DISTRIBUTIONDISTRIBUTION

Why distribution agreements ? Distribution v. direct sales Why distribution agreements ? Distribution v. direct sales (cross-border or with representatiev office/establishment)(cross-border or with representatiev office/establishment)

- Practical reasonsPractical reasons- Commercial reasons (eg efficient marketing)Commercial reasons (eg efficient marketing)- Financial reasons (eg less capital)Financial reasons (eg less capital)- Legal reasonsLegal reasons

- NB. for ‘direct investment’, see Ch. 8NB. for ‘direct investment’, see Ch. 8 Vice-versa: why do business buyers buy domestically rather Vice-versa: why do business buyers buy domestically rather

than import ?than import ?

FORMS OF DISTRIBUTIONFORMS OF DISTRIBUTION Forms of distribution (general):Forms of distribution (general):- Sales representative = employee with an employment contract Sales representative = employee with an employment contract

(receives wage plus commission)(receives wage plus commission)- Distributorship (« concessionaire »): distributor itself buys and resells Distributorship (« concessionaire »): distributor itself buys and resells

; chooses in principle its price for selling; difference of price is his ; chooses in principle its price for selling; difference of price is his income income

- Commercial agency: agent sells or buys in the name of and on behalf Commercial agency: agent sells or buys in the name of and on behalf of the principal (see of the principal (see infra infra forms of agency); principal determines the forms of agency); principal determines the price; income of the agent = commission on sales; manufacturer has price; income of the agent = commission on sales; manufacturer has more control over agents than over distributors, and is also more more control over agents than over distributors, and is also more liable.liable.

- Alternative: «commission agent » (acts in his own name for the Alternative: «commission agent » (acts in his own name for the principal)principal)

- Occasional intermediaryOccasional intermediary

National law conyains protective rules for distributors & agents. But National law conyains protective rules for distributors & agents. But sometimes the weaker party is the (small) supplier dealing with big sometimes the weaker party is the (small) supplier dealing with big distributors (esp. When the distirbutor has stipulated exclusivity).distributors (esp. When the distirbutor has stipulated exclusivity).

DISTRIBUTORSHIP DISTRIBUTORSHIP General characteristics: a concession to (re)sell with an General characteristics: a concession to (re)sell with an

obligation for the distributor to buy and for the supplier to obligation for the distributor to buy and for the supplier to supply/sell to the distributor; often further obligations related to supply/sell to the distributor; often further obligations related to resale, marketing etc.resale, marketing etc.

-- To be distinguished from sales contracts taking place within this To be distinguished from sales contracts taking place within this frameworkframework

Conflict of law rule:Conflict of law rule:- In the Rome-I-Regulation Art. 4 (1) f: choice of law, subs. country In the Rome-I-Regulation Art. 4 (1) f: choice of law, subs. country

of the distributorof the distributor- Often mandatory rules in the country of the distributor , e.g. Often mandatory rules in the country of the distributor , e.g.

Belgian Statute of 1961 (for concessions on Belgian territory). Belgian Statute of 1961 (for concessions on Belgian territory). They will be applied by courts of other countries only insofar as They will be applied by courts of other countries only insofar as they render performance in the country of performance illegal they render performance in the country of performance illegal (Art. 9, 3 Rome-I)(Art. 9, 3 Rome-I)

Substantive law:Substantive law:- No ‘global’ uniform law (DCFR contains a model in Book IV E) No ‘global’ uniform law (DCFR contains a model in Book IV E)

(uniform rules in OHADA)(uniform rules in OHADA)- national law: usually general contract law + some specific rules national law: usually general contract law + some specific rules

DISTRIBUTORSHIP DISTRIBUTORSHIP Drafting a distributorship agreement (for competition law Drafting a distributorship agreement (for competition law

restrictions , s. further):restrictions , s. further):- Parties. Quid in case of change of parties ? Of change of Parties. Quid in case of change of parties ? Of change of

control ?control ?- Possibly the general purpose (common intent)Possibly the general purpose (common intent)- Which products. Including new products ? Adapted products ?Which products. Including new products ? Adapted products ?- Territory. Exclusivity ? May supplier sell directly in the territory Territory. Exclusivity ? May supplier sell directly in the territory

