Selling online abroad: applicable law, geoblocking and antitrust law.
The purpose of this article is to provide the reader with ideas for structuring an online sales strategy aimed at foreign markets, taking into account the EU regulations on geoblockingregulations of the countries to which one intends to export and, last but not least, antitrust law.
1. Geoblocking: what is it and when does it apply?
Firstly, one must
analysing the recent European discipline, introduced with Reg.
28 February 2018, No 302/2018in force since 3 September 2018, containing
measures to prevent unjustified geographical blockades (also known as
as "geoblocking").
The geoblocking was introduced by the EU with
to ensure that it is also correctly applied to the market
one of the founding principles of the European Union: free movement
of goods.
The new Regulation, si
therefore proposes to prevent unjustified geographical blockades or other forms of
discrimination based, directly or indirectly, on nationality, place
of residence or establishment of customers.
Article 3 of that regulation states
in fact that:
"A professional [i.e. an entrepreneur/company].
cannot block or restrict through the use of technological tools or
otherwise, a customer's access to its online interface for
reasons related to nationality, place of residence or place of establishment
of the customer."
This article continues:
"A professional
cannot for nationality reasonsplace of residence, or to the
place of establishment of a customer, redirect that client to a version
of its online interface other than the one the customer wanted
log in initiallybecause of the structure of the language used or of
other features that make it specifically intended for customers with
a particular nationality, place of residence or place of establishment, a
unless the customer has explicitly consented thereto. "
From a concrete point of view, the
Rules prohibits the practice whereby a user is prevented, to
French example, to buy a product on an Italian site, as it is redirected
automatically to another site designated to handle French customers.
Warning, this does not mean
intends that the professional may not use different versions of its
interface onlinein order to address customers from
Different Member States[1]
(e.g. the German language version, for the German market, the
French for France, etc.), but requires that the different versions designed for the
different markets, be accessible from all EU countries (a
French, you can see the Italian site and the conditions of sale there).
On this point, Art. 3(2),
point 2 of the Regulation makes it clear that:
"in case of redirection with the explicit
consent of the client, the practitioner's version of the online interface
which the customer initially wished to access must remain easily accessible
to the customer in question."
As a result, the professional will not only be free to use different versions of their interface online to address customers from different Member States, but also to automatically redirect the customer to a certain version of the interface if the user has given his or her explicit consent[2] and provided that the user is still free to access all other versions of the same interface.
2. Does geoblocking mean that I have to sell everywhere?
One point must be clarified: the new Regulation
clears the block, but does not oblige you to sell outside your country.
The geoblocking does not limit the possibility of deciding
to market their products online in certain countries, but prohibits
that if the site only provides for delivery to certain countries (for
simplify, in Italy), the customer from another EU country (Germany) is prevented
to buy online that product if you accept delivery in Italy.[3]
Furthermore, if marketing is envisaged
price differentiation is allowed in several countries to take into account, for example,
of the different costs to be incurred for the delivery of the goods, as long as the choice
does not take place in a discriminatory manner.
In fact, Art. 4(1) of the Regulation
provides that the geoblocking:
"does not prevent traders from offering general terms and conditions, including net selling prices, that differ between or within Member States and that are offered to customers in a specific territory or to specific groups of customers on non-discriminatory basis. "
3. Who do I sell to?
Given that the proposal of
sale entered online on its website implies that it is visible
by all users of the network, in the absence of clarification, it is
would apply the general rule that if the professional directs
its sales activity in a given foreign country, implicitly makes
assume that the sale is also aimed at customers domiciled in that particular
Country.
It follows that if the site is
translated into German it is implied that the sale is directed against Germany,
Austria, Lichtenstein and Luxembourg, as well as if it is translated into English, that the
same is promoted to (almost) the whole world.
Although the choice of 'maximum
opening' may seem very commercially viable, we invite you to evaluate it
prudently, as it has considerable legal repercussions (mainly
related to the law applicable to individual sales contracts and the
violation of any foreign rules), tax (in particular with
reference to the transaction being subject to VAT in the purchaser's country of domicile)
and customs (in the case of non-EU sales).
Therefore, for the avoidance of doubt, once you have assessed which countries you actually intend to sell to, it is advisable to state this directly on the site and in the general terms and conditions of sale.
4. By what law is the sale regulated?
If sales are only aimed at
to a market (e.g., to simplify, Italy), with delivery of the goods
in the territory of that country and the purchaser is a consumer domiciled in a different
country (e.g. Germany), which requires the delivery of the goods to take place in
Italy, such a sale will be governed by Italian law, without the need to worry about
to provide in the general terms and conditions of sale for compliance with any regulations
imperative provided by Germany. [4]
A different matter, however, if the order originates in Germany and the delivery of the goods takes place on German territory, in which case the law applicable to the contract of sale will be German law and, if the end user is a consumer, this may not be derogated from, even with the written consent of the parties.[5]
5. Violation of information obligations and foreign regulations.
If the site provides for the sale
also in countries other than Italy, it will be necessary to organise it by ensuring
that:
- the general sales conditions respect the obligations of
consumer information, as referred to in Art. 6, para. 1 of the Directive
2011/83/EU;[6] - the general terms and conditions of sale comply with any mandatory regulations
of the countries to which they intend to export, different and/or additional to those
provided for by Italian law; - commercial information required by the
State of export.
With reference to the above
disclosure obligations, it should be noted that:
- the restriction on delivery of the goods must be clearly stated
since the beginning of theprocedure leading to the conclusion of the contract, formerly Art. 8(3) of the
Directive 2011/83/EU;[7] - must be in the language of the consumer (Art. 8 para. 1 of the Directive
provides for the obligation to 'inform the consumer in plain and intelligible language').[8]
The penalty in case of
breach of consumer information obligations consists in the extension of
of the right of withdrawal from fourteen days to twelve months and fourteen
days.[9]
In addition to the risk of such a sanction, in some European countries there is also the risk of being subject to a warning and, in the most serious cases, an injunction action before the competent court: German law, for example, provides that in the case of ineffective clauses in the general terms and conditions of sale and violation of consumer protection rules, the warning and/or injunction action may be brought not only by the consumer, but even by a competitor, i.e. a consumer protection association.[10]
6. Can distributors and retailers sell online?
In the event that the manufacturer also makes use of third-party distributors and resellers to market its products, it is worth briefly recalling what are the powers of control over these entities, referring, for further details, to the section antitrust of this blog.
The Vertical Sales Regulation 330/2010 and recent judgments of the European Court of Justice[11] provided that a manufacturer may not prohibit its distributor/reseller from sell purchased products through their own websitenor market through the digital platforms of third parties.
The only way to limit this possibility by third parties is (for high-end, luxury and technically developed products) to create a selective distribution networkin which the distributors and resellers undertake to sell the contract goods only to distributors selected on the basis of objective criteria of a qualitative nature established indiscriminately and non-discriminatorily for all persons belonging to the network.
In that case, according to the most recent case law of the Court of Justice,[12]a manufacturer is authorised to impose a clause on its distributor allowing it to sell products via internet, but on condition that such sales activity online is realised through an 'electronic shop window' of the authorised shop and that the aura of luxury and exclusivity of these products is thereby preserved (on this point, see the Amazon Case e The mixed system: when the manufacturer chooses to adopt both exclusive and selective distribution).
[1] Compare recital 20
of the Regulation on geoblocking.
[2] Consent, once given, may be considered valid
even for subsequent visits by the same customer to the same interface
online, provided that the customer is given the opportunity to revoke it when he or she considers
appropriate. On this point, see recital 20 of the Geoblocking Regulation.
[3] On this point, see Stefano
Dindo, E-Wine, Legal-economic aspects of wine communication and distribution
online, G. Giappichelli Editore, p. 41, 2018.
[4] According to Art. 6(1),
(a) and (b) of Regulation 593/2008.
[5] See previous footnote.
[6] Directive 2011/83/EU of
european parliament and the council of 25 october 2011 on the rights of
consumers. Importantly, since this is a Directive (and not a Regulation), the
it must be transposed by national laws, while leaving the
Member countries free to choose the most appropriate regulatory path to achieve the
objectives set therein; it follows that each country is free to insert
information obligations in addition to those set out in the directive itself.
[7] Art. 3 Directive 2011/83/EU:
"E-commerce sites shall indicate clearly and legibly, at the most
late at the beginning of the ordering process, if restrictions apply
delivery and which means of payment are accepted."
[8] Attention! These parameters
language must also be complied with for the application of the provisions
of the GDPR. On this point, see Recital 20 of that Regulation.
[9] Art. 10 para. 1 of Directive 2011/83.
[10] Cf. Robert Budde, E-Wine,
Legal-economic aspects of online wine communication and distribution, G.
Giappichelli Editore, p. 51 ff., 2018.
[11] See judgment of the Court of
Justice in the Pierre Fabre case C-439/09.
[12] Judgment of 6 December 2017, C-230/16 Coty Germany GmbH.
Parallel sales and the principle of trade mark exhaustion.
Can unauthorised distributors make parallel sales? When can the principle of trademark exhaustion be invoked? The Amazon, Sisley and L'Oréal cases.
Like
has already been explained (cf. La
selective distribution. A brief overview: risks and benefits), the
selective distribution has the function of protecting the marketing of
products which, depending on their characteristics, require a
resale more selected and cared for than consumer products.
In
such cases, the producer is inclined not so much to focus on the breadth and
capillarity of its sales network, as much as to favour a limitation of
commercial channelspreferring to entrust their products to a small
number of specialised dealers, chosen according to certain criteria
objective dictated by the nature of the products: professional competence (for
as far as would-be distributors are concerned),[1] quality
of the service offered, i.e. prestige and care of the premises in which the
retailers will have to carry out their activities.[2]
This system, regulated by the EU Regulation 330/2010 on Vertical Agreements,[3] complies with Art. 101 § 3 of the Treaty (and therefore does not fall under general prohibition laid down in § 1 of that Article), essentially if:
- "the choice of dealers is made according to objective criteria of a qualitative nature, concerning the professional qualification of the dealer, his staff and his facilities'.,
- which "these requirements are required indiscriminately for all potential resellers".,
- and that "are assessed in a non-discriminatory manner".[4]
With
reference to the type of products for which it may be
justified the use of a selective system, even though the Regulation
330/2010 makes no mention of this, as it merely gives a definition
of this system, it is considered that it is only reserved for products of
luxury, high quality and technologically developed.[5]
One
of the essential elements linked to selective distribution, it is certainly
related to the fact that, in such a system, the producer can impose the obligation of
not sell to parties (other than end users) not belonging to
to the network (formerly Article 4 (b) (iii)).[6]
According to
advantage is related to the limits that can be imposed on members of the system
selective, regarding the possibility of selling products online. On
point, European case law has stated that, while a
manufacturer of a non-selective system, it cannot prevent its distributors
to sell online,[7]
in a selective system, the producer is authorised to impose on its
distributor a clause allowing products to be sold through internet, a
provided that such sales activity online is
realised through an 'electronic shop window' of the authorised shop and that
thus preserving the aura of luxury and exclusivity of these
products.[8]
Moreover, case law[9] considered legitimate a contractual clause that prohibits authorised distributors of a selective distribution system to make recognisable use of third-party platforms for the Internet sale of contractual products, provided that this is aimed at safeguarding the image of those products and that it is established indiscriminately and applied in a non-discriminatory manner.
1. Parallel distribution by unauthorised distributors.
In any case, it is highly common in practice that, even if the manufacturer creates a selective system, parallel distributions develop within the market itself. This may be due to the fact that very often manufacturers only distribute 'selectively' in the most important markets, while reserving a 'classic' system (i.e. through an exclusive, non-selective importer) for the other areas, thus allowing (and facilitating) the 'classic' distributors to sell products also to parallel distributors within a selective market.[10]
Read also Parallel Sales in the EU. When and to what extent can a manufacturer control them? e Selective and exclusive distribution: the mixed system selective.
What
therefore happens if the manufacturing company takes over the unauthorised sale of
their products on a platform e-commerceby a
distributor/intermediary outside the selective distribution network?
