” competition but “balanced”, “workable” competition free competition is reconciled with other interests e. g. environment, regional development, R&D, … – important social corrections, protection of services of general interest ↔ social exclusion the EU competition law model

BASICS OF EU COMPETITION LAW n n n Art. 101 TFEU 1. General prohibition: The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices* which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market 2. Effects: next slide 3. Exceptions to prohibition: next slide * incl. where the agreement or concertation is through and with a third party that is not a competitor, see e. g. ECJ C-194/14 Treuhand, C-74/14, Eturas.

DISTRIBUTION & EU COMPETITION LAW in particular those which: n n n (a) directly or indirectly fix purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development, or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

EU COMPETITION LAW Evaluation requires determination of the relevant market: - Which product that is interchangeable/substitutable (product or service market) - Geographical market - Temporal factor - (see in general Commission Notice C-72 of 1997 on the definition of relevant market) Dominant position on that market - Market share is a very important (but not only) element - Barriers to entry (of new players) Abuse - Non limitative list in 101 (2) TFEU - Refusal to deal with competitors in case of essential facilities (indispensable to compete on the downstream market) (conditions not met in ECJ 1998 Bronner (home distribution of newspapers)

DISTRIBUTION & EU COMPETITION LAW n Effects of prohibition n Art. 101 TFEU (2): Any agreement or decision prohibited pursuant to this article = automatically void. n Nullity does not exclude a right to compensation from one party against another: ECJ C-453/99 Courage/Crehan n Possible liability against third parties: ECJ C-295/04, Manfredi / Lloyd Adriatico Assicurazioni + Directive 2014/104

DISTRIBUTION & EU COMPETITION LAW 101 (3): The provisions of paragraph 1 may, however, be declared inapplicable: n in the case of any agreement or category of agreements between undertakings, any decision or category of decisions by associations of undertakings, any concerted practice or category of concerted practices, n which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, n and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. n n Comp. in the US the “rule of reason” applying to agreements or practices unless they are “per se” (inherently and obviously) anticompetitive

EU & NATIONAL COMPETITION LAW n n n - - Relationship EU competition law / national competition law: reform in force May 1, 2004 (Regulation 1/2003). As to substantive law (see art. 3 Reg. 1/2003): national competition law adapted to EC competition law; national competition law only relevant for practices with merely insignificant influence on trade As to competent authorities: in principle parallel (art. 4 & 5 Reg. 1/2003) National authorities have full competence to act (including application of the exemptions of art. 101 (3) TFEU) (ex-81 (3) EC) EU Commission may decide to tackle the case itself (with priority over national authorities) “European Competition Network” (ECN) for cooperation

EU COMPETITION LAW n - - Reg. 1/2004 has abolished the notice to the EU Commission (see Art. 1) The EU Commission does no longer give a negative clearance (it can ex officio make a declaration of inapplicability of Art. 101 TFEU (ex-81 EC), see art. 10 Reg. 1/2003) National authorities cannot grant a binding clearance. Agreements and practices presumed to be not contrary to 101 (1) or in accordance with para (3): 1° “De minimis”: Commission Notice 25 June 2014 (next slide) 2° Block exemptions + additional guidelines (infra) n n Interpretation of “effect on trade”: Commission published Guidelines in 2004

DE MINIMIS n “De minimis” Commission Notice 2014 Prohibition of Art. 101 does not apply in case of minimal effect (new version: https: //eurlex. europa. eu/legal-content/EN/ALL/? uri=OJ: C: 2014: 291: TOC) only quantitative thresholds based on market share n > Agreements etc. are presumed not to be contrary to Art. 101 when: 1° in case of agreements between non-competitors: if the market share held by each of the parties to the agreement does not exceed 15 % on any of the relevant markets affected by the agreement. If it is mixed horizonatl/vertical or unclear, then max. is 10 % 2° in case of agreements between (actual or potential) competitors: if the aggregate market share held by the parties to the agreement does not exceed 10 % on any of the relevant markets. 3° in case of network effects*, presumption only for market shares under 5 % each (e. g. distribution of beer) or * A higher number of users makes a platform more attractive for potential new users and indirectly for new developers n n Notice is not binding for Courts, only for the Commission (ECJ C-226/11, Expedia)

