Distribution, franchise and commercial agent attorney in Paris

Distribution agreements overview

The marketing of products and services in France is structured around several legal models, the choice of which depends on the desired degree of integration, the supplier's control over commercial policy, the transfer of ownership of goods, and the social and tax status of the distributor. The main contracts are the concession (exclusive or selective distribution), franchise, commercial agency, affiliated commission, brokerage and salaried VRP.

Each structure responds to a specific economic logic. The concession transfers ownership of products to the distributor who resells them in its name. The franchise replicates a concept identically through transferred know-how. The commercial agent, an independent intermediary, does not bear the risk of the transaction. The affiliated commissionaire acts in its own name but on behalf of the principal.

Exclusive and selective distribution

The concession contract is an agreement by which a supplier (concedant) entrusts an independent merchant (concessionaire) with the exclusive or non-exclusive resale of its products on a defined territory, generally combined with an exclusive supply obligation and compliance with a commercial policy. The concession is not specifically regulated by the Commercial Code and falls under general contract law, framed by European and French competition law.

Exclusive distribution grants a protected territory to the concessionaire, who reciprocally undertakes not to sell competing products and to comply with network standards. The vertical block exemption regulation (EU) 2022/720 admits these clauses within the 30% market share thresholds, subject to the absence of hardcore restrictions (notably the prohibition of passive sales outside the territory).

Selective distribution allows the supplier to choose its distributors based on objective qualitative criteria (staff training, point of sale layout, after-sales services), particularly used for luxury products, cosmetics, consumer electronics. The Métro and Coty case law frames the validity conditions of these networks.

Termination of the concession contract is governed by general contract law and by Article L. 442-1, II of the Commercial Code on abrupt termination of established commercial relationships. Litigation frequently concerns the duration of notice, the fate of inventories, indemnification of unamortised investments and compliance with post-contractual clauses.

Franchise agreements

A franchise is a contract by which a franchisor grants an independent franchisee, against direct or indirect remuneration (entry fee, ongoing royalties), the right to operate a coherent system comprising: the use of distinctive signs (trademarks, signage), the transfer of substantial, secret and identified know-how, and ongoing commercial or technical assistance throughout the term of the contract.

Franchise is not specifically codified but governed by a composite framework: European code of ethics for franchising, EU vertical block exemption regulation, general contract law, Article L. 330-3 of the Commercial Code on precontractual disclosure, Articles L. 341-1 to L. 341-2 introduced by the Macron Law on the duration of commitments and post-contractual clauses, and abundant case law.

The precontractual disclosure document (DIP) is the central element of the formation phase. It must be delivered at least twenty days before signing and contain: information on the franchisor, the state of the network (entries, exits, litigation), the general and local market, a realistic operating forecast based on the experience of the network. An insufficient or misleading DIP may result in contract nullity for fraud and franchisor liability.

The franchisor's main obligations are the effective transfer of know-how, initial and ongoing assistance, trademark defence and respect for the granted territory. The franchisee undertakes to comply with network standards, pay royalties, protect the confidentiality of know-how and comply with any supply obligations.

The end of the contract raises sensitive issues: non-renewal, termination, post-contractual non-affiliation clause (limited to one year and to the operated premises, Article L. 341-2), inventory treatment, equipment buy-back, notice duration. Post-termination litigation is one of the most active areas of franchise law.

Commercial agent

Codified in Articles L. 134-1 to L. 134-17 of the Commercial Code (transposing Directive 86/653/EEC), the commercial agent status applies to an intermediary who, as a self-employed professional, is permanently entrusted with negotiating and, where applicable, concluding contracts of sale, purchase, rental or services in the name and on behalf of producers, industrials, merchants or other commercial agents.

Classification is mandatory: French case law requalifies as commercial agent any relationship presenting the objective characteristics of the status, regardless of the name chosen by the parties. The agent must be registered with the special register of commercial agents kept by the commercial court registry.

The principal's main obligations are providing necessary documents and information, paying commissions on transactions concluded during and, under conditions, after termination of the contract (Article L. 134-7), and providing a commission statement. The agent is bound by a duty of loyalty, information and good faith performance.

The end-of-contract indemnity (Article L. 134-12) is the central and mandatory element of the status. It compensates the prejudice suffered by termination and is generally assessed at approximately two years of gross commissions (average of the last three years). It is excluded in case of serious misconduct by the agent, termination at the agent's initiative not justified by the principal or by age, infirmity or illness, or assignment of the contract with the principal's consent.