È
clear, in fact, that in such a situation the relationship between producer and third party is
of a non-contractual nature and one must therefore understand what (and if any) instruments
legal provisions enabling the manufacturer to defend itself against such extraneous sales
to the selective system.
In order to answer this question, it is necessary to take a brief step back.
2. The principle of Community exhaustion.
As is well known, the European legal system guarantees the (fundamental) freedom of movement of goods; the child of this freedom is the principle of Community exhaustionintroduced with European Directive 2008/95/EC in Article 7 and transposed into Italian law by thearticle 5 c.p.i.[11]
According to
this principle, once the holder of one or more property rights
industry enters directly or with its own consent[12]
(e.g. by the licensee) to market a good in the territory of the Union
the European Union, the latter loses its exclusive rights.
The exclusive
is therefore limited to the first act of marketingwhile none
exclusivity may subsequently be claimed by the holder of the design,
on the circulation of the product bearing the mark.
The
principle of exhaustion, however, has an important exception: the second
paragraph of Article 5 c.p.i. contains, in fact, a safeguard rule that, with
reference to the trade mark, allows the proprietor, even when he has placed the
product on the market and, therefore, 'exhausted' the right, of prevent the
patent suffers a decrease in attractiveness and value.
At
in order to circumvent the fact that the trade mark proprietor may arbitrarily restrict the
free movement on the Community market, the derogation from the principle
of trade mark exhaustion is limited to the occurrence of conditions that
make it necessary to safeguard the rights that are the specific subject of the
property: the second paragraph of Art. 5 of the IPC provides that they must
exist
"reasons
legitimate for the holder himself to object to the further
marketing of products, particularly when the state of these is
modified or altered after being placed on the market".
La
community case law[13]
confirmed that the existence of a selective distribution network can be
included among the 'legitimate reasons' preventing exhaustion, provided that
the marketed product is a luxury or prestige item that
justifies the decision to adopt a selective distribution system.
It will be up to
at national judgetherefore, called upon to judge whether
there are 'legitimate reasons' for the trade mark proprietor to oppose it
further marketing of its products and, therefore, check whether the
selective distribution contracts comply with the law antitrust
European.[14] This
is (to simplify, but far from trivialising) to ascertain:
- the lawfulness of the
products, assessing their nature (i.e. whether they are luxury goods or,
high quality or technologically developed products); - that the third party respects the standard which
the manufacturer requires from its authorised distributors.
In
If not, then if the marketing methods used of the
third do not respect the standard required and are damaging to the trade mark
of the producer, this activity will be exempt from the principle of exhaustion.
In order to give some practical examples and thus try to make this issue as clear as possible for the reader, three recent (and very interesting) judgments of the Court of Milan are given below.
The case of Landoll s.r.l. v MECS s.r.l.
In the
2018 the Court was called upon to decide the following question: Landoll,
company leader in research, development and commercialisation
of professional cosmetics and owner of several brands, provided
selective distribution of their products, based on standard qualitative
selected, aimed at protecting the image of luxury and prestige. The applicant
detected the unauthorised offer for sale of its products on a
platform e-commerceattributable to the defendant. The applicant has therefore
sought an injunction against the respondent to continue its activity
of sale.
The
Court recognised that the infringement of the
appellant on its registered trade marks, it was inferred from the
"assessment of the existence of a
effective harm to their image of luxury and prestige that follows
from examination of the how products are presented to the public [...] is
on an e-commerce platform, which on its websitemanifested in the
their presentation to be plainly assimilated to any generic product of the
even lower quality sectors."[15]
Ha
therefore prevented the respondent from further advertising,
marketing, offer for sale of the plaintiff's products.
Case Sisley Italia s.r.l. v. Amazon Europe Core s.a.r.l.
In
this dispute,[16] Sisley
Italia s.r.l., a company also leader in the cosmetics sector and
organised through a selective distribution system, brought an action for
the Court of Milan prevented Amazon from marketing in the territory
Italian products bearing the Sisley trademarks, considering that the manner in which they are placed
commercially used by the defendant violated the standard required
by Sisley to its authorised distributors. The device states that on the
Amazon portal
"Sisley products
are displayed and offered mixed with other items, such as products for the
household and cleaning products, which are however low-profile and of little value
economic. Also in the 'Luxory Beauty' section [...] the Sisley brand is
approached to low-end brands of very high quality, reputation and price
inferior or far less prestigious."
La
judgment continues:
"Where you
consider that, in its contracts, Sisley explicitly requires that the
their products are sold in luxury perfumeries or in departments
specialising in perfumery and cosmetics in department stores, with staff
qualified, in a given urban context, undoubtedly appears
inadequate, compared to the required standards, the sale of products
in question next to microwave containers, cleaning products for the
floors and for pets,'
The Court of Milan therefore recognised that the marketing and promotion of such products on the same internet page as products of other brands - even of lower market segments - was "detrimental to the prestige and image of the Sisley brand. "
But what happens if products are imported from a non-EU country? The L'Oréal Case.
Like
condition because the exhaustion formerly article 5 c.p.i.
takes place is that the first marketing was carried out by the
holder (or with his consent) and that such entry is made
within the single market.
Different
the situation where the first entry into the single market is made by
Unauthorised third parties: the jurisprudence of the Court of Justice since 1982
decided that if the marketing of the protected good is carried out by the
holder outside the Community, the latter may assert his right
to oppose importation into the Union by a distributor
non-EU.[17]
Applying
these principles the Court of Milan[18]
prohibited IDS International Drugstore Italia s.p.a. from offering for sale
and marketing, in any manner or form, including the use of internet
and of social mediaof products L'Oréal. These products
had indeed been purchased by IDS from a non-EU distributor,
who had bought them directly from the manufacturer.
Place
that the first marketing within the EU had not been
carried out by the owner (or with his consent), he continued to
hold, pursuant to arts. 5 and 20 c.p.i., the right to oppose importation
parallel from non-EU countries without his consent.
Different
issue would be where the trade mark proprietor consents to the marketing
on the market in a given EEA Member State, in which case he exhausts
its intellectual property rights and, therefore, can no longer prohibit the importation
in a different Member State.
[1] Consider the
decision Grundig approved in 1985 by the Commission, in which
presence was required "of qualified personnel and an external service
with the technical expertise to assist and advise customers',
as well as 'the technical organisation necessary for the storage and
timely supply of buyers'; 'present and display products
Grundig in a representative manner in special rooms, separate from other
departments, and whose appearance reflects Grundig's market image'.
[2] On this point cf.
PAPPALARDO, The Competition Law of the European Union, p. 409, UTET,
2018.
[3] defining distribution
selective as: "a distribution system in which the supplier
undertakes to sell the goods or services covered by the contract, either directly or
indirectly, only to distributors selected on the basis of criteria
specified and in which these distributors undertake not to sell such
goods or services to unauthorised resellers in the territory that the supplier has
reserved for such a system."
[4] Metro Judgment I,
25.10.1977 and Case C-31/80, L'Oréal v PVBA. This orientation was confirmed
also from the Commission's Guidelines at No. 175, which state that "In
gender, it is considered that selective distribution based on purely
quality does not fall under Article 101(1) because
does not lead to anti-competitive effects, provided three
conditions. Firstly, the nature of the product in question must make
selective distribution system in the sense that such a system
must be a legitimate requirement in view of the
characteristics of the product in question, to preserve its quality and
ensure their proper use. Secondly, the choice of dealers
must take place according to objective criteria of a qualitative nature established
indiscriminately and made available to all potential resellers and
applied in a non-discriminatory manner. Thirdly, the criteria established do not
must go beyond what is necessary."
[5] In any case, an answer can be found in the Commission's Guidelines, where in No. 176, it is stated that: "if the characteristics of the product do not require selective distribution [...], such a distribution system does not generally lead to efficiencies that outweigh a significant reduction in intra-brand competition. If appreciable anti-competitive effects occur, the benefit of the Block Exemption is likely to be withdrawn". See also, n. 25, case Coty Germany, judgment of 6.12.2017, which provides:
[6] In this regard, one
recalls what the Court of Justice stated in the case Metro-Saba
IJudgment of 25.10.1977, at para. 27 ".Any sales system
based on the selection of distribution points inevitably implies -
otherwise it would make no sense - the obligation for wholesalers who are part of the
network, to supply only authorised dealers'.
[7] Case Pierre Fabre, judgment of 13.10.2011.
[8] Case Coty Germany, judgment of 6.12.2017.
[9] Cf.
previous note.
[10] In that case, the
manufacturer may not impose a ban on passive sales, in the
resellers in areas where the system does not exist
selective, but only prohibit it, pursuant to Art. 4(b)(i), from selling
active.
[11] Art. 5,
paragraph 1, c.p.i. (Exhaustion), "The exclusive faculties conferred by this
code to the holder of an industrial property right are exhausted one
once products protected by an industrial property right are
put on the market by the holder or with his consent in the territory
State or in the territory of a Member State of the European Community or of the
European Economic Area.'
[12] The practice
decision-making and European case law have made it clear that one has the consent
when the marketing was carried out by a controlled undertaking
by the intellectual property right holder or an enterprise, as a rule
a licensee, authorised to do so by the holder. Exhaustion occurs
when the protected product has been placed on the market by the holder of the
right "with his consent or by a person bound to him by ties of dependence
legal or economic' (sent. Keurkoop, cit., no. 25). On this point Cf. Pappalardo, The right
European Union competition, p. 875, 2018, UTET.
[13] Case Copad SA, judgment of 23 April 2009, "Where the marketing of luxury goods by the licensee in breach of a clause in the licensing contract is nevertheless to be regarded as having taken place with the consent of the proprietor of the trade mark, the latter may rely on that clause to oppose a resale of those goods on the basis of Article 7(2) of Directive 89/104, as amended by the Agreement on the European Economic Area, only if it is established, having regard to the circumstances of the case, that such resale damages the reputation of the trade mark. "
[14] On this point, cf. Fratti, Selective distribution of luxury cosmetics: the Court of Milan clarifies the prerequisites for the exclusion of the principle of trade mark exhaustion.
[15]
Court of Milan, Order of 18.12.2018. See previous footnote.
[16] Court of Milan, order of 3.7.2018
[17] Cf. Pappalardo,
op. cit., p. 878.
[18]
Court of Milan, Order of 19.11.2018, see footnote 12.
Consequences in the event of the transfer of the agency contract or company transfer.
What are the consequences of the transfer of an agency contract? If the principal decides to make a business transfer, can the agent terminate the contract?
The legal institution of assignment of the contract is governed by arts. 1406 et seq. of the Civil Code. In brief, an assignment of a contract occurs when a party to a performance relationship (the assignor) enters into a new contract (assignment) with a third party (the assignee), whereby the assignor agrees to transfer to the assignee the original contract or, to be more correct, all the assets and liabilities arising from the assigned contract. The assignment of the contract is, therefore, a trilateral transaction, which is perfected only (pursuant to Art. 1406 of the Civil Code) with the consent of all parties: original contracting parties (assignor and assignee) and assignee.[1]
1. Assignment of the agency contract
The agency agreement, of course, is also subject to the general principles on contracts briefly referred to above. It follows that for the assignment of an agency contract to be valid, it must be communicated to and accepted by the assignee.[2]
With reference to the form of the contract of assignment, the silence of the legislature leaves a problem open; the jurisprudence is however constant in resolving it, affirming that the same forms prescribed for the contract of assignment must be observed for the contract being transferred, given that the assignment brings about a real subjective modification of the obligatory relationship.[3] By virtue of this principle, the assignment of the agency contract will also be subject to the written form ad probationem request pursuant to Article 1742(2) of the Civil Code.
Read also Formal requirements of the agency contract.
In the event that it is the agent who transfers the contractual relationship, it is
essential to emphasise that the right
of the same to receive severance pay formerly Article 1751
c.c.. The second paragraph of that article provides that:
"L'allowance not
is due when pursuant to an agreement with the principal, the agent yields
to a third party the rights and obligations who has by virtue of a contract
agency.'