DE MINIMIS n “De minimis” Commission Notice 2014 n The new Notice 2014 does no longer cover agreements which have as their “object” the prevention, restriction or distortion of competition within the internal market. Then no study of effects necessary. There is a “+ Guidance on interpretation of restriction of competition “by object”” n Not covered are also ‘hardcore restrictions’ = particularly restrictive agreements (e. g. price fixing, territorial division). Defined in Art. 11 (and corresponding to art. 4 of the Block exemption, see further).

ancillary restraints n Especially clauses necessary for the functioning of an agreement that is as a whole not anti-competitive n Ø E. g. In a contract for the sale of an undertaking Commission Notice on restrictions directly related and necessary to concentrations 2005 (https: //eur-lex. europa. eu/legalcontent/EN/ALL/? uri=CELEX%3 A 52005 XC 0305%2802%29) “any restriction which is directly related and necessary to the implementation of a main operation“ “directly related” = subordinate to the implementation of the operation + have an evident link with it (usually same parties) “necessary” = objectively necessary + proportionate n n n E. g. in franchising: at least some clauses accepted by ECJ in C-161/84 Pronuptia n See other examples in the VBER n

EVOLUTION IN 101(3) TFEU n Exemptions by application of Art. 101 (3) TFEU: - History: ECJ in C-26/76 Metro/Saba accepts selective distribution agreements for high end consumer goods (here electronic equipment) C-161/84 Pronuptia accepts franchising (here wedding dresses) with some restrictive practices under conditions (some have seen this decision as applying a “rule of reason” US style) - - - Collective or “Block” Exemptions by EU regulations or national measures: presumption that Conditions of art. 101 (3) TFEU are fulfilled ratio : efficiency, legal certainty for a limited period only (usually 10 years), renewal possible Individual exemptions are abolished since May 1, 2004 (if no block exemption applies, enterprise thus has to evaluate itself whether it thinks the conditions of Art. 101 (3) TFEU are fulfilled: DIY)

EU COMPETITION LAW - - > for “vertical agreements” since 2000 a single general Regulation (Reg. 2790/1999) replaced in 2010 by Reg. 330/2010: the “VBER” (applicable since 1 June 2010 on new contracts and 31 May 2011 on existing contracts; applicable until May 31, 2022); > specific Regulations for some sectors, esp. Reg. 461/2010 for car distribution, ended 1 June 2013 (general regulation now applies) > (for “horizontal” agreements, s. next chapter, a stricter regulation) Next to the Regulation, the Commission has published “Guidelines on Vertical restraints” (Guidelines 2010 on Regulation 330/2010)

VBER 330/2010 n n n since 2000: more economic approach to vertical restraints, effectsbased instead of form-based main changes since 2000 – umbrella approach – black list instead of white list – market share based instead of form-based – increased decentralisation no block exemption for hard-core restrictions new in 2010 – 30% threshold on both sides (recognition of buyer power!) – e-commerce above threshold is not presumed to be illegal - guidelines

VBER (330/2010) Conditions for the block exemption for vertical agreements: - Applies only to vertical agreements in the definition of Art. 1, i. e. vertical agreements concerning the sale of products and services; agreements also dealing with other obligations not related to such sales are not exempted on the basis of this Regulation. - > not to agreements between distributors or franchisees among them (e. g. where the existing franchisees determine who can obtain a franchise)