? ? - May the distributor sell competing products ? May the distributor sell competing products ? - Non-competition after termination of the distributorship ? Non-competition after termination of the distributorship ? - Obligations of confidentiality Obligations of confidentiality - Inform and assist the supplier in case of violation of suppliers Inform and assist the supplier in case of violation of suppliers

IP rightsIP rights- Obligations concerning publicity and promotion Obligations concerning publicity and promotion - Terms concerning the modalities for sale/supply to the Terms concerning the modalities for sale/supply to the

distributor: price, period for delivery, payment modalities, distributor: price, period for delivery, payment modalities, warranties, possible technical assistance, …warranties, possible technical assistance, …

DISTRIBUTORSHIP DISTRIBUTORSHIP Drafting a distributorship agreement (cont.):Drafting a distributorship agreement (cont.):- Terms concerning the modalities of (re)sale; fixation of resale Terms concerning the modalities of (re)sale; fixation of resale

price usually contrary to competition law Minimum sales quota price usually contrary to competition law Minimum sales quota ? ?

- Obligations concerning stocks, after sales service, qualified Obligations concerning stocks, after sales service, qualified staff, etc.staff, etc.

- Duration of the distributorship: definite period / indefinite Duration of the distributorship: definite period / indefinite period with a certain period of notice to terminate & grounds period with a certain period of notice to terminate & grounds for immediate termination for immediate termination

- Effects of termination (indemnities, stock, etc.) Effects of termination (indemnities, stock, etc.) - Choice of law, choice of forum Choice of law, choice of forum

Overriding mandatory provisions on the effects of termination, Overriding mandatory provisions on the effects of termination, e.g. Belgian statute of 1961, next slidee.g. Belgian statute of 1961, next slide

Other continental systems: abusive termination. Eg Italian Other continental systems: abusive termination. Eg Italian C.Cass. In Renault Italia spaC.Cass. In Renault Italia spa

DISTRIBUTORSHIP DISTRIBUTORSHIP Overriding mandatory provisions on the effects of termination in the Overriding mandatory provisions on the effects of termination in the

Belgian Distributorship Statute of 1961 (now integrated in the Belgian Distributorship Statute of 1961 (now integrated in the Economic Law Code 2014)Economic Law Code 2014)

Scope of application: 3 conditionsScope of application: 3 conditions- Exclusive, quasi-exclusive, serious investments Exclusive, quasi-exclusive, serious investments - Belgian territoryBelgian territory- Indefinite period or after 3 x definite periodIndefinite period or after 3 x definite period Effects of termination except for fundamental breach by distributor:Effects of termination except for fundamental breach by distributor:- Termination giving notice with a reasonable period (or compensation Termination giving notice with a reasonable period (or compensation

corresponding to that period); length of period not determined by corresponding to that period); length of period not determined by statutestatute

- Equitable additional compensation for:Equitable additional compensation for:a)a) goodwill (remaining to supplier), goodwill (remaining to supplier), b)b) investments profiting to supplier, and investments profiting to supplier, and c)c) severance (costs incurred for employees dismissed).severance (costs incurred for employees dismissed).

Jurisdiction of Belgian courts (but: Brussels-I-Reg. has priority if 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 defendant resides in the EU or the designated court is in the EU) (for Arbitration, see Chapter on arbitration)Arbitration, see Chapter on arbitration)

Termination of distributorships contracts under Termination of distributorships contracts under Belgian lawBelgian law

notice period granted by courtsnotice period granted by courts

..

FRANCHISINGFRANCHISING General characteristics: special type of distributorship, but not General characteristics: special type of distributorship, but not

necessarily goods, also possible for services, combined with a necessarily goods, also possible for services, combined with a licensing contractlicensing contract

- Right of a franchisee to sell goods or services under the Right of a franchisee to sell goods or services under the distinctive sign of the franchisor; make use of the uniform sales distinctive sign of the franchisor; make use of the uniform sales presentation; exploit the IP rights and know-how of the presentation; exploit the IP rights and know-how of the franchisor; and/or commercial & technical assistance by franchisor; and/or commercial & technical assistance by franchisor (eg collective publicity and promotion) franchisor (eg collective publicity and promotion)

- Sometimes a mere license to manufacture using the IP rights of Sometimes a mere license to manufacture using the IP rights of the franchisor: such contracts are contracts for transfer of the franchisor: such contracts are contracts for transfer of technology (see next chapter) technology (see next chapter)