This provision is based on the fact that the new agent succeeds to the overall legal position of the original agent, i.e. to all active and passive relationships arising from the assigned contract, among which is certainly included the right to severance pay.[4]
2. Agency contract and business transfer
Another very interesting topic, also related to the issue
of the assignment of contracts, is the case of the succession of the
report of agency following purchase of company.
This issue is governed by Article 2558 of the Civil Code.[5] which provides as a natural effect of the transfer of the company, the succession of the purchaser in all contractual relationships entered into for the operation of the company that do not have a personal character;[6] It is therefore a true and proper automatic transfer of the obligatory relationship, which is not subject to the consent of the transferred party, as provided for in the case of the assignment of the contract. With this provision, the legislator intended to ensure the preservation of the economic functionality of the business unit that has been transferred and, therefore, to protect the interests of the acquiring party.
It is important to emphasise that the parties (seller and buyer) may still derogate this provision and avoid the purchaser's consequent sub-entry into certain contractual relationships of the transferor, provided that the contractual relationship(s) that they intend to exclude from transfer do not have "personal character'. (cf. Civil Cassation No. 3312 of 2001).
The doctrine[7] tends to hold that the agency relationship should not be excluded a priori from contracts intuitu personaegiven the absolute heterogeneity of the category of commercial agents, which can take the form of both corporations and natural persons; contrary to majority case law[8] excludes that this contractual figure can be included among relationships of a personal nature, asserting that:
"the agency contract is not of a personal naturebut constitutes a typical contract pertaining to the operation of the business and the organisation of the business structure, so that in the event of a transfer of the business it automatically continues with the transferee unless the parties have agreed otherwise."[9]
The fact that the agency contract is attributed the nature '.staff" means that it is impossible to apply to the same the discipline of Article 2112 of the Civil Code.,[10] which gives employment relationships greater protection in the event of transactions involving the transfer of a company.
Firstly, formerly Article 2112 of the Civil Code, employment relationships automatically continue in the hands of the transferee and (unlike the discipline under Article 2558 of the Civil Code) this provision is mandatory by the parties.
Secondly, Article 2112 of the Civil Code gives the employee the right to resign within three months of taking over the business if there has been a substantial change in working conditions; otherwise, Article 2558 of the Civil Code provides for the possibility of terminate the relationship within three months of being informed of the transferonly if there is a just cause:
"the agent does not enjoy a freedom of
absolute termination, but rather conditional on the existence of a just cause."[11]
In order to understand the extent to which the agent is entitled to terminate the contract if the principal sells the business, a 2007 judgment comes to our aid, which expressed the following principle:
"the agent is entitled
to withdraw from the contract for just cause in the event that for reasons
extrinsic to the contract, not directly inherent in it, the substitution
of the assignee to the assignor as counterparty to the contractual relationship realises
a situation in view of which would have refused to contract if
had known her in time. "
To give a practical example, the following may be invoked as a cause for termination of the agency relationshipinsufficient security of financial strength of the buyerwhich does not guarantee to the third party a regular performance of the obligations arising from the continuation of the term contract.[12]
3. Debts prior to the transfer of the business
In the event of a transfer of the principal's business, the purchaser's succession in the existing relationship with the agent, does not imply an automatic cumulative assumption of pre-sale debts (e.g. unpaid commissions). The fate of the debts relating to the transferred business is governed by Art. 2560 of the Civil Code, according to which the transferor is not discharged if the debts predate the transfer (para. 1) and the same are apparent from the compulsory account books (para. 2).
The following is an excerpt from a 2017 judgment of the Court that was questioned on this issue:
"The only (alleged)
transmission of accounting documents relating to the agency contract
(transferred to the successor company pursuant to Article 2558 of the Civil Code) is certainly not equivalent to
also mean that the condition expressly required by Art.
2560(2) i.e. the entry of debts in the books of account
obligatory, so that the joint and several obligation ancillary to
borne by the purchaser of the transferred business.
Therefore, anyone wishing to assert the corresponding claims against the purchaser of the business has the burden of proof among the constituent elements of one's right also called inscription.[13]
Read also The principal's bankruptcy and the agent's lodgement of liabilities.
[1] For a
overview of the institution see TORRENTE AND SCHLESINGER, Handbook of Law
private, GIUFFRÈ EDITORE.
[2] On
Point cf. Court Reggio Calabria, 15.1.2003, which ruled that "for the purposes of
of the assignment of the agency contract, it is necessary
the consent of the assigned contractor. "
[3] Cass. Civ. 2001 no. 10498; Cass.
Civ. 1993 No. 12163.
[4] Cf.
VENEZIA, Il contratto di agenzia, p. 462 et seq., 2015, Giuffrè Editore.
[5] Art.
2558 c.c. states "unless otherwise agreed, the purchaser of the business
succeeds to the contracts concluded for the operation of the holding itself that do not
have a personal character.
[6] Cf. on
point Cass. civ. Sec. II,
19/06/1996, n. 5636
[7] Cf. VENEZIA, The Agency Contract, p. 462 et seq., 2015, Giuffrè Editore; TRADATI, Il contratto di agenzia nel trasferimento d'azienda, in Agenti & Rappresentanti 2003, no. 4, p. 14 ff.
[8] Cass.
Civ. 2017 no. 15956, Court of Perugia 17.5.2011 Cass. Civ. 2004 no. 21678,
Trib. Reggio Emilia 8.2.2002. Contra for the personality of the
agency, with the consequent need for consent for its transfer Trib.
Reggio Calabria 15.1.2003.
[9] Trib. Di
Reggio Emilia 8.2.2002.
[10] Cass. Civ. 2004 no. 21678, Cass.
Civ. 2000 no. 6351.
[11]
Court of Perugia 17.5.2011.
[12] Cass. Civ. 2007 no. 21445, with note by SANGIOVANNI, Obbligazioni e contratti, no. 5, 2008.
[13] Cass.
Civ. 2017 No. 15956.
Agent's right to commission on long-term contracts.
Quando l’agente promuove contratti di durata, può sorgere il dubbio se abbia diritto alla provvigione anche sulle forniture eseguite dopo lo scioglimento del rapporto. Il contributo analizza la disciplina dell’art. 1748, comma 3 c.c., il ruolo degli AEC e l’orientamento giurisprudenziale in materia.
Where an agent procures long-term contracts, such as long-term supply contracts or subcontracts, the question arises as to whether or not the agent is entitled to commission on the deliveries made in performance of the contract procured following a possible termination of the agency relationship.
To answer this question, it is necessary to take a brief step back and understand in detail when the agent's right to commission arises (on this point see also Agent's commissions for business concluded by the principal after termination of the relationship). Article 1748(3) of the Civil Code provides on this point that:
"The agent is entitled to commission on business concluded after the date of termination of the contract if the proposal was received to the principal or agent before or business is concluded within a reasonable time from the date of termination of the contract and the conclusion is from mainly traceable to his activityIn such cases the commission is due only to the previous agent, unless specific circumstances show that it is equitable to allocate the commission among the intervening agents."
This approach[1] is intended to prevent the principal from running the risk of paying a double commission: one to the outgoing and one to the incoming agent.[2] In the event of termination of the relationship, therefore, the agent will be entitled to the commission:
- if the proposal was received on antecedent upon termination of the relationship;
- if the deal is concluded within a reasonable term from the date of termination of the contract and the conclusion is due to mainly to theactivities of the agent.
While the first hypothesis does not give rise to any particular problems of interpretation, the second, on the other hand, may give rise to several doubts, mainly related to the interpretation of the concept of 'prevalence' and of 'reasonableness[3]".
An interpretative aid can be derived from Art. 6, last paragraph, AEC 30.7.2014[4] (cf. when applying ERM e how the AEC Industry 2014 severance payment is calculated), which imposes an obligation on the agent to report to the principal in detail on negotiations undertaken and not concluded at the time of termination of the relationship; this provision also provides that if, within six months from the date of termination of the relationship, some of those negotiations are successful, the agent will be entitled to the relevant commissions (cf. The agent's obligation to inform the principal).
On the basis of the foregoing, where the agent in the course of the relationship promotes term contracts, the entitlement to commission on deliveries made in performance of the contract procured after the termination of the relationship depends essentially on the nature of the term contract.
In principle, in the event that the term contract is a a supply contract, a subcontracting contract, or a sales contract with divided deliveries, it can be stated that (unless otherwise agreed)[5]the agent is entitled to commission on all deliveries made even after termination of the agency contract, since these are in fact acts of performance of a contract concluded during the course of the relationship.
Conversely, where the contract promoted is a framework contractwhere each supply is to be the subject of a further agreement (order - acceptance), in which case the individual supplies are to be regarded as independent sales contracts,[6] even if concluded in the context of the framework contract, with the consequence that such subsequent sales contracts will not give rise to an entitlement to commission (unless the agent can prove that such business is attributable to its promotion activity and was concluded within a reasonable time).
Continuing with the reasoning, if, on the other hand, the term relationship is signed by the principal following the termination of the relationshipIn order to understand whether the agent may be entitled to commission, it will not be sufficient to ascertain the nature of the relationship of duration, but also to prove that the conclusion of the transaction is attributable to the agent's promotional activity.
A very interesting case is recalled below[7]which was decided by a series of three judgments of the Court of GrossetoA case in point was the following: an agent, following burdensome negotiations lasting several months, had procured for the principal (a company operating in the frozen food sector) a deal with a chain of supermarkets for the indefinite supply of frozen and pre-packaged ready meals. The administration contract was concluded a few months after the termination of the agency relationship.
The agent sued the principal for payment of commissions on supplies made in performance of the supply contract. By judgment No. 52/2012, the Court of Grosseto upheld the agent's claims, holding that:
"the administration contract was formally concluded [...]. just over two months after the termination of the agency contract [...], a term that must be considered, due to its objective brevity, absolutely reasonable.
Although the Court had found that the agent was entitled to commissions, it rejected the plaintiff's claim seeking an order that the principal pay them
"until the end of the administration contract [...] as this would be a pronouncement of sentence 'in the future' related, moreover, to a term that was not identified by the parties in the administration contract, since the same contract was concluded for an indefinite period."
The agent, a few years after the delivery of the first judgement, brought a further action, in which it sought an order that the principal be ordered to pay commissions on supplies made after the expert valuation referred to in the first judgement. The agent based its claim on the principle of Article 2909 of the Civil Code.according to which the finding contained in the final judgment shall be conclusive for all purposes between the parties. The Court again condemned the principal, stating that
"the right to obtain the payment of the commissions that will gradually accrue in relation to the prolonged performance of the supply contract, is unquestionable and has already been ascertained in the irrevocable ruling issued by this Office with the consequent application of the revocatory effect provided for by Article 2909 (on this point, among others, Court of Cass. Sez. Lav. 2001 no. 4304).
Following this ruling, in order to avoid the payment of commissions on future business, the principal proceeded to effectively giving up the business to a company of the same group, also active in the frozen food sector. The agent then appealed again to the Court of Grosseto, arguing that the assignment of the duration contract pursuant to Article 1406 of the Civil Code entailed the transferee's obligation to pay commissions. The Court of Grosseto[8]again supported the plaintiff's argument, stating that:
"since the characteristic feature of the assignment of the contract under Art. 1406 of the Civil Code is that it has as its object the transmission of a unitary set of active and passive legal situations resulting from each party to the contract [...], the transferee shall be obliged to pay to the plaintiff commissions - in the same amount as agreed in the agency contract - on the supplies of frozen food products made to X srl."