VBER (330/2010) Conditions for the block exemption for vertical agreements: - - 4 Conditions for the exemption: 1° Market share threshold in Art. 3: market share held by either party (supplier AND buyer) < 30 % of the relevant market on which it sells/purchases the goods or services (relevant market defined in art. 7) 2° Turnover threshold of 50 Mio. in case of associations (art. 2 (2)) 3° Not on the black list of hardcore prohibitions of art. 4 (next slide) 4° No clauses from the black list of art. 5 (certain forms of noncompetition clauses): (1 a + 2) (1 b + 3) (1 c) - Individual withdrawal of exemption possible by EC Commission (art. 6)

VBER Conditions for the block exemption for vertical agreements (cont. ): black list of hardcore prohibitions of art. 4: i. e. restrictions of (a) the buyer's ability to determine its sale price (except maximum price )* (no RPM allowed = Resale price maintenance) - (b) the territory the buyer may sell, except in 4 cases where restriction is permitted (i-iv) – distinction between “active sales” (may be restricted under i) / “passive sales” (may not be restricted unless ii, iv)** (thus no absolute territorial protection allowed) • This favours intra brand competition. Restrictions not always forbidden in the US: SCot. US 28 VI 2007 in Leegin Creative Leather Products / PSKS: unless justified under the ‘rule of reason’ (lack of market power, incentivise retailers to provide service, etc. ). Some US states have stricter rules. In the EU, the Guidelines give examples where price restrictions are allowed under 101 (3). • ** EC Guidelines deal more in detail with forbidden restrictions of passive sales, i. a. by geoblocking or rerouting (except in exceptional cases) + Art. 6, 2 Geoblocking regulation (2018/302): “Provisions of agreements + Art. 6, 2 Geoblocking regulation (2018/302): “ imposing obligations on traders, in respect of passive sales within the meaning of Regulation (EU) No 330/2010, to act in violation of the prohibitions laid down in Articles 3, 4 and 5 of this Regulation shall be automatically void. ” -

VBER Conditions for the block exemption for vertical agreements (cont. ): black list of hardcore prohibitions of art. 4: i. e. restrictions of (c) sales to end users at the retail level of trade** , ° (d) cross-supplies (e) the sale of components as spare parts to end-users ** Eg forbidding internet sales: C-439/09 Pierre Fabre Dermo-cosmétique. Before that judgment, the EU Commission accepted (Guidelines no. 54) the no-logo-clause (the buyer may not use an online platform bearing the logo of a third party such as the platform organiser), but this clause is probably no longer possible. However, in C-230/16, Coty, the ECJ accepted that this does not apply for luxury products: Selective distribution (SDS) is allowed where the characteristics of the products: product in question necessitate such a network in order to preserve its quality and ensure its proper use. > in Coty prohibition on the use of third party platforms (in casu Amazon) was permitted; > But CJ accepts also a mere “aura of luxury” as quality …. . (ECJ in Copad, C 59/08)

competition law & trademarks n - Cfr. Supra: 1° the « exhaustion principle » : trademark is limited by EU case law to its specific object (since Centrafarm, C-16/74) > right is in principle exhausted when put on the market in the EU (more correctly EEA) with consent of trademark holder (eg ECJ C-119/75 in Terrapin; ECJ C-16/03 Peak Holding), unless an important or unreasonable modification has taken place (now codified in art. 15 Reg. 2017/1001). - 2° But vertical agreements are permissible under certain conditions. > The exhaustion principle does not apply in permissible selective distribution systems insofar as control is necessary to guarantee the origin and quality of the goods. Case law has accepted this basically only in 2 cases - Pharmaceuticals (but merely an additional label withour repackaging falls under the exhaustion: C-642/16, Junek in case Debrisoft); - Top end luxury goods (ECJ in C-59/08, Copad/Christian Dior). - In other cases, it is sufficient that they were put on the market with the consent of the holder and the holder can not invoke against a third party that the first buyer or licensee has not respected the conditions for resale stipulated by the holder.