Post-contractual non-compete clauses are admitted within the limits of Article L. 134-14: written form, maximum duration of two years, limitation to the agent's geographical sector and to the products or services concerned.

VRP, broker and commissionaire

The VRP (voyageur, représentant, placier) is a salaried representative working exclusively for one or several employers, regularly canvassing a defined clientele and conducting no commercial transactions for personal account. Governed by Articles L. 7311-1 et seq. of the Labour Code and the national interprofessional agreement of 3 October 1975, the VRP enjoys a mandatory protective status: clientele indemnity at end of contract, right to commissions on direct orders, presumption of salaried status.

The broker (Article L. 131-1) is an independent intermediary who brings two parties together for the conclusion of a contract without being a party or mandatary. Brokerage remuneration is owed by the party in whose interest the broker acted. The broker cannot be confused with the commercial agent (who negotiates and concludes in the name of the principal) nor with the commissionaire (who acts in its own name).

The commissionaire (Article L. 132-1) acts in its own name but on behalf of the principal. It is personally liable to the third party. The affiliated commissionaire is a contemporary variant allowing an independent merchant to operate a point of sale by acting in its own name on behalf of a principal who retains ownership of the goods and sets the price.

Abrupt termination of established commercial relationships

Article L. 442-1, II of the Commercial Code engages the liability of the author of an abrupt termination, even partial, of an established commercial relationship, without written notice taking into account in particular the duration of the relationship and respecting the minimum notice determined by reference to commercial usage or interprofessional agreements. The Egalim 2 Law capped the required notice at a maximum of eighteen months, save particular circumstances.

The relationship is established when it is continuous, stable and habitual, giving the partner a legitimate belief in its sustainability. Case law assesses globally the duration of the relationship, the volume of business, any state of economic dependence, the specificity of investments made, and the existence of exclusivity.

The remedy is full compensation of the prejudice suffered from the absence or insufficiency of notice. The reference method calculates the gross margin (sometimes the contribution margin) the victim would have generated during the missing notice period, based on the average of the last three financial years. Additional prejudices may be compensated (unamortised investments, conversion costs, image prejudice).

Jurisdiction is centralised: only eight specialised first-instance courts and the Paris Court of Appeal have jurisdiction to hear cases under Article L. 442-1 (Article D. 442-3).

Competition law and vertical restraints

Distribution contracts are subject to European and national competition law. Article 101 TFEU and Article L. 420-1 of the Commercial Code prohibit agreements having the object or effect of restricting competition. EU Regulation 2022/720, applicable since 1 June 2022, and its guidelines, exempt vertical agreements within the 30% market share thresholds and in the absence of hardcore restrictions.

Hardcore restrictions trigger inapplicability of the exemption: imposition of a fixed or minimum resale price, absolute restrictions on passive sales (sale solicited by the customer outside the territory), restrictions on online sales (Macron Law, Coty and Pierre Fabre case law), restrictions on cross-supplies within a selective distribution system.

Case-by-case analysis applies for restrictions outside the scope of the exemption and for agreements concluded by undertakings exceeding the thresholds. Selective distribution requires objective qualitative criteria, applied uniformly and non-discriminatorily. Non-compete obligations during the contract may not exceed five years.

Litigation and damages

Distribution litigation is centred before the commercial court and the courts specialised in restrictive practices. The main actions are: end-of-contract indemnity for the commercial agent, clientele indemnity for the VRP, compensation for abrupt termination, nullity of the franchise contract for vitiated consent, litigation on post-contractual non-compete clauses, contesting de-listing, opposition to refusal of renewal.

Summary proceedings allow the rapid obtention of provisional measures: continuation of notice, forced communication of documents, judicial expertise to assess the prejudice. Alternative dispute resolution (mediation, arbitration) is frequently stipulated in contracts.

Role of counsel

Counsel intervenes at all stages: audit of the envisaged distribution model, choice of contractual classification, drafting and negotiation of standard and individual contracts, preparation of the precontractual disclosure document for franchise, implementation of quality charters and operating manuals, support during phases of growth and reorganisation of the network.

In litigation, counsel assists the client in securing termination, assessing the appropriate notice, drafting notification letters, defending before specialised courts, settlement negotiation, enforcement of decisions and obtaining provisional measures.

Why Mac Mahon Avocats

The firm advises in Paris network heads, franchisors, suppliers, distributors, franchisees and commercial agents, in France and internationally. The team articulates contract drafting, competition analysis and litigation, in a multidisciplinary approach integrating contract law, competition law, commercial law and business litigation.