* * *
Lastly, it should also be emphasised that the signing of term contracts can be used as a determinant for prove that the conditions required by Article 1751 of the Civil Code are fulfilled.for the agent's right to receive severance pay (cf. Agent's severance pay. How is it calculated if AEC does not apply?). We read in an interesting Supreme Court ruling that:
"The termination indemnity compensates the agent for the asset increase that its activity brings to the principal by developing the goodwill of the business. It follows that this condition must be deemed to exist, and the indemnity is therefore due, where the contracts concluded by the agent are contracts of duration, since the development of goodwill and the continuation of benefits to the principal, even after the termination of the agency relationship, are in re ipsa'..[9]
______________________________
[1] Article reformed by Legislative Decree No. 65/1999, by which the legislature transposed the principles of European Directive No. 86/653 and, in particular, Article 8, which provides as follows: "For a commercial transaction concluded after the termination of the agency contract, the commercial agent shall be entitled to commission; (a) if the transaction is mainly due to the result of the work performed by him during the agency contract and if the transaction is concluded within a reasonable period after the termination of the agency contract, or (b) if, in accordance with the conditions set out in Article 7, the order placed by the third party was received by the principal or the commercial agent before the termination of the agency contract. "
[2]Cf. Court of Rimini, 22.9.2004, No. 238, which excluded the agent's right to commissions in the event of extensions of supply offers, given the absence of the former agent's preponderant promotional intervention. On this point see VENEZIA, Il contratto di agenzia, pg. 281, 2015, CEDAM.
[3] Jurisprudence has also considered a term of six months to be reasonable (Court of Cassation Civ. 9.2.2006) and in some cases, such term has even been extended to two years (see Court of Cassation Civ. 16.1.2013 in which the Court held that the two-year term for loyalty cards sold thanks to the agent's promotional activity was reasonable, thus considering fuel sales made after the termination of the relationship attributable to the agent's performance.
[4] Art. 6, last paragraph AEC 2014 Industry: "The agent or representative is entitled to commission on business proposed and concluded even after termination of the contract, if the conclusion is primarily the result of the activity performed by the agent or representative and takes place within a reasonable time after termination of the relationship. To this end, upon termination of the relationship, the agent or representative shall report to the principal in detail on the business negotiations undertaken, but not concluded, due to the termination of the agency agreement.
If, within a period of six months from the date of termination of the relationship, any such negotiations are successful, the agent shall be entitled to the relevant commission, as regulated above. Once that period has elapsed, the conclusion of any order, whether or not included in the agent's report, shall no longer be considered a consequence of the agent's activity and no commission shall be paid. This is without prejudice, however, to any agreements between the parties providing for a different time limit or for the distribution of the commission among the agents who have been present in the area and who have intervened in the promotion and conclusion of the transaction. "
[5] Art. 1748 para. 3 of the Civil Code, on commissions due for business concluded after termination of the contract, is entirely derogable: in favour Saracini-Toffoletto, Il contratto di agenzia. Commentario, 2014, GIUFFRÈ and Bortolotti, op. cit., p. 276; contrary, Trioni, who holds that this rule is not mandatory, given that the third paragraph of Art. 1748 cc, unlike the second and fourth, does not expressly provide for the salvation of contrary agreements.
[6] See on this point BORTOLOTTI, Concessione di Vendita, Franchising e altri contratti di distribuzione, p. 8, 2007, CEDAM.
[7] For more details see Giulia Cecconi, Le provigioni sui contratti di durata, in Agents and sales representatives, 1/2019, PUBLISHING AGE.
[8] Court of Grosseto, Judgment No. 269 of 2018.
[9] Cass. Civ. sez. lav. no. 24776 of 2013.
Parallel Sales in the EU. When and to what extent can a manufacturer control them?
When we speak of parallel sales, we are referring to imports alongside those made by an 'official', i.e. territorially competent, importer[1]Parallel traders enter the market reserved for exclusive distributors, without having direct access to the supplier, which only supplies authorised dealers.
Parallel trade, over the years, has taken very diverse forms and has often allowed the emergence of 'alternative' trade networks, which have flanked the official ones set up by the manufacturer; sometimes they are fed by the exclusive distributors themselves, who, having purchased the goods from the manufacturer, find it cheaper to resell them to parallel traders, with whom they have established trade relations; other times, parallel traders procure the goods from retailers in another country, where market prices are lower.[2]
1. Is an exclusive sales system that blocks parallel distribution lawful?
EU legislation has been confronted with this phenomenon from the very beginning and has had to try to find a balancing between, on the one hand, the free trade in goods and, on the other hand, the commercial interests of individual producers to divide up the different European markets through the appointment of exclusive dealers. The Commission's approach has always been to allow manufacturers to create networks by appointing exclusive dealers, so that they could more easily manage the different European markets. The 'compromise' that was reached was to create a clear dividing line between the forms of exclusive 'open' distributionwhich are considered permissible in principle, and so-called 'closed' exclusivities, which are almost always considered unauthorised[3].
The first forms are characterised by the fact that the dealer obtains the right to be the only party to be supplied by the manufacturer in a given territory. In any case, the position which is granted to the latter is not a 'monopoly', since parallel importers, in the manner and within the limits which will be described below, may purchase goods from third parties (wholesalers or dealers in other areas), and then possibly also resell them in the dealer's exclusive territory.
In contrast, theexclusive 'closed' is characterised by the fact that the dealer is granted perfect territorial protection by imposing on all distributors in the network a prohibition not to resell to persons outside their area, and a further obligation to impose this prohibition on their purchasers as well, and so on.
This approach was taken in the (now distant) decision Grundig[4]which the Commission has never deviated from, where it was deemed contrary to the principles of the European single market, the absolute protection of dealers and the creation of closed exclusive distributions, through, for example[5]:
- export ban imposed by suppliers on distributors;
- supplying traders known for their resale activities outside the established areas;
- price differentiation according to destination;
- reduction or outright abolition of discounts to wholesalers who had made unwanted exports[6];
- Reducing the quantities usually sold to wholesalers, with the aim of discouraging parallel exports.
The Court therefore held not only that distribution contracts with absolute territorial protection fall under the prohibition of theArticle 101(1) TFEUbut even that such agreements are prohibited solely on the basis of their restrictive object, without any market investigation being necessary to ascertain the effects such bans actually have on the market.
2. Regulation 330/2010: active and passive sales.
The Court's approach was also confirmed by the Regulation 330/2010on vertical sales. The Regulation, on the one hand, empowers market sharing through the granting of open exclusivity[7]On the other hand, Article 4(b) provides for the validity of contractual clauses imposing on importers the ban on active sales [8] (and not passive[9]) in the exclusive territory or to exclusive customers reserved for other distributors. Importantly, the exception is not limited to the prohibition of active sales in the exclusive territory, but also covers the ban on sales to exclusive customersthat is to say, that which the supplier reserves to itself, or has reserved for another purchaser.
The supplier, therefore, may not merely prohibit the distributor from making sales outside a zone or to a group of customers, since the prohibition, in order to be lawful, must relate to active sales in a zone or to customers exclusively reserved to a different distributor, or to the supplier itself.
The grantor may therefore prevent its exclusive dealers from taking initiatives aimed at conquering parts of the market in zones other than those assigned to them; in any event, the prohibition of out-of-zone sales may not be imposed for passive sales, i.e. the response to unsolicited orders from individual customers outside the exclusive zone.
3. Internet sales and the impact on parallel sales.
The phenomenon of parallel distribution certainly developed with the advent of Internet. The web being a platform that, by definition, can be visited "worldwide"has significantly increased the potential of individual links in the distribution chain to be visible (and thus sell) in territories exclusively reserved for other players (on this topic see Can a manufacturer prevent its distributors from selling online? Active sales, passive sales and geoblocking.).
Although there are substantial differences between sales online and sales offlineit can certainly be said that the principles set out in the preceding paragraph apply equally to both types of market. The powers and limits of the manufacturer to prohibit and direct the sales of its dealers are the same for traditional and electronic commerce: it will therefore be essential to understand, even in this context, the distinction between active and passive sales.
According to the Orientations of the Commission, the mere existence of an Internet site must in principle be regarded as a form of passive selling. Indeed, it reads:
"If a customer visits the Internet site of a distributor and contacts him, and if that contact results in a sale, including actual delivery, this is considered a passive sale. The same applies if a customer decides to be informed (automatically) by the distributor and this results in a sale. " [10]
Otherwise, it must be considered an active sale:
"Online advertising specifically targeted at certain customers [...]. Banners showing a territorial link on third party websites [...] and, in general, efforts to be found specifically in a particular territory or by a particular customer group constitutes active selling in that territory or to that customer group [including] the payment of a fee to a search engine or online advertising provider to present advertisements specifically to users located in a particular territory. "
The appreciable expansion of sales via the Internet has had the effect of opening up considerable space for intra-brand competition and parallel distribution, and this has certainly also been favoured by European case law, which tends to favour the use of this tool also by the supplier's dealers and intermediaries.
Indeed, following the rulings Pierre Fabre of 13.10.2011[11]an absolute prohibition on distributors from using the internet for the distribution of purchased goods is to be considered fundamentally impermissible. A limit to this dispositive power was imposed by the judgment of 6 December 2017 Coty Germany GmbH[12]where the Court clarified that in a system of selective distribution of luxury products, a manufacturer (in this case Coty) is authorised to impose a clause on its distributor allowing it to sell the products via internet, but on condition that this activity is carried out in such a way as to preserve the luxurious connotation of the products.
The most recent decision Guess of December 2018[13]in which the Commission fined the parent company EUR 40 million for imposing a ban on retailers selling contractual products via internet or any other electronic or computer system, without the prior written consent of Guess same.
Also linked to the Internet is the question - which would require much more in-depth study on its own - of whether a manufacturer can directly sell on a platform online products at lower prices than those recommended to their dealers. Indeed, the question arises whether such conduct can be considered contrary to the performance of the contract in good faith formerly Article 1375 of the Civil Code. Italian jurisprudence does not yet appear to have ruled on this matter; for the time being, we limit ourselves to recommending that this case be clearly and precisely provided for in the concession contract, since otherwise such conduct could give rise to very complex and burdensome disputes for both parties.[14]
4. Can parallel distribution be avoided by creating a selective distribution system?
One way to avoid the creation of parallel distribution could be the creation of a selective distribution network, since, in this type of distribution, the manufacturer can demand that its goods can only be purchased from certain intermediaries, who comply with the form and quality requirements imposed by the manufacturer (cf. Selective distribution. A brief overview: risks and benefits). It follows that, in a selective distribution system without loopholes, products do not come into the possession of intermediaries or commercial resellers who are not admitted to the network. (cf. The mixed system: when the manufacturer chooses to adopt both exclusive and selective distribution).
However, even this system has advantages, disadvantages and limitations; firstly, it can only be implemented for products high quality and technologically developed.[15]
In addition, Article 4 d) of the Regulation, however, provides for restrictions on the manufacturer's power of direction, which may not prevent the "cross-supplies between distributors within a selective distribution system, including distributors operating at different trading levels." This freedom for each member of the selective network to obtain supplies from other members without hindrance is the necessary counterpart to the exclusion of parallel distribution networks. The Orientations provide in paragraph 58 that:
"an agreement or concerted practice may not have as its direct or indirect object to prevent or restrict active or passive sales of the contract products between the selected distributors, who must remain free to purchase those products from other designated distributors in the network, operating at the same or a different level of trade. Selective distribution may therefore not be combined with vertical restraints aimed at forcing distributors to purchase the contract products exclusively from a particular source."
Last but not least, it is noted that, albeit in a selective distribution, "the producer may impose a no-see obligation on parties (other than end users) outside the network" formerly Article 4(b)(iii), very often in practice many manufacturers distribute 'selectively' only in the most important markets, while reserving a 'classical' system (i.e. through an exclusive importer) for the other zones. In such a case, the manufacturer may not impose a ban on passive sales, vis-à-vis resellers belonging to areas where the selective system does not exist, but only prohibit active sales under Article 4(b)(i).
However, this is without prejudice to the right of the producer, who has legitimately adopted a selective distribution system in order to protect the branded productsto take action against parallel distributors, whose resale methods are such as to damage the image of luxury and prestige - which the manufacturer seeks to defend precisely through the adoption of a selective distribution system - or in any case that there is a confusing effect as to the existence of a commercial link between the trademark owner and the unauthorised reseller. In this regard, we highlight two recent orders of the Court of Milan (cf. Online sales by unauthorised distributors. The Amazon, L'Oréal and Sisley cases). [16]
__________________________________
[1] See definition from Simone Online Dictionaries https://www.simone.it/newdiz/newdiz.php?action=view&id=736&dizionario=11
[2] On this point see Pappalardo, The Competition Law of the European Union, p. 403, 2018, UTET.