- Thus always at least a (license of) bundle of IP rights and the Thus always at least a (license of) bundle of IP rights and the use of know how of the franchisor by the franchiseeuse of know how of the franchisor by the franchisee

- Whether or not territorially Whether or not territorially exclusive (contract exclusive (contract will contain provision on possible competition or prohibition of competition)

- In exchange, franchisor stipulates « front money », royalty In exchange, franchisor stipulates « front money », royalty and/or consultancy fee; plus usually a duty of the franchisee to and/or consultancy fee; plus usually a duty of the franchisee to make investments make investments

FRANCHISINGFRANCHISING

Conflict of law rule: Rome-I Art. 4(1)e: choice of law, subs. Conflict of law rule: Rome-I Art. 4(1)e: choice of law, subs. country of the franchisee; country of the franchisee;

sometimes overriding mandatory provisions sometimes overriding mandatory provisions

Substantive law:Substantive law:- In Belgium: Act of 19-XII-2005 on precontractual duties to In Belgium: Act of 19-XII-2005 on precontractual duties to

inform (in 2014 inserted in economic law code with broader inform (in 2014 inserted in economic law code with broader scope of application) requiring a PID or DPI (precontractual scope of application) requiring a PID or DPI (precontractual information document)information document)

- International: ICC model international franchising contract; International: ICC model international franchising contract; DCFR IV E.DCFR IV E.

IP RIGHTSIP RIGHTS Intellectual property rights are ‘territorial monopolies’ Intellectual property rights are ‘territorial monopolies’

(national or multinational)(national or multinational)

especially relevant for distribution are: especially relevant for distribution are: Trademarks Trademarks Designs (in the US either trade dress protection or design Designs (in the US either trade dress protection or design

patent)patent) Geographical indications & appellations of originGeographical indications & appellations of origin See also in next ch.: patents, know how, copyright.See also in next ch.: patents, know how, copyright. Trade nameTrade name Domain nameDomain name- ICANN & WIPO have developed a Uniform Domain Name ICANN & WIPO have developed a Uniform Domain Name

Dispute Resolution Policy (UDRP) (and in 2014 an Uniform Dispute Resolution Policy (UDRP) (and in 2014 an Uniform Rapid Suspension (URS) system)Rapid Suspension (URS) system)

TrademarksTrademarks Trademarks and Designs: Trademarks and Designs:

- « national monopolies » (except Benelux: unitary for 3 countries); « national monopolies » (except Benelux: unitary for 3 countries);

- alternative: Community Trade Mark and Community Design: alternative: Community Trade Mark and Community Design: unitary and largely autonomous rights (will be renamed into EU unitary and largely autonomous rights (will be renamed into EU trade mark …). Administered by the OHIM in Valencia (will be trade mark …). Administered by the OHIM in Valencia (will be renamed EUIPO)renamed EUIPO)

- In between: single application leading to a bundle of national In between: single application leading to a bundle of national trademarks: Madrid Protocol. Possible for the ‘EC’ (EU minus trademarks: Madrid Protocol. Possible for the ‘EC’ (EU minus Malta) or for the OAPI (African Intellectual Property Organisation)Malta) or for the OAPI (African Intellectual Property Organisation)

TrademarksTrademarks National trademark law to some extent harmonised by EU National trademark law to some extent harmonised by EU

Directives. Revision under way; unregistered trademarks not Directives. Revision under way; unregistered trademarks not protected, unregistered designs enjoy some protectionprotected, unregistered designs enjoy some protection

International harmonisation by the Singapore Trademarks Treaty International harmonisation by the Singapore Trademarks Treaty 2006.2006.

The TRIPS Agreement 1994 (Trade Related Aspects of Intellectual The TRIPS Agreement 1994 (Trade Related Aspects of Intellectual Property Rights ) (see next chapter) contains a minimum standard Property Rights ) (see next chapter) contains a minimum standard of protection to be granted by all member states (WTO) for a of protection to be granted by all member states (WTO) for a number of IP rights, incl. Trademarks: Minimum protection must number of IP rights, incl. Trademarks: Minimum protection must be available as determined by the Paris Convention (1883 as be available as determined by the Paris Convention (1883 as amended 1967): amended 1967):

- Protection on registration, with a min. of 7 years, renewable an Protection on registration, with a min. of 7 years, renewable an indefinite number of times indefinite number of times

- Registration can be challenged in a procedure Registration can be challenged in a procedure - If protected: right to prevent any use that would result in a If protected: right to prevent any use that would result in a

likelihood or confusion (presumption of likelihood or confusion in likelihood or confusion (presumption of likelihood or confusion in case of an identical sign)case of an identical sign)

- Combating counterfeiting, see next chapter.Combating counterfeiting, see next chapter.