COMMERCIAL AGENCY General characteristics: independent (no employee) - Task: negotiate and possibly conclude contracts in the name of a principal (for commission agents: in their own name on behalf of the principal) n n - - Conflict of law rule: distinguish the different relationships : Internal relationship agent-principal (contract if agency or mandate): Rome. I Reg. : choice of law subs. residence of the agent Whether the act of the agent is attributed to the principal: Hague Convention on agency 1978 (few ratifications); Belgian IPL Code: place where the agent acts Contract concluded by the agent: Rome-I Reg. applied to relationship between principal and third party Whether agent has obligations towards third party: normally country of residence of the agent

COMMERCIAL AGENCY n Substantive law: - EU Directive 653/1986 harmonisation commercial agency (nature, s. further); does not deal with precontractual duties - Non-harmonised questions left to national law. In Belgium the rules in the new Economic Law Code on precontractual duties to inform also apply to commercial agency contracts (requiring a PID - precontractual information document) - Unidroit Convention 1983 - not in force (5 ratifications out of required 10); model law in the DCFR -

COMMERCIAL AGENCY n Is art. 101 TFEU applicable ? - In case of genuine agency (agent does not bear the risk), the restrictions on the authority of the agent do not fall under Art. 101 TFEU Restrictions as to the activity of the agent in general fall under art. 101. -

COMMERCIAL AGENCY n - - Directive 653/1986: art. 1 scope of application: intermediary who has continuing authority to negotiate the sale or the purchase of goods on behalf of a principal (no services) (with some exceptions in art. 1 and 2) Art. 3 obligations of the agent: act in good faith, prospect, inform, comply Art. 4 obligations of the principal: act in good faith, document the goods, inform expectations, inform about acceptance, pay commission Art. 5 mandatory character Art. 7 for which transactions agent entitled to commission (direct, former customer, area), art. 8 & 9 on transactions after termination (> Some variation in national law as to default interpretation of an area (exclusive or not; effects on right to commission) Art. 10 -11 further conditions before commission becomes due (performance by one of the parties; non-performance caused by principal) Art. 12 quarterly statement of commission; right to information Art. 13 right to a written contract

COMMERCIAL AGENCY n - - - Directive 653/1986: Art. 14 Termination of agency for fixed period Art. 15 Termination of agency for an indefinite period: by notice with a specific period of time (1 year: 1 month, to 6 years or more: 6 months) Art. 16 Termination for non-performance or other serious grounds: left to national law Art. 17 -18 Additional indemnity or compensation: Indemnity for new customers* and for losses, max. 1 year income, further damages may be proven / or compensation for damage (but not double compensation for the same damage: C-338/14, Quenon K sprl) Not applicable in case of termination for fundamental non-performance or where the agent terminates without certain justifications Art. 20 restriction on non-competition clauses (here again variations in national law as to possible duration) * ’new’ customers may involve persons already customer of the principal but not for the goods entrusted to the agent (C-315/14 Marchon Germany)

COMMERCIAL AGENCY n n n - Mandatory nature of these rules In France, the Act is mandatory but not ‘internationally mandatory’ (overriding): Cass. 28 Nov. 2000. But: the EU Directive is overriding mandatory law in relation to non-EU law (ECJ 9 Nov 2000, C-381/98, Ingmar) German law: national law is overriding mandatory Belgian law: idem (Act of April 13, 1995 now integrated in the Economic Law Code - more protective for the agent than the EU Directive (‘goldplating’); overriding if related to Belgian territory (art. X. 25 WER/CDE) ECJ 13 Oct 2013 in C-184/12, Unamar, on the possibility to apply Belgian law (including restriction on arbitration clauses) where the applicable law is that of another Member State having also implemented the Agency Directive: «only if the court before which the case has been brought finds, on the basis of a detailed assessment, that, in the course of that transposition, the legislature of the State of the forum held it to be crucial, in the legal order concerned, to grant the commercial agent protection going beyond that provided for by that directive, taking account in that regard of the nature and of the objective of such mandatory provisions» - (see further in Ch. 12 arbitration)