[3] On this point see Bortolotti, I contratti di distribuzione, p. 690, 2016, Wolters Kluwer.
[4] Decision Grundig-Costen, 23.9.1964.
[5] On this point see Pappalardo, The Competition Law of the European Union, p. 383, 2018, UTET.
[6] The Commission expressed its opinion in the case Distillers (1978), where the Commission emphasised the fact that rebates can be used to regulate export flows indirectly ".by providing that DCL's UK resellers who export spirits to other EEC countries are charged a different price to that charged when the spirits are resold for consumption on the domestic market, and by also reserving the price discounts only to sales of spirits for resale and consumption in the UK, restrict the freedom of those customers to resell the products in question in another EEC country (...).
The inapplicability of discounts to sales of spirits for export and the application of different prices to the same customers for spirits intended for export and those intended for consumption in the United Kingdom, constitute a clear attempt to prevent parallel imports from the UK into other EEC countries and therefore amount to an express export ban (n. 2, p. 25).
[7] Importantly, however, Regulation 330/2010, contrary to its predecessor 2790/1990, does not mention the "open" exclusivity clause, but it is "automatically" exempted on the basis of the principle of the lawfulness of all clauses not expressly prohibited, laid down in Article 2 of the Regulation.
[8] Le Commission Guidelines (LGC or Orientations) in paragraph 51, active sales are defined as: 'active contact with individual customers for instance by mail, including by sending unsolicited e-mails, or by visits to customers; or active contact with a specific group of customers, or customers located in a specific territory through advertisements in the media or via the Internet or other promotions specifically aimed at that group of customers or customers in that territory. Advertising or promotions that are only attractive to the buyer if they (also) reach a specific group of customers or customers in a specific territory are considered active sales to that group of customers or customers in that territory."
[9] Le LGCPoint 51 defines passive sales as: 'the response to unsolicited orders from individual customers, including the delivery of goods or the provision of services to such customers. Passive sales are advertising actions or promotions of a general nature that reach customers within the (exclusive) territories or customer groups of other distributors, but which are a reasonable way to reach customers outside those territories or customer groups, for instance to reach customers within one's own territory. General advertising or promotions are considered a reasonable way to reach such customers if it is attractive for the buyer to make such investments even if they do not reach customers within the (exclusive) territory or the (exclusive) customer group of other distributors
[10] LGC No. 52
[11] C-439/09, Pierre Fabre of 13.10.2011.
[12] C-230/16, Coty Germany of 6.12.2017.
[13] https://www.bbmpartners.com/news/La-decisione-Guess-della-Commissione-Europea-Una-prima-analisi
[14] Please refer to Dr. Thume's "Paralleler Online-Vertrieb des Herstellers im Spannungsfeld seiner Dispositionsfreiheit und Treuepflicht', Betriebs-Berater, 15.2018, p. 770.
[15] This means that the application of such a system to product types that are not "adequate'", entails the risk of a (albeit hypothetical) withdrawal of the exemption by the Commission, i.e. by the Supervisory Authority, for agreements with effects exclusively on the internal market. On this topic see Pappalardo, Il diritto della concorrenza dell'Unione Europea, 2018, p. 405, UTET.
[16] Orders of 19 November 2018 and 18 December 2018 of the Court of Milan. https://sistemaproprietaintellettuale.it/notizie/angolo-del-professionista/13754-distribuzione-selettiva-di-cosmetici-di-lusso-il-tribunale-di-milano-chiarisce-i-presupposti-per-l-esclusione-del-principio-dell-esaurimento-del-marchio.html
Selective distribution. A brief overview: risks and benefits.
Certain products, depending on their intrinsic characteristics (e.g. the luxury sector, i.e. technically very complex products), often require a more select and careful resale system than consumer products.
In such cases, the manufacturer is inclined, not so much to focus on the vastness and capillarity of its sales network, as to favour a restriction of commercial channelsThey prefer to entrust their products to a small number of specialised dealers, chosen according to certain objective criteria dictated by the nature of the products: professional competence (as far as would-be distributors are concerned),[1] quality of the service offered, i.e. prestige and care of the premises in which the dealers are to carry out their activities.[2]
1. Definition and brief overview.
Selective distribution refers precisely to a distribution system in which products pass exclusively from the hands of the manufacturer to those of authorised dealers, i.e. to those intermediaries who comply with the form and quality requirements of the manufacturer. The EU Regulation 330/2010 on Vertical Agreements For this purpose, it defines selective distribution as:
"a distribution system in which the supplier undertakes to sell the contract goods or services, directly or indirectly, only to distributors selected on the basis of specified criteria and in which these distributors undertake not to sell such goods or services to unauthorised resellers in the territory reserved by the supplier for that system."
According to the Court, a selective distribution is in conformity with Art. 101 § 3 of the Treaty (and does not fall under general prohibition laid down in § 1 of that Article), essentially if there are three fundamental principles:
- "the choice of dealers is made according to objective criteria of a qualitative nature, concerning the professional qualification of the dealer, his staff and his facilities'.,
- which "these requirements are demanded indiscriminately for all potential resellers".,
- and that "are assessed in a non-discriminatory manner".[3]
In certain cases, the manufacturer may add a further barrier in the selection of those who can join its selective network, as it may consider imposing an additional quantitative restrictionthus opting not to automatically admit to the network all retailers presenting the standards required, but also by limiting the number of recognised entities, often calibrated to take into account the economic potential of the different markets where the contractual products are sold.[4]
The European Court of Justice has granted the exemption for quantitative selective distribution systems, recognising that the restriction has the character of indispensability required by Article 101 § 3 of the Treaty, by virtue of a predominantly economic principle: it has held that such a distribution system is lawful whenever admission to the selective system of all qualified resellers has a negative impact on the profitability of the sales network, since "would reduce the sales possibilities of each of these to a few units per year."[5] We recall here briefly the Case Vichy,[6] in which the manufacturer had reserved the products only for pharmacies for certain cosmetic products.
This was due to the fact that in some countries access to the profession of pharmacist was subject to a closed number. Still the Guidelines on Vertical Restraints (n. 175)[7], make it part of the quantitative restriction, the imposition on the supplier to make a minimum turnoverset by the provider, thus indirectly limiting access to the network to all those who fail to reach the set turnover threshold.
With reference to the type of products for which the use of a selective system may be justified, Regulation 330/2010 makes no mention of this, as it merely gives a definition of such a system. In any case, an answer can be found in the Commission's Guidelines, where at no. 176, it is stated that:
"if the characteristics of the product do not require selective distribution [...], such a distribution system does not generally lead to efficiencies that outweigh a significant reduction in intra-brand competition. If appreciable anti-competitive effects occur, it is likely that the benefit of theblock exemption is revoked".
It can, therefore, be said that selective distribution is reserved only for high quality and technologically developed products; this means that the application of this system to product types that are not "adequate'"The risk of (albeit hypothetical) withdrawal of the exemption by the Commission, or the Authority, for agreements with effects exclusively on the internal market.[8]
Let us now briefly analyse what are the peculiarities of a selective distribution system.
2. Selective distribution and prohibition of selling to outsiders.
The first element is certainly related to the fact that in a distribution system, the producer may impose an obligation not to sell to parties (other than end users) outside the network (Art. 4 (b) (iii)).[9]
This advantage, however, is counterbalanced by the prohibition imposed on the provider by Art. 4(c) to restrict the freedom to make "sales active and passive to end users by members of a selective distribution system operating in the retail trade.'
This prohibition differs from what is normally provided for, formerly Article 4 (b) (i), for distribution systems not selective, which allows the supplier to prohibit its dealers from selling only into territories or groups exclusively reserved for other intermediaries.
Having said that, it should be noted that very often in practice many manufacturers distribute 'selectively' only in the most important markets, while reserving a 'classical' system (i.e. through an exclusive importer) for the other zones. In such a case, the producer may not impose a ban on passive sales, vis-à-vis resellers belonging to areas where the selective system does not exist, but only prohibit him, pursuant to Article 4 (b) (i), from active sales (on this point see The mixed system: when the manufacturer chooses to adopt both exclusive and selective distribution).
3. Selling on the Internet and selective distribution.
The consequence that in the selective system, a retailer belonging to the network cannot be prevented from promoting products and advertising, outside its area, to end users, certainly has a disruptive effect, especially when combined with sales online (on this topic see also 'Can a manufacturer prevent its distributors from selling online?"): it is clear that, given the transversal nature of internetallowing a retailer to sell outside its territory has a very important impact (just think of the complexity of managing a pricing policy). If this is coupled with the fact that with the new Regulation 302/2018 on the so-called. Geoblockingthe EU has prevented unjustified geographical blockades based on the nationality, place of residence or place of establishment of customers within the internal market. [10]
This has prompted many manufacturers to prohibit the use of internet. On the legitimacy of the manufacturer to prevent its resellers/retailers from selling onlinea rather articulate and very complex European jurisprudential current has developed, the analysis of which would require a very in-depth study. In order to enable the reader to have a broader overview of this topic, the most important rulings of recent years are briefly summarised here.
The first in the 'series' was the Court's 2011 ruling in the case Pierre Fabre, where it was held that an absolute ban on Internet sales, where not objectively justified, constitutes a restriction by object that excludes the application of Block Exemption Regulation 330/2010.[11]
This was followed by the 2017 judgment in the case Coty Germanywhich (also) established the compatibility with Article 101 of a contractual clause
"prohibiting authorised distributors of a selective distribution system for luxury products aimed, primarily, at safeguarding the luxury image of those products from recognisably using third-party platforms to sell the contracted products via the Internet, where such a clause is aimed at safeguard the luxury image of these productsis established indiscriminately and applied in a non-discriminatory manner, and is proportionate to the objective pursued, circumstances which it is for the referring court to verify."[12]
The most recent decision Guess of December 2018, in which the Commission fined the parent company EUR 40 million for imposing a ban on retailers selling contractual products via internet or any other electronic or computer system, without the prior written consent of Guess same.[13]
4. Cross-selling within the network of selective distribution.
Article 4(d) of the Regulation prohibits "the restriction of cross-supplies between distributors within a selective distribution system, including distributors operating at different trading levels".
This provision gives members of the distribution network the freedom to sell to other members of the network; this is to allow, at least within a 'closed' system, maximum freedom of movement.
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[1] Consider the decision Grundig approved in 1985 by the Commission, which required the presence of "qualified personnel and an external service with the necessary technical expertise to assist and advise customers', as well as 'the technical organisation necessary for the storage and timely supply of purchasers'; 'presenting and displaying Grundig products in a representative manner in special rooms, separate from other departments, and whose appearance reflects Grundig's market image'.
[2] On this point, see PAPPALARDO, The Competition Law of the European Union, p. 409, UTET, 2018.
[3] Judgment Metro I25.10.1977 and Case C-31/80, L'Oréal/ PVBA. This orientation was also confirmed by the Commission's Guidelines No. 175, which state that "Selective distribution based on purely qualitative criteria is generally considered to fall outside the scope of Article 101(1) because it does not give rise to anti-competitive effects, provided that three conditions are fulfilled. First, the nature of the product in question must make a selective distribution system necessary in the sense that such a system must be a legitimate requirement, having regard to the characteristics of the product in question, to preserve its quality and ensure its proper use. Secondly, the choice of dealers must be made according to objective criteria of a qualitative nature established indiscriminately and made available to all potential dealers and applied in a non-discriminatory manner. Thirdly, the established criteria must not go beyond what is necessary"
[4] On this point cf. case Omega, Commission Decision of 28.10.1970 and BMW case of 23.12.1977.
[5] Case Omega, Commission Decision of 28.10.1970
[6] Vichy case, Commission decision of 27.2.1992
[7] "Quantitative selective distribution adds further selection criteria that limit the potential number of dealers more directly, e.g. by imposing a minimum or maximum level of purchases, fixing the number of dealers, etc."