Geographical indications & Geographical indications & AOAO

The TRIPS Agreement 1994 also contains a minimum standard of The TRIPS Agreement 1994 also contains a minimum standard of protection to be granted for Geographical indications: the protection to be granted for Geographical indications: the Minimum protection as determined by the Paris Convention (1883 Minimum protection as determined by the Paris Convention (1883 as amended 1967)as amended 1967)

- incl. procedures to prevent the use of misleading geographical incl. procedures to prevent the use of misleading geographical indications indications

There also is a WIPO Convention of 1958: Lisbon Agreement for There also is a WIPO Convention of 1958: Lisbon Agreement for the Protection of Appellations of Origin and their International the Protection of Appellations of Origin and their International registration (28 ratifications) (revised Treaty Geneva 2015):registration (28 ratifications) (revised Treaty Geneva 2015):

- member states may notify indications protected in their territory to - member states may notify indications protected in their territory to WIPO; WIPO will register them and notify them to the other WIPO; WIPO will register them and notify them to the other member countries of the system and those can issue refusals of member countries of the system and those can issue refusals of protection with a certain time period protection with a certain time period

DISTRIBUTION & DISTRIBUTION & COMPETITION LAW COMPETITION LAW

Contracts will often restrict possibilities of competition for Contracts will often restrict possibilities of competition for one or both parties. This may conflict with competition one or both parties. This may conflict with competition law. law.

As soon as the interstate commerce is affected, EU As soon as the interstate commerce is affected, EU competition law applies (if not, agreement may still be competition law applies (if not, agreement may still be forbidden under national competition law)forbidden under national competition law)

Basic rules: Art. 101 ff. TFEU (formerly 81 EC Treaty)Basic rules: Art. 101 ff. TFEU (formerly 81 EC Treaty)

DISTRIBUTION & EU DISTRIBUTION & EU COMPETITION LAW COMPETITION LAW

Art. 101 TFEUArt. 101 TFEU 1. General prohibition:1. General prohibition: The following shall be prohibited as incompatible with the The following shall be prohibited as incompatible with the

internal market: internal market:

all agreements between undertakings, decisions by all agreements between undertakings, decisions by associations of undertakings and concerted practices associations of undertakings and concerted practices

which may affect trade between Member States and which may affect trade between Member States and

which have as their object or effect the prevention, which have as their object or effect the prevention, restriction or distortion of competition within the internal restriction or distortion of competition within the internal marketmarket

2. Effects: next slide2. Effects: next slide 3. Exceptions to prohibition: next slide3. Exceptions to prohibition: next slide

DISTRIBUTION & EU DISTRIBUTION & EU COMPETITION LAW COMPETITION LAW

in particular those which:in particular those which: (a)(a)   directly or indirectly fix purchase or selling prices or   directly or indirectly fix purchase or selling prices or

any other trading conditions;any other trading conditions; (b)(b)  limit or control production, markets, technical  limit or control production, markets, technical

development, or investment;development, or investment; (c)(c)  share markets or sources of supply; share markets or sources of supply; (d)(d)  apply dissimilar conditions to equivalent transactions  apply dissimilar conditions to equivalent transactions

with other trading parties, thereby placing them at a with other trading parties, thereby placing them at a competitive disadvantage;competitive disadvantage;

(e)(e)  make the conclusion of contracts subject to  make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, which, by their nature or according to commercial usage, have no connection with the subject of such contracts.have no connection with the subject of such contracts.

DISTRIBUTION & EU DISTRIBUTION & EU COMPETITION LAW COMPETITION LAW

Effects of prohibitionEffects of prohibition

Art. 101 TFEU (2):  Any agreement or decision prohibited Art. 101 TFEU (2):  Any agreement or decision prohibited pursuant to this article = automatically void.pursuant to this article = automatically void.

