Concession of sale and severance pay. The new legislation in the car industry (and how does it work in Germany?)
The termination indemnity for distributors or sales dealers in Italy has been the subject of recent legislative developments, which have led to significant changes.
The recently introduced law in the motor vehicle distribution sector establishes an 'innovative' right to fair compensation for authorised distributors and a minimum contractual term of five years for fixed-term contracts, as well as twenty-four months' notice for open-ended contracts.
Although the interpretation of the rule and the determination of the amount of the severance payment still present significant complexities, pending further developments in law and jurisprudence, the German model, which has recognised it for years in all business sectors, could provide interesting pointers.
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1. Introduction. Damages and compensation.
Until a few months ago, in the Italian legal landscape, the termination indemnity in sales concession contracts was devoid of any legal regulation and case law remained firm and unanimous in holding that any indemnity should be paid to the concessionaire for the customers contributed by them, thus excluding an analogical application of the agency provisions.
In the Italian legal system, upon termination of the contractual relationship, the interests of the dealer were mainly protected in the context of an assessment of the legitimacy and/or appropriateness of the termination or dissolution of the contract, by means of an estimate of the profits that the dealer could have received if the contract had been fulfilled until its natural expiry. The instrument used is that of damages, calculated in the loss of the expected profit and in the absorption of the costs inherent in the organisation and promotion of sales, as well as the investments undertaken in reliance on the continuation of the contract.[1]
On the other hand, compensation is not intended to reward the dealer for his work in building up a customer base, as is in fact provided for in agency relationships in Article 1751 of the Civil Code.
The termination of the sales and/or distribution dealership contract. Brief analysis.
So that, for the fixed-term contractsunilateral termination of the relationship is excluded (unless expressly agreed by the parties) and termination of the contract may only occur in the event of serious breach.[2]
Otherwise, for the open-ended contractsunilateral termination is permitted, even in the absence of non-performance, provided that adequate notice is given.[3] Where the parties have not agreed on a period of notice, it must be assessed by reference to the interests of the party 'suffering' the termination, the termination party having to grant a period of notice that may enable it to prevent, at least partially, the negative effects resulting from the termination of the relationship;[4] the concessionaire must have the possibility of recovering part of the investments made (e.g. the disposal of inventories), while the grantor must have sufficient time to be able to buy back the goods still in stock from the concessionaire, so that they can be reintroduced into the distribution circuit.[5]
If the parties had contractually agreed and quantified the period of notice, it is debatable whether the judge can assess its adequacy; the majority jurisprudence holds that this period, even if short, must be observed, and that the judge does not have to assess its adequacy.[6]
However, mention must be made of a case in which the Court of Cassation, in a ruling of 18 September 2009 in the automotive sector,[7] dealt with a dispute between an association of former car dealers and Renault; in particular, the manufacturer had terminated the contracts with the dealers, acknowledging the contractual notice period of twelve months. The dealers considered the termination to be abusive, and the court upheld the plaintiffs' claims, ruling that the court can assess whether the right of termination was exercised in good faith or whether it was abused, relying on the criterion of objective good faith, which is considered the fundamental benchmark for the parties' conduct.
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2. The novella on motor vehicle distribution.
In this context, the new regulations introduced for the automotive distribution sector with the Law No. 108 of 5 August 2022later updated by Law No. 6 of 13 January 2023.
In particular, Art. 2 specifically regulates the duration of the contract, providing that:
- if the ratio is at fixed-termthe minimum duration of the agreement is five years, with each party being obliged to give written notice, at least six months before the expiry date, of its intention not to renew the agreement, on pain of ineffectiveness of the notice;
- as regards relations to indefinitethe written notice period between the parties for termination is twenty-four months.
It is then introduced in Article 3 of the Act, an obligation on the manufacturer or importer to provide the dealer withprior to the conclusion of the agreement, as well as in the event of subsequent amendments thereto, all information in its possession, which are necessary to make an informed assessment of the extent of the commitments to be undertaken and the sustainability of the same in economic, financial and asset terms, including an estimate of the marginal revenue expected from the marketing of the vehicles.
Article 4 then introduces a 'revolutionary' (at least for Italian law) obligation on the manufacturer or importer, who terminates the agreement before the contractual deadline, to pay the authorised distributor a fair compensationwhich is to be measured on the basis:
- of the investments it has made in good faith for the purpose of performing the agreement and which have not been depreciated at the date of termination of the agreement;
- goodwill for the activities carried out in the performance of the agreements, commensurate with the turnover of the authorised distributor over the last five years of the agreement.
Compensation under para. 4 is not due in the event of termination for non-performance or when termination is requested by the authorised distributor.
Finally, Article 5-bis of the regulation expressly states that the provisions of paragraphs 1 to 5 are "mandatory".
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3. Some insights into the new legislation.
To date, there are no case law precedents that allow for an interpretation of the legal provision, which remains very general and difficult to apply in practice.
In anticipation of a jurisprudential development, we briefly raise what are the major criticisms that can be detected even from a simple reading of the text of the law, with particular regard to two aspects, namely:
- the duration of the contract and
- the quantification of fair compensation.
3.1. Duration of the contract and automatic renewal
If the contract has been concluded for a fixed term, it would appear that the contract will be automatically renewed for the same period for which it was concluded if either party fails to terminate it within six months from the closing date.
One can come to this 'hasty' conclusion from a simple reading of the text, which speaks precisely of 'renewal' and not so much of transformation of the contract from a fixed-term to an open-ended term, as is the case, for example, in agency relationships (cf. Article 1750 of the Civil Code.). It is clear that this is a matter of great practical impact, given that the renewal of the contract, if indeed automatic, entails the extension of the relationship for a period of not less than five years, this being the minimum term fixed by the legislation.
This element also has a very important bearing on the possible entitlement of the concessionaire to fair compensation, which, it should be noted, is not only due in the event of the concessionaire's non-performance, i.e. its termination. If, as is more than likely to be expected, the theory of automatic renewal of the agreement passes, the indemnity will be awarded to the dealer even in the event that he declares that he does not wish to renew the agreement before its expiry, since this is not technically a case of actual termination. Similarly, compensation is likely to be due even if the parties agree to terminate the contractual relationship.
Since it is then a mandatory rule that of indemnity, the question arises, as in the case of agency, whether any waiver prior to the termination of the relationship can be considered valid, or whether it is effective only if agreed by the parties once the contract is terminated.
Read also: Which waivers and settlements may be challenged by the commercial agent.
3.2 Fair compensation.
As to the quantification of fair compensation, as we have seen, the rule refers to two very general parameters, namely:
- the investments made in good faith by the dealer and not amortised at the date of termination of the agreement;
- l'start-up of commercial activity, commensurate with the turnover developed by the distributor over the last five years of the agreement.
Firstly, it should be noted that it does not appear to be an analogical application of the principles laid down on the subject of agencysince neither requirement makes any reference whatsoever to the clientele brought in by them and the business developed with them, as stipulated by the'Article 1751 of the Civil Code.
Article 4(a) refers precisely to investments made in good faith, completely detached from what was the customer contribution and business development that the dealer managed to develop in the course of the relationship.
The choice made by the legislator seems to want to give more weight to the performance of the relationship according to good faith, which requires, on the one hand, the grantor to act in such a way as to preserve the interests of the concessionaire