[8] On this point see Bortolotti, Distribution Contracts, 2016, p. 720, Wolters Kluwer; Pappalardo, The Competition Law of the European Union, 2018, p. 405, Wolters Kluwer.
[9] In this regard, reference is made to what the Court of Justice stated in the case Metro-Saba IJudgment of 25.10.1977, at para. 27 ".Any sales system based on the selection of distribution points inevitably implies - otherwise it would make no sense - the obligation for wholesalers who are part of the network to supply only authorised retailers.
[10] With the new regulation 302/2018 on the CD. geoblockingregulation on measures to prevent unjustified geographical blocking and other forms of discrimination based on the nationality, place of residence or place of establishment of customers within the internal market. This regulation (mentioned here only briefly), aims to prevent unjustified geographical blockades or other forms of discrimination based directly or indirectly on the nationality, place of residence or place of establishment of customers: the regulation does in fact remove the blockade, but does not oblige customers to sell outside their own country or to have the same prices for the whole of Europe.
[11] Case Pierre Fabre, judgment of 13.10.2011
[12] Case Coty Germany, judgment of 6.12.2017.
[13] https://www.bbmpartners.com/news/La-decisione-Guess-della-Commissione-Europea-Una-prima-analisi
Agent's severance pay. How is it calculated if AEC does not apply?
In cases where no Collective Bargaining Agreements apply to the agency relationship, understanding whether (and how much) severance pay is due to the agent is not at all easy.
In contrast to AECs, which provide for a precise calculation allowing the parties to quantify the severance payment, the Civil Code only provides a ceiling for the level of indemnity, without giving precise guidelines on the method of calculation
Severance pay was introduced at European level by the Directive 86/653EECthen transposed into our legal system most recently with the reform of Legislative Decree 65/1999, which amended the current text of Article 1751 of the Civil Code, which provides as follows:
"Upon termination of the relationship, the principal is obliged to pay the agent an indemnity if the following conditions are met:
- The agent has procured new customers to the principal or has appreciably developed business with existing customers;
- The principal still receives substantial advantages arising from business with such customers;
- The payment of this allowance is fairtaking into account all the circumstances of the case, in particular the commissions that the agent loses and that result from business with such customers."
The judge must therefore, in the first analysis, find on the basis of the preliminary findings, whether the agent has increased the agent's clientele and/or business and, therefore, determine what amount should be owed to the agent, judging according to equity.
In cases where no Collective Bargaining Agreements apply to the agency relationship, understanding whether (and how much) severance pay is due to the agent is not at all easy.
Contrary to the AEC, which provide for a precise calculation that allows the parties to quantify the severance payment, the Civil Code only provides for a ceiling for the level of indemnity, without providing precise guidelines on the method of calculation
- Read also: Severance Indemnity: Art. 1751 of the Civil Code and AEC compared.
The following is a brief analysis of the criteria set out in the Civil Code.
1. The agent's contribution of customers.
The termination indemnity pursuant to Article 1751 of the Civil Code is undoubtedly intended to reward the principal's activity of promoting and developing customers. For this reason, the following must be considered excluded from the scope of applicability of this rulerecruitment and coordination of agentssince the latter, although relevant and very important from an organisational point of view, is only instrumental and ancillary in nature with respect to customer enhancement.[1]
Following this reasoning, not even the mere increase in turnover by the agent can be considered sufficient to prove the acquisition of new customers or the substantial development of those already existing at the beginning of the relationship:[2] it is not sufficient for the agent to prove (cf. Burden of proof in the agency contract) the increase of its commissions over the years, if it also does not diligently indicate the new customers it has brought in. This is stated in case law:
"the request for payment of the indemnity pursuant to Article 1751 of the Civil Code cannot be granted in the event that the applicant generically acknowledge on appeal of the recurrence of the relevant prerequisites, however failing to deduct precisely the volume of business handled for each individual customeras well as to specify the business concluded, the total value of the contracts, any increase over the business concluded with the same client in the preceding year, omitting altogether to indicate which clients he personally took care of."[3]
And again:
"The agent acting pursuant to Art. 1751 of the Civil Code must first prove that he has brought new customers to the principal, or at least that he has increased the turnover of customers who, prior to the commencement of the agency relationship, were already doing business with the principal."[4]
As for the definition of 'new customer", it should be recalled that in 2016 the European Court of Justice,[5] questioned whether it was possible to recognise as such, legal entities which, prior to the granting of the agency mandate, had already established business relations with the principal, but for products different from those covered by the agency contract. In the present case, the agent had received a mandate to sell spectacle frames of different brands from those that had already been marketed by the principal; the Court was therefore asked whether the sale of such new products to existing customers could fall within the civil law definition[6] of 'new client'. The Court stated that;
"are to be regarded as new customers within the meaning of that provision, even though they already had business relations with the principal with respect to other goods, if the sale of the first goods by the agent has required to enter into specific business relationshipswhich it is for the referring court to ascertain."
2. Advantages for the principal arising from the agent's activity.
The second condition laid down in Article 1751 of the Civil Code is that "the principal still receives substantial benefits from doing business with such customers." When analysing this condition, one must certainly understand to which time period reference must be made to verify the existence or non-existence of advantages. According to the best doctrine[7] the wording of the law is quite clear and refers to the situation existing at the time of the termination of the relationship; case law, on the contrary, is not unambiguous on this point, and there is an opposite orientation, which deems it necessary to verify whether the advantages subsist and continue also in subsequent years and, in this sense, excludes the indemnity if the agent is not able to prove judicially the 'retention' of customers even after the termination of the relationship.[8]
Certainly, the agent cannot be negatively affected by the principal's personal choice to opt for transferring the company to others (for a price undoubtedly determined not only by the trade mark, but also by the goodwill, essentially consisting of the customer portfolio), unless, of course, it is established that the increase in customers was due to factors external to the agent.[9]
On the other hand, the condition must be deemed to be fulfilled if the contracts concluded by the agent are contracts of durationas the development of goodwill and the benefits to the principal, even after termination of the relationship, are in re ipsa.[10]
3. The determination of severance pay in equity.
Once the existence of the first two requirements has been ascertained, the judge will have to quantify the allowance in equity. As mentioned above, for the purposes of determining the quantumthe judge is bound to verify compliance with the requirement of equity prescribed by Art. 1751 of the Civil Code, taking into account all the circumstances of the case and in particular the commissions that the agent loses and that result from business with those customers.
It is interesting to note that, while the law clearly identifies the requirements for the agent to be granted the indemnity, for the quantification in equity, the normative reference is not exhaustive and concerns all "the circumstances of the case', identifying, by way of example only, the reference to commissions that the agent loses and that result from business with customers.[11] In this regard, case law holds that the judge must:
"have regard to all those elements that are suitable for an adequate personalisation of the quantum due to the agent"[12] e "may or may not be considered 'fair'in the sense of also compensating for the special merit of the agent emerging from the [emerging] factual circumstances."[13]
"If it does not consider it fair, in the absence of a specific regulation, it must award the agent the differential necessary to bring it back to fairness. "[14]
It is clear that equity is a principle that is difficult to apply in practice. It follows that the non-application of the AEC to the relationship certainly entails greater uncertainty as to the quantification of the severance payment, since this is ultimately left to the sensitivity of the individual judge.
It is also important to recall that the one referred to in Article 1751 of the Civil Code is a typical case of judicial equity and as such can only be criticised in the court of legitimacy from the point of view of the logic and congruity of the reasoningbut not in its amount.[15]
4. Severance pay calculated on the basis of the criteria set by the Commission.
From the above analysis, it appears that the approach of the European directive, which only provides a ceiling for the level of indemnity, without providing precise guidelines as to the method of calculation, has and continues to create great uncertainty. It is clear, therefore, that a clear and precise method, perhaps developed by national jurisprudence, would lead to greater legal certainty, with benefits for both contracting parties.
This issue was also encountered by the same European Commission in its report of 23/7/1996which, aware of this regulatory limitation, prepared a report aimed on the one hand at analysing how European case law has approached this interpretative issue and on the other hand at providing a solution to the member states.
A solution would have been found in the German model (and in particular §89b of the HGB from which the legislation was inspired), taking into account the fact that since 1953 it has provided for the payment of a surplus value allowance, which has given rise to extensive case law regarding the calculation of the latter.
The Commission report goes into detail to analyse the calculation model developed by German case law, to which reference is made in full. For what it is worth, it is important to emphasise the fact that the system developed by German case law was then used as a model for the drafting of AEC calculations and that, therefore, the same system, although very complex, is not completely alien to us.
The Commission, after having analysed the calculation method in an analytical manner, concludes by noting that the model developed by German case law can nevertheless be used as a model to be applied, as this "facilitate a more uniform interpretation of this article."
Italian jurisprudence has, in any case, very rarely followed this model (perhaps also because it was not pushed by the parties' advocates), which at the moment remains almost completely unknown; in any case, there are a number of judgments on the merits that have shared the Commission's position, which deemed it appropriate to quantify the severance indemnity on the basis of the calculation criteria established by the European Commission in its report of 23/7/1996 on the application of Article 17 of Directive 86/653/EEC. [16]
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[1] Cass. Civ. 2018 No. 25740.
[2] On this point see also Bortolotti, Distribution Contracts, p. 386 ff., 2016, Wolters Kluver.
[3] Court of Milan 26.7.2016.
[4] Court of Bari 12.2.2014.
[5] Judgment of 7.4.2016, Case C-314/14, Marchon v. Karaskiewicz
[6] To be more precise, in the definition of 'new customer', of which Article 17 of the European Directive 1986/653 on commercial agentsby Article 4, Legislative Decree No 303 of 10.9.1991, which amended Article 1751 of the Civil Code and replaced it by Article 5, Legislative Decree No 65 of 15.2.1999.
[7] Bortolotti, Distribution Contracts, p. 388.
[8] See Court of Padua 21.9.2012 where the indemnity was denied for lack of orders following the dissolution of the relationship; to the contrary Cass. Civ. 2013 no. 24776 ".Moreover, the utility for the principal is to be assessed at the time of termination of the relationship, the crystallisation of the results obtained by the agent at that time being of relevance. "
[9] Cass. Civ. 2013 no. 24776.
[10] Cass. Civ. 2013 no. 24776.
[11] See Cass. Civ. 2018 no. 21377, Cass. Civ. 2008 no. 23966.
[12] Cass. Civ. 2016 No. 486.
[13] Cass. Civ. 2014 No. 25904.
[14] Court of Appeal Florence 4.4.2012.
[15] Cass. Civ. 2018 No. 25740.
[16] Court of Pescara of 23.9.2014, with comment by Trapani in Agenti&Rappresentanti di commercio no. 2/2015; Court of Bassano del Grappa of 22.11.2008
Commercial agent and antitrust law: when the agency contract is considered a vertical agreement.
The purpose of this article is to try to understand whether the agency contract can be considered a vertical agreement within the meaning of European Regulation 330/2010 on vertical agreements and, as such, be subject to the prohibition under Article 101(1) TFEU and antitrust law.
As has already been analysed (cf. exclusivity clauses and vertical economic agreements), the Regulation No 330/2010 provides that vertical agreements between undertakings may not have as their object or effect the prevention, restriction or distortion of competition within the common market and that such agreements, if any, are void pursuant to Article 101(1) TFEU.
In this blog, the applicability of the regulation to the exclusive distributors and to the retailers using e-commerce to distribute contractual products. The purpose of this article is to analyse (albeit briefly) an equally complex and interesting topic, namely whether the agency contracts can be considered vertical agreements within the meaning of the Regulation and, as such, be subject to the prohibition under Article 101(1) TFEU; this question is of particular relevance, given that agency agreements normally contain a number of restrictive covenants such as limitations on the determination of price, territory and clientele.