Nullity does not exclude a right to compensation from one Nullity does not exclude a right to compensation from one party against another: ECJ C-453/99 party against another: ECJ C-453/99 Courage/CrehanCourage/Crehan

Possible liability against third parties: ECJ C-295/04, Possible liability against third parties: ECJ C-295/04, Manfredi / Lloyd Adriatico Manfredi / Lloyd Adriatico AssicurazioniAssicurazioni

DISTRIBUTION & EU DISTRIBUTION & EU COMPETITION LAW COMPETITION LAW

101 (3):  The provisions of paragraph 1 may, however, be 101 (3):  The provisions of paragraph 1 may, however, be declared inapplicable:declared inapplicable:

in the case of any agreement or category of agreements between in the case of any agreement or category of agreements between undertakings, any decision or category of decisions by undertakings, any decision or category of decisions by associations of undertakings, any concerted practice or category associations of undertakings, any concerted practice or category of concerted practices,of concerted practices,

which contributes to improving the production or distribution of which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit,allowing consumers a fair share of the resulting benefit,

and which does not:and which does not:

(a)(a)  impose on the undertakings concerned restrictions which  impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;are not indispensable to the attainment of these objectives;

(b)(b)  afford such undertakings the possibility of eliminating  afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in competition in respect of a substantial part of the products in question.question.

EU & NATIONAL EU & NATIONAL COMPETITION LAWCOMPETITION LAW

Relationship EU competition law / national competition law: Relationship EU competition law / national competition law: reform in force May 1, 2004 (Regulation 1/2003).reform in force May 1, 2004 (Regulation 1/2003).

As to substantive law (see art. 3 Reg. 1/2003):As to substantive law (see art. 3 Reg. 1/2003):- national competition law adapted to EC competition law; national competition law adapted to EC competition law; - national competition law only relevant for practices with national competition law only relevant for practices with

merely insignificant influence on trade merely insignificant influence on trade As to competent authorities: in principle parallel (art. 4 & 5 As to competent authorities: in principle parallel (art. 4 & 5

Reg. 1/2003)Reg. 1/2003)- National authorities have full competence to act (including National authorities have full competence to act (including

application of the exemptions of art. 101 (3) TFEU) (ex-81 application of the exemptions of art. 101 (3) TFEU) (ex-81 (3) EC)(3) EC)

- EU Commission may decide to tackle the case itself (with EU Commission may decide to tackle the case itself (with priority over national authorities) priority over national authorities)

- ““European Competition Network” (ECN) for cooperation European Competition Network” (ECN) for cooperation

EU COMPETITION LAWEU COMPETITION LAW

Reg. 1/2004 has abolished the notice to the EU Reg. 1/2004 has abolished the notice to the EU Commission (see Art. 1) Commission (see Art. 1)

- The EU Commission does no longer give a negative The EU Commission does no longer give a negative clearance (it can clearance (it can ex officio ex officio make a declaration of make a declaration of inapplicability of Art. 101 TFEU (ex-81 EC), see art. 10 inapplicability of Art. 101 TFEU (ex-81 EC), see art. 10 Reg. 1/2003)Reg. 1/2003)

- National authorities cannot grant a binding clearance.National authorities cannot grant a binding clearance.

Agreements and practices presumed to be not contrary Agreements and practices presumed to be not contrary to 101 (1) or in accordance with para (3):to 101 (1) or in accordance with para (3):

1° “De minimis”: Commission Notice 25 June 2014 (next slide)1° “De minimis”: Commission Notice 25 June 2014 (next slide)2° Block exemptions + additional guidelines (infra)2° Block exemptions + additional guidelines (infra)

Interpretation of “effect on trade”: Commission published Interpretation of “effect on trade”: Commission published Guidelines in 2004Guidelines in 2004

EU COMPETITION LAWEU COMPETITION LAW Prohibition of Art. 101 does not apply in case of minimal effect: “De Prohibition of Art. 101 does not apply in case of minimal effect: “De

minimis” Commission Notice 2014 (new version) + Guidance on minimis” Commission Notice 2014 (new version) + Guidance on interpretation of restriction of competition “by object”.:interpretation of restriction of competition “by object”.:

Agreements etc. are Agreements etc. are presumedpresumed not to be contrary to Art. 101 when: not to be contrary to Art. 101 when:1° in case of agreements between non-competitors: if the market share 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 held by each of the parties to the agreement does not exceed 15 % on any of the relevant markets affected by the agreement. This does not any of the relevant markets affected by the agreement. This does not apply to the “hardcore” restrictions defined in Art. 11 (and apply to the “hardcore” restrictions defined in Art. 11 (and corresponding to art. 4 of the Block exemption, see further). corresponding to art. 4 of the Block exemption, see further).