These restrictions are expressly among those defined fundamentals by Article 4 of the Regulation and the presence of which means that the agreement as a whole loses the benefit of the block exemption provided for by the Regulation[1]. The vertical restrictions that would have the greatest impact on an agency contract would certainly be those relating to the prohibition of:
- determination by the purchaser of the resale price;
- determination by the purchaser of the territory or customers to whom the buyer may sell the contract goods or services;
- restriction of sales (active or passive) to end users;
Hence the importance of understanding when an agency contract is to be considered (under the antitrust) as true and when fakeIf the brokerage contract were to be considered (within the meaning of the antitrust) an agency contract fakethe same would fall under the prohibition of Art. 101, with the result that the principal would not be able to impose limits on the agent with regard to the determination of the price (or at least reserve to him the right to grant discounts on his commission), territory, customers and inhibit him from passive sales to customers outside their area. [11]
The first assessment as to whether agreements concerning commercial representation are subject to the prohibition formerly art 101, § 1, goes back to the "Communication Christmas"of 1962[2]The Commission had excluded, in principle, the sales representative from this prohibition, provided that he did not assume '...'.in the performance of his duties (...) no other contractual risk, except the usual guarantee of the star del credere."[3] The Commission considered that the trade representation agreements,
"have neither the object nor the effect of preventing, restricting or distorting competition", since the representative performs in the market ".merely an auxiliary function [acting] in accordance with the instructions and in the interest of the undertaking on whose behalf it carries on business'.
Over the years, jurisprudential orientations have emerged[4] on the basis of which one can basically state[5] that the principle laid down in Art. 101(1) does not apply to commercial agency contracts where:
- the agent does not assume the risks commercial and financial typical of a distributor/dealer;
- the agent is integrated within the structure distribution of the principal;
- the agency contract is not part of a broader framework of contracts falling under Art. 101.
Similarly, in the Guidelines on Vertical Restraints,[6] the characterising element, in order to be able to understand whether or not an agency agreement is subject to the prohibition, is characterised by the risks assumed by the party qualified (correctly or not) as agent:[7] if the risks are substantially borne by the principal, we are in the presence of a true agency agreement, otherwise an agreement liable to incur the prohibition formerly Art. 101, § 1.
The same Orientations Point 16 states that:
"an agreement will generally be considered [...] agency [...] if ownership of the contract goods [...] does not pass to the agent or if the agent does not himself provide the contract services."
In Orientations several examples of risks outside the typical activity of the agent (in the strict sense) are then enumerated, which occur when the agent:
- acquires ownership of the contract goods[8];
- contributes to the costs related to the supply/purchase of goods covered by the contract;
- maintains, at its own cost or risk, stocks of the contract goods;
- assumes liability towards third parties for any damage;
- assumes liability for non-performance of the contract by customers;
- is obliged to invest in sales promotion;
- makes investments in equipment, premises or staff training;
- carries out other activities in the same product market as the one requested by the principal.
The best doctrine[9] (to which we refer for a more in-depth study of the issue briefly reported here) notes that the Commission's considerations in the Orientations regarding the criteria for distinguishing between agents real e fakes are often "misleading"This is partly due to the fact that the general criteria set out in the Orientations have been taken up (mostly) by a series of case law precedents of the European Court of Justice of a very particular character and this has not allowed the Commission to "consider the way in which 'normal' agents operate, of which [the Commission] was not aware [...]; the Commission has identified a number of criteria that are difficult to apply to the reality of 'normal' cross-border agency relationships'. [10]
Hence a situation of grave uncertaintydistinctive criteria indicated in the Orientations may mislead the reader (e.g. judges and national competition authorities) who relies on them, leading them to qualify as fakes agents, intermediaries who de facto (at least from a civil law point of view) perform a typical agency activity.
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[1] The regulation defines categories of agreements for which, even if there is a restriction of competition within the meaning of Article 101(1), they may be presumed to be exempt from its application.
[2] OJ, No. 139, 24.12.1962, p. 2912 ff.
[3] Id. p. 2922.
[4] Case SugarCommission decision of 2.1.1973, case Vlaamse Reisbureaus decision of the Court of Justice of 1.10.1987, case Vag Leasing decision of the Court of Justice of 24.10.1995.
[5] See on this point Bortolotti, Distribution Contracts, p. 674., Wolters Kluwer, 2016
[6] Point 13) of the Orientations: "The determining factor in defining a commercial agency agreement for the application of Art. 101(1) is the financial or commercial risk assumed by the agent in relation to the activities for which it has been appointed as agent by the principal.
[7] See on this point Pappalardo, The Competition Law of the European Union, p. 321 ff. UTET, 2018.
[8] On this point see the case Mercedes Benz decided by the commission in its decision of 10.10.2001, in which the Court of First Instance held that the purchase of demonstration cars and spare parts was not a sufficient element for the agent to be considered a distributor in its own right.
[9] Bortolotti, Distribution Contracts, p. 675 ff., Wolters Kluwer, 2016
[10] Id. p. 675
[11] The Guidelines, point 51, define passive sales as: "the response to unsolicited orders from individual customers, including the delivery of goods or the provision of services to such customers. Passive sales are advertising or promotions of a general nature that reach customers within the (exclusive) territories or customer groups of other distributors, but which are a reasonable way to reach customers outside those territories or customer groups, for instance to reach customers within one's own territory.
General advertising or promotions are considered a reasonable way to reach these customers if it is attractive for the buyer to make such investments even if they do not reach customers within the (exclusive) territory or (exclusive) customer group of other distributors'..
Can a manufacturer prevent its distributors from selling online?
When is it possible to block the online sales of distributors or members of one's own sales network? Active sales, passive sales, geoblocking... Let's have some clarity!
L'e-commerce is undoubtedly a tool with extraordinary potential: it makes it possible to address a very wide range of users, to target offers with great precision at well-defined customer categories, and for the end consumer, let's not forget, it is undoubtedly convenient!
In view of its potential, this tool must be used with great awareness by any entity wishing to operate in the e-commerce sector; a strategy must be carefully worked out marketingIt is necessary to take into account the logistical complexities involved and to comply with increasingly complex and binding regulatory requirements (think only of the privacycertainly made more complex following the entry into force of the GDPR).
Furthermore, given the transversality of the webthe use of e-commerce contributes significantly to making the increasingly transparent prices and this not infrequently clashes with the manufacturer's distribution strategies, often aimed at protecting the brand and creating a pricing policy that is as controlled as possible.
1. The European Commission's analysis of the impacts of e-commerce.
The European Commission recently carried out an investigation into the trade impacts that thee-commerce has on the market and consumers, concluded with the drafting of the "final report on the e-commerce sector enquiry."[1] Here are some insights into the conclusions reached by the Commission:
[Through e-commerce, price transparency has] increased [and] consumers are [...] able to immediately obtain and compare product and price information online and quickly switch from one channel (online/offline) to another."[2]
[...]
The ability to compare product prices between different online retailers leads to increased price competition for both online and offline sales[3] and alternative online distribution models, such as online marketplaces, have enabled retailers to reach customers more easily [...] with limited investment and effort."[4]
This analysis paints a very effective picture of the reality of sales online, leading increasingly to one:
- greater transparency on prices;
- easier to reach a very large customer base, even beyond the territorial limits possibly imposed by the distributor.
2. Can the manufacturer block the online sales of its distributors? Regulation 330/2010.
Aware of these risks, the manufacturer, in order to defend its strategy, often decides to impose limits on its distributors' use of this medium, prohibiting them from selling online (sometimes also requiring distributors to apply the same restriction to their buyers), or preventing them from selling online outside the territory assigned to them (on this subject see also The mixed system: when the manufacturer chooses to adopt both exclusive and selective distribution).
At this point, the question arises: can the manufacturer prevent its distributor from selling online?
To answer this question, one must start with theArticle 101(3) of the Treaty on the Functioning of the EU (TFEU). This rule ban agreements and concerted practices of enterprises "which have as their object or effect the prevention, restriction or distortion of competition within the common market"This prohibition includes agreements that prevent the distributor from selling to customers domiciled outside the territory.[5]
In any case, European legislation derives specific exceptions which are fixed in the Regulation No 330/2010 concerning the so-called '.vertical agreements', i.e. agreements for the distribution and supply of goods or services concluded between undertakings each operating at a different level of the production or distribution chain. This regulation must be interpreted and supplemented in the light of the Commission Guidelines (LGC), published on 20 April 2010, which, among other things, expand on the topic of restrictions on e-commerce.
The European legislation referred to above prohibits theArticle 4 of the Regulation agreements that prevent the distributor from selling to customers domiciled outside the territory. In any event, in order to prevent a manufacturer from dividing its network of distributors into different territories, it allows restrictions only on the so-called '.active sales"[6] in the exclusive territory or to the exclusive customer base of the supplier, while not allowing the so-called '.passive sales. "[7]
As for the online salesthe Guidelines (point 52) specify that they are generally to be regarded as "passive", with the consequence that, in principle, no distributor may be prevented from using internet to sell their products. In particular, it is made express prohibition to negotiate agreements whereby the distributor agrees to:
- redirecting consumers to the site internet of the manufacturer or other distributors with territorial exclusivity;
- interrupting transactions online of consumers following the ascertainment of their geographical area of residence through their credit card data;
- limit the proportion of total sales made via internet;
- pay a higher price for products intended for resale online compared to those for traditional outlets (para. 52 LGC).
It is therefore not possible to prevent a distributor or retailer from setting up its own site for sales onlinelet alone use digital platforms (e.g. Amazon, E-bay, Alibaba, etc.) for marketing.[8] The manufacturer can find its products online, supplied by the distributor or by the shop itself supplied by the distributor, without being able to prevent this process, let alone control it (on this topic see also article "Exclusivity clauses and vertical economic agreements in the European context: e-commerce and territorial exclusivity"by colleague Vittorio Zattra).
The distributor, by the way, will not be obliged to accept all orders from customers outside its territory: in order to avoid the risk that foreign customers might assume that the offer is directed at them, for the sole reason that they have visibility of the offer on their device, it is advisable to indicate directly on the site that the offer does not concern sales involving the delivery of goods abroad. This clause is also in line with the new regulation 302/2018 on the CD. geoblockingon measures to prevent unjustified geographical blockades and other forms of discrimination based on the nationality, place of residence or place of establishment of customers within the internal market.
This regulation (mentioned here only briefly), aims to prevent unjustified geographic blockades or other forms of discrimination based directly or indirectly on the nationality, place of residence or establishment of customers: the regulation in fact removes the blockade, but does not oblige customers to sell outside their own country or to have the same prices for the whole of Europe.[9]
3. Court of Justice rulings on online sales.
3.1. The Pierre Fabre Case.
However, the Court of Justice in the case Pierre Fabre C-439/09 decided that the absolute ban on the use of internet imposed by a manufacturer on a distributor, constitutes a restriction that is not in line with the provisions of Regulation 330/2010, provided that the manufacturer demonstrates that this prohibition does not is objectively justified.
One (other) question arises: when is such a restriction justifiable and to what extent?
3.2. The Coty Germany GmbH case.
The Court in its recent judgment of 6 December 2017, C-230/16 Coty Germany GmbH clarified that in a system of selective distribution[10] of luxury products, a manufacturer (in this case Coty) is authorised to impose a clause on its distributor allowing it to sell the products via internet, but on condition that such sales activity online is realised through an 'electronic shop window' of the authorised shop and that it is thus preserved the luxurious connotation of the products.
In that case, the Court decided that a clause preventing the dealer not so much from using internet to sell/promote the goods purchased from the manufacturer, but to market them through digital platforms such as Amazon and the like. This is because the quality of the products:
"results not only from their material characteristics, but also from the style and image of prestige that gives them an aura of luxury, because such an aura constitutes an essential element of these products in order for them to be distinguished by consumers from other similar products."
In conclusion, it can be said that the manufacturer/supplier, once it has authorised a distributor to handle its goods, may not prevent the latter from using e-commerce to sell them also beyond the pre-established boundaries, invading the exclusive territory reserved for other distributors, provided that the end customer's request can be considered as spontaneous and not specifically solicited by the distributor.
There is also the possibility for the supplier to impose, in any case, on its distributors certain quality standards for the presentation of products, or specific sales methods consistent with its distribution system, provided that these conditions do not directly affect the quantity of goods marketable via internet or on the prices practicable on that platform.
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[1] Report from the Commission to the Council and the European Parliament, Final Report on the E-Commerce Sector Inquiry, 10.5.2017.
[2] Id. No. 11
[3] Id. No. 12
[4] Id. No. 14
[5] On this point See Bortolotti, Distribution Contracts, Wolters Kluwers, 2016, p. 746 ff.
[6] The LGCs, paragraph 51, define active sales as: "active contact with individual customers, e.g. by mail, including by sending unsolicited e-mails, or by visits to customers; or active contact with a specific group of customers, or with customers located in a specific territory through advertisements in the media or via the Internet or other promotions specifically addressed to that group of customers or to customers in that territory.
Advertising or promotions that are only attractive to the buyer if they (also) reach a specific group of customers or customers in a specific territory are considered active sales to that group of customers or customers in that territory. "
[7] The LGCs, paragraph 51, define passive sales as: "the response to unsolicited orders from individual customers, including the delivery of goods or the provision of services to such customers. Passive sales are advertising or promotions of a general nature that reach customers within the (exclusive) territories or customer groups of other distributors, but which are a reasonable way to reach customers outside those territories or customer groups, for instance to reach customers within one's own territory.
General advertising or promotions are considered a reasonable way to reach these customers if it is attractive for the buyer to make such investments even if they do not reach customers within the (exclusive) territory or (exclusive) customer group of other distributors'..
[8] On this point see Stefano Dindo, E-Wine, Legal-economic aspects of wine communication and distribution online, G. Giappichelli Editore, p. 47, 2018.
[9] On this point see Stefano Dindo, E-Wine, Legal-economic aspects of wine communication and distribution online, G. Giappichelli Editore, p. 41, 2018.
[10] There is no definition of selective distribution, however the Metro judgement, Court of Justice, 25.9.1977, already indicates the criteria for its identification: a) the products must be products whose quality or technological content require a selective distribution system, which safeguards their quality and correct use; b) the choice of distributors is made according to objective criteria of a qualitative nature; c) the defined criteria must not go beyond what is necessary.
Agent and/or Area Manager? A brief overview.
When a company intends to organise its sales network in a structured manner, it often needs to rely not only on a plurality of agents, but also to ensure that they are among themselves organised hierarchically and are coordinates by a supervising person: the area manager.
The function of coordinating sales agents is often assigned by the company to a Area Manager (also known as area manager or area coordinator/supervisor), who is entrusted with a wide variety of tasks: he/she may be required to support the agents at the beginning of the relationship and supervise their work; coordinate the sales network in the assigned area, which may be composed of both agents and direct salespeople or resellers; or select and recruit agents, thus creating/implementing a distribution network within the assigned area.
Given the multiplicity of functions that can be attributed to an Area Manager, this figure is not easily framedMoreover, despite the highly strategic role it plays, the importance of properly delineating the relationship is frequently underestimated, with an awareness of what could be the risks associated with an ill-considered management.
1. Area manager: self-employed or commercial agent?
Before starting to establish the relationship, it should be clear how one intends to include this figure in the company's distribution network: employee, self-employed, or commercial agent?
One should ask oneself these questions not only before contracting the collaboration, but also during the development phase: it often happens that an Area Manager, classified as an agent, after the relationship is closed, claims the subordinate natureasserting (and proving) that the collaboration has always presented the typical characteristics of employment[1]. In the event of a dispute, it is common ground that, regardless of what the name iuris which the parties conferred on the relationship, the judge is called upon to frame it according to the manner in which the parties actually 'experienced' it (on this point cf. differences between agent and employee).
It follows that the creation of a hierarchical pyramid structure, structured in such a way as to strongly affect the Area Manager's autonomy of choice, may entail the risk that a (often unwanted...) relationship of a subordinate nature is established between the parties.
Among the elements characterising the subordinate nature of cooperation, there is, for example, the imposition on the Area Manager of excessively stringent visiting obligations, the giving of constant instructions on the management of the agents coordinated by him, or an obligation to report very frequent.[2]
The Court also held to be in the nature of a subordinate employment relationship, that of an Area Manager classified as an agent, but who performed almost no direct promotional activity, limiting himself to coordinating and directing the agents subordinated to him. He was remunerated with a monthly fixed sum, qualified as an advance on commissions, against commissions that were in fact practically nil (Lire 5,400 in 10 months of activity).[3]
In contrast, the Court ruled out the subordinate nature of the relationship of a coordinator of a group of commercial agents, where the parties had agreed on a monthly advance payment, to be balanced with the commissions actually accrued, in addition to a share of the commissions that the commercial agents of the group under his coordination would have accrued. The Court recognised in this structure both the actual activity of coordination, but also that of promotion, typical of the agent, with the allocation to the latter of a
"risk in the activity of the [agent]represented by the insecurity of commission level. "[4]
If the typical characteristics of subordination briefly set out above do not exist, it must first be clarified that the activity of Area Manager is not incompatible with that of commercial agent[5]However, if he only performs the activity of coordination/supervision, without actually promoting sales in the area entrusted to him, he cannot be classified as an agency.[6]
This principle is constantly reaffirmed by case law, which states that the activity of promoting the conclusion of contracts, which constitutes the agent's typical obligation under Article 1742 of the Civil Code, cannot consist in a mere activity neither of mere control, nor of "propaganda"even if this results in an increase in sales (see also: Obligations of the Agent. Is a simple propaganda activity sufficient?). On this point we read:
"The activity of promoting the conclusion of contracts on behalf of the principal, which constitutes the agent's typical obligation, [...]. cannot consist of a mere propaganda activityfrom which an increase in sales can only indirectly be derived, but must consist in persuading the potential customer to place orders for the principal's products, since it is precisely with regard to this result that the agent is awarded the remuneration, consisting in the commission on the contracts concluded through him and successfully concluded.[7]
In any event, promotion activity should not be understood solely as the activity of seeking out the end customer, who may also have been acquired on the principal's instructions (or in any other way),
"provided there is causal link between the promotional work performed by the agent vis-à-vis the client and the conclusion of the transaction to which it relates the request for commission (Applying these principles, the S.C. upheld the contested judgment that had excluded the existence of an agency contract between the parties, given that the appellant had the task of creating a commercial network by recruiting and training agents, as well as carrying out propaganda and support activities for them, without, however, having any influence on the individual deals concluded by the agents themselves with customers). (Cass. Civ. 2018, no. 20453)
Therefore, strictly speaking, since the activity of controlling and coordinating agents is not an '.promotion"of concluding contracts, the Area Manager who only performs that task cannot be considered to be a commercial agent.[8] In order to classify the Area Manager as a commercial agent, he will have to combine coordination activities with the promotion of business directly, i.e. in cooperation with the agents assigned (or selected by him);[9] It will certainly be easier to consider it an agent where the second activity is, if not predominant, at least significant.
2. The ancillary nature of the office of area manager.
That being said, in the event that the Area Manager predominantly carries out promotion activities and is therefore classifiable as an agent, the coordination activity has accessory naturethan that of agent. On this point, the Supreme Court has ruled on several occasions: [10]
"the relationship between agency contract and ancillary supervisory assignment must be reconstructed through the scheme of the negotiated link, with unilateral dependence bond. "
Given the ancillary nature of the coordinator's relationship with respect to that of an agent, one of the main consequences of this unequivocal interdependence is that in the event of termination of the main contract (agency), the ancillary contract (coordination) will follow
"the fate of the main contract to which it accedes [11][...].
Conversely, in the event of revocation of the ancillary contract (i.e. that of coordinator),
"precisely because it relates to a contractual relationship distinct from that of agency, it cannot have any effect on the latter, either from the point of view of the alleged failure of the revoking principal to fulfil its obligations under the agency contract, or from the angle of an alleged lack of interest on the part of the same principal in the continuation of the agency relationship[11]. "
Direct (and far from secondary) consequences of the accessory nature of the Area Manager position as opposed to the agency contract are essentially two:
- the parties may agree not to make the revocation of this assignment subject to any notice period (which, however, is expressly prohibited for the agency contract (cf. Early termination of an agency contract. How is the indemnity for lack of notice calculated?);
- i fees accrued by the Area Manager are not of a commission nature and, therefore, do not fall within in the calculation for quantifying theseverance pay.
2.1. The obligation to give notice and the corresponding indemnity.
With reference to theobligation to give notice (and consequent entitlement to compensation for loss of notice) in the event of termination of the appointment as Area Manager only, the Court:
"ruled out the possibility of a general rule of the system which, in contractual relationships of indefinite duration, would require the grant of a notice period (or the payment of the indemnity in lieu of notice) in every case of termination by one of the parties, unless there is a contractual derogation excluding such an obligation on the withdrawing party", and that this is to be inferred from the fact that only for some typical types of long-term contracts does the law make the validity of the termination conditional on the other party being granted a period of notice, and subject, in any event, to the assessment of whether the duties imposed by Articles 1175 and 1375 of the Civil Code in the performance of the contract."[11]
2.2. Area managers and quantification of severance pay.
As for theseverance pay:
"the claim [...] that the rules laid down in Article 1751 of the Civil Code for the basic agency contract should be applied to the ancillary assignment has no legal or even contractual support."
The ancillary nature of this relationship, from which a compensation non-contributory, which does not affect either the notice allowance or the severance pay, is also indirectly apparent from a reading of the AEC. Article 6 para. 4 of the AEC Industry 2014, in fact states that:
"In the event that the agent or representative is entrusted with the task of coordinating other agents in a certain area, provided that this is specified in the individual contract, a separate commission or a specific additional remuneration, in non-commissionable form, shall be established."
Article 4(11) of the AEC Commerce 2009 extends this regime to all ancillary activities carried out by the agent:
"In the event the agent or representative is entrusted with the continuous task of collecting on behalf of the principal, with the agent's liability for accounting errors, or of performing complementary and/or ancillary activities with respect to the provisions of ss. 1742 and 1746 of the Civil Code, including those of coordinating other agents in a certain area, provided that they are specified in the individual contract, a specific additional remuneration, in non-providential form, shall be established."
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[1] See on this point Cass. Civ. 2004, no. 9060.
[2] On this point see Perina - Belligoli, Il rapporto di agenzia, G. Giappichelli Editore, 2014, p. 21 et seq.
[3] Cass. Civ. 1998, no. 813.
[4] Cass. Civ. Cass. 2002, no. 17534.
[5] Cass. Civ. 1990, no. 2680 "The agency relationship - which is of an autonomous nature - is not incompatible [...] with the agent's obligation to visit and instruct other employees, with the fact that the principal has several agents organised hierarchically, with the principal's obligation to reimburse certain expenses incurred by the agent, nor with the agent's obligation to report daily to the principal."
[6] In doctrine on this point see Bortolotti, Distribution Contracts, Wolters Kluvers, 2016, p. 109. See also Tassinari&Sestini, Area manager in sales agent format, are you in?
[7]Tribunale Vicenza, 22.3.2018, concurring also Cass. Civ. 4.9.2014 no. 18690.
[8] In Doctrine, Bortolotti, op. cit, p. 109.
[9] Cass. Civ. 2007, no. 18303 "Although the "nomen iuris" assigned by the parties to a contract is irrelevant, nevertheless for the purposes of reconstructing the intention of the parties, according to the rules of Art. 1362 et seq. of the Civil Code, the qualification is also part of the words used and contributes to offering elements for reconstructing the common intention of the contracting parties.
In particular, since it is necessary to verify the correspondence of the "nomen" with the negotiated content, both the agent's carrying out of the promotional activity by availing itself of other coordinated and supervised agents and the lack of a formal and express indication of the area in which the agency is to be carried out must be deemed compatible with the legal notion of agency, where such indication is otherwise inferable from the reference to the territorial area in which the parties operate at the time of the establishment of the relationship. (Rejected, App. Trieste, 8 October 2004)"Cass. Civ. 1998 no. 813; in Dottrina Perina - Belligoli, op. cit., p. 22.
[10] Cass. Civ. 2005, no. 19678.
[11] Cass. Civ. 2018, no. 16940; Cass. no. 14436, 2000.