2° in case of agreements between competitors: if the aggregate market 2° in case of agreements between competitors: if the aggregate market share held by the parties to the agreement does not exceed 15 % on share held by the parties to the agreement does not exceed 15 % on any of the relevant markets;.any of the relevant markets;.

3° in case of network effects, presumption only for market shares under 5 3° in case of network effects, presumption only for market shares under 5 % (eg distribution of beer)% (eg distribution of beer)

The new Notice 2014 does no longer cover agreements which have as The new Notice 2014 does no longer cover agreements which have as their object the prevention, restriction or distortion of competition their object the prevention, restriction or distortion of competition within the internal market. within the internal market.

Notice is not binding for Courts, only for the Commission itself (ECJ nr. Notice is not binding for Courts, only for the Commission itself (ECJ nr. C-226/11, C-226/11, ExpediaExpedia))

EU COMPETITION LAWEU COMPETITION LAW Exemptions by application of Art. 101 (3) TFEU:Exemptions by application of Art. 101 (3) TFEU:-- History: ECJ in History: ECJ in PronuptiaPronuptia accepts franchising under conditions accepts franchising under conditions- Collective or “Block” Exemptions by EU regulations or national Collective or “Block” Exemptions by EU regulations or national

measures: presumption that Conditions of art. 101 (3) TFEU are measures: presumption that Conditions of art. 101 (3) TFEU are fulfilledfulfilled

- For “vertical agreements” since 2000 a single general Regulation For “vertical agreements” since 2000 a single general Regulation (Reg. 2790/1999) replaced in 2010 by Reg. 330/2010: the “VBER”(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 (applicable since 1 June 2010 on new contracts and 31 May 2011 on existing contracts; applicable until May 31, 2022); existing contracts; applicable until May 31, 2022);

- specific Regulations for some sectors, esp. Reg. 461/2010 for car specific Regulations for some sectors, esp. Reg. 461/2010 for car distribution, ended 1 June 2013 (general regulation now applies)distribution, ended 1 June 2013 (general regulation now applies)

- (for “horizontal” agreements, s. next chapter) (for “horizontal” agreements, s. next chapter)

- Next to the Regulation, the Commission has published “Guidelines Next to the Regulation, the Commission has published “Guidelines on Vertical restraints” (Guidelines 2010 on Regulation 330/2010)on Vertical restraints” (Guidelines 2010 on Regulation 330/2010)

- Individual exemptions are abolished since May 1, 2004 (if no block Individual exemptions are abolished since May 1, 2004 (if no block exemption applies, enterprise thus has to evaluate itself whether it exemption applies, enterprise thus has to evaluate itself whether it thinks the conditions of Art. 101 (3) TFEU are fulfilled)thinks the conditions of Art. 101 (3) TFEU are fulfilled)

VBERVBERConditions for the block exemption for vertical agreements:Conditions for the block exemption for vertical agreements:

- Applies only to vertical agreements in the definition of Art. 1, i.e. Applies only to vertical agreements in the definition of Art. 1, i.e. vertical agreements concerning the sale of products and services; vertical agreements concerning the sale of products and services; agreements also dealing with other obligations not related to such agreements also dealing with other obligations not related to such sales are not exempted on the basis of this Regulation.sales are not exempted on the basis of this Regulation.

- 4 Conditions for the exemption:4 Conditions for the exemption:- 1° Market share threshold in Art. 3: market share held by either 1° Market share threshold in Art. 3: market share held by either

party (supplier AND buyer) < 30 % of the relevant market on which party (supplier AND buyer) < 30 % of the relevant market on which it sells/purchases the goods or services (relevant market defined it sells/purchases the goods or services (relevant market defined in art. 7)in art. 7)

- 2° Turnover threshold of 50 Mio. in case of associations (art. 2 (2))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 3° Not on the black list of hardcore prohibitions of art. 4 (next

slide)slide)- 4° No clauses from the black list of art. 5 (certain forms of non-4° No clauses from the black list of art. 5 (certain forms of non-

competition clauses): (1 a + 2) (1b + 3) (1 c)competition clauses): (1 a + 2) (1b + 3) (1 c)

- Individual withdrawal of exemption possible by EC Commission (art. 6)- Individual withdrawal of exemption possible by EC Commission (art. 6)

VBERVBERConditions for the block exemption for vertical agreements (cont.):Conditions for the block exemption for vertical agreements (cont.):- black list of hardcore prohibitions of art. 4: i.e. restrictions ofblack list of hardcore prohibitions of art. 4: i.e. restrictions of- (a) the buyer's ability to determine its sale price (except (a) the buyer's ability to determine its sale price (except

maximum price)*, (b) the territory the buyer may sell, except in maximum price)*, (b) the territory the buyer may sell, except in 4 cases where restriction is permitted (i-iv) – distinction 4 cases where restriction is permitted (i-iv) – distinction between “active sales” (may be restricted under i) / “passive between “active sales” (may be restricted under i) / “passive sales” (may not be restricted unless ii, iii, iv)sales” (may not be restricted unless ii, iii, iv)

- (c) sales to end users at the retail level of trade** (c) sales to end users at the retail level of trade** - (d) cross-supplies (d) cross-supplies - (e) the sale of components as spare parts to end-users(e) the sale of components as spare parts to end-users

* This favours intra brand competition. Restrictions not always forbidden in the * This favours intra brand competition. Restrictions not always forbidden in the US: SCotUS 28 VI 2007 in US: SCotUS 28 VI 2007 in Leegin Creative Leather Products. Leegin Creative Leather Products. In the EU, In the EU, the the Guidelines Guidelines give examples where price restrictions are allowed under give examples where price restrictions are allowed under 101 (3).101 (3).

** Eg forbidding internet sales: C-439/09 Pierre Fabre Dermo-cosmétique** Eg forbidding internet sales: C-439/09 Pierre Fabre Dermo-cosmétique

COMMERCIAL AGENCYCOMMERCIAL AGENCY General characteristics: independent (no employee)General characteristics: independent (no employee)- Task: negotiate and possibly conclude contracts in the name of a Task: negotiate and possibly conclude contracts in the name of a

principal principal (for commission agents: in their own name on behalf of the principal)(for commission agents: in their own name on behalf of the principal) Conflict of law rule: distinguish the different relationships :Conflict of law rule: distinguish the different relationships :- Internal relationship agent-principal (contract if agency or Internal relationship agent-principal (contract if agency or

mandate): Rome-I Reg.: choice of law subs. residence of the agent mandate): Rome-I Reg.: choice of law subs. residence of the agent - Whether the act of the agent is attributed to the principal: Hague Whether the act of the agent is attributed to the principal: Hague

Convention on agency 1978 (few ratifications); Belgian IPL Code: Convention on agency 1978 (few ratifications); Belgian IPL Code: place where the agent actsplace where the agent acts

- Contract concluded by the agent: Rome-I Reg. applied to Contract concluded by the agent: Rome-I Reg. applied to relationship between principal and third partyrelationship between principal and third party

- Whether agent has obligations towards third party: normally Whether agent has obligations towards third party: normally country of residence of the agent country of residence of the agent

COMMERCIAL AGENCYCOMMERCIAL AGENCY Substantive law:Substantive law:

- EU Directive 653/1986 harmonisation commercial agency (nature, EU Directive 653/1986 harmonisation commercial agency (nature, s.further); does not deal with precontractual dutiess.further); does not deal with precontractual duties

- Non-harmonised questions left to national law. In Belgium the Non-harmonised questions left to national law. In Belgium the rules in the new Economic Law Code stemming from the Act of 19-rules in the new Economic Law Code stemming from the Act of 19-XII-2005 on precontractual duties to inform now also apply to XII-2005 on precontractual duties to inform now also apply to commercial agency contracts (requiring a PID - precontractual commercial agency contracts (requiring a PID - precontractual information document)information document)

- Unidroit Convention - not in force; model law in DCFRUnidroit Convention - not in force; model law in DCFR

COMMERCIAL AGENCYCOMMERCIAL AGENCY

Directive 653/1986:Directive 653/1986:- art. 1 scope of application: intermediary who has continuing art. 1 scope of application: intermediary who has continuing

authority to negotiate the sale or the purchase of goods on behalf of 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)a principal (no services) (with some exceptions in art. 1 and 2)

- Art. 3 obligations of the agent: act in good faith, prospect, inform, Art. 3 obligations of the agent: act in good faith, prospect, inform, complycomply

- Art. 4 obligations of the principal: act in good faith, document the Art. 4 obligations of the principal: act in good faith, document the goods, inform expectations, inform about acceptance, pay goods, inform expectations, inform about acceptance, pay commissioncommission

- Art. 5 mandatory characterArt. 5 mandatory character- Art. 7 for which transactions agent entitled to commission (direct, Art. 7 for which transactions agent entitled to commission (direct,

former customer, area), art. 8 & 9 on transactions after termination former customer, area), art. 8 & 9 on transactions after termination - Art. 10-11 further conditions before commission becomes due Art. 10-11 further conditions before commission becomes due

(performance by one of the parties; non-performance caused by (performance by one of the parties; non-performance caused by principal)principal)

- Art. 12 quarterly statement of commission; right to information Art. 12 quarterly statement of commission; right to information - Art. 13 right to a written contract Art. 13 right to a written contract

COMMERCIAL AGENCYCOMMERCIAL AGENCY Directive 653/1986:Directive 653/1986:- Art. 14 Termination of agency for fixed period Art. 14 Termination of agency for fixed period - Art. 15 Termination of agency for an indefinite period: by notice with a 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)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 Art. 16 Termination for non-performance or other serious grounds: left to

national law national law - Art. 17-18 Additional indemnity or compensation:Art. 17-18 Additional indemnity or compensation:- Indemnity for new customers and for losses, max. 1 year income, further Indemnity for new customers and for losses, max. 1 year income, further

damages may be proven / or compensation for damage damages may be proven / or compensation for damage - Not applicable in case of termination for fundamental non-performance Not applicable in case of termination for fundamental non-performance

or where the agent terminates without certain justificationsor where the agent terminates without certain justifications- Art. 20 restriction on non-competition clauses Art. 20 restriction on non-competition clauses Is art. 101 TFEU applicable ?Is art. 101 TFEU applicable ?- In case of genuine agency (agent does not bear the risk), the restrictions 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 TFEUon 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.Restrictions as to the activity of the agent in general fall under art. 101.

COMMERCIAL AGENCYCOMMERCIAL AGENCY Mandatory nature of these rulesMandatory nature of these rules In France, the Act is mandatory but not ‘internationally mandatory’ In France, the Act is mandatory but not ‘internationally mandatory’

(overriding): Cass. 28 Nov. 2000.(overriding): Cass. 28 Nov. 2000. But: the EU Directive is overriding mandatory law in relation to non-But: the EU Directive is overriding mandatory law in relation to non-

Eu law (ECJ 9 Nov 2000, C-381/98, Eu law (ECJ 9 Nov 2000, C-381/98, IngmarIngmar)) German law: national law is overriding mandatoryGerman law: national law is overriding mandatory Belgian law: idem (Act of April 13, 1995 now integrated in the Belgian law: idem (Act of April 13, 1995 now integrated in the

Economic Law Code - more protective for the agent than the EU Economic Law Code - more protective for the agent than the EU Directive (‘goldplating’) Directive (‘goldplating’)

- ECJ 13 Oct 2013 in C-184/12, ECJ 13 Oct 2013 in C-184/12, UnamarUnamar, on the possibility to apply , on the possibility to apply Belgian law (including restriction on arbitration clauses) where the Belgian law (including restriction on arbitration clauses) where the applicable law is that of another Member State having also applicable law is that of another Member State having also implemented the Agency Directive: «only if the court before which implemented the Agency Directive: «only if the court before which the case has been brought finds, on the basis of a detailed the case has been brought finds, on the basis of a detailed assessment, that, in the course of that transposition, the assessment, that, in the course of that transposition, the legislature of the State of the forum held it to be crucial, in the legislature of the State of the forum held it to be crucial, in the legal order concerned, to grant the commercial agent protection legal order concerned, to grant the commercial agent protection going beyond that provided for by that directive, taking account in going beyond that provided for by that directive, taking account in that regard of the nature and of the objective of such mandatory that regard of the nature and of the objective of such mandatory provisions»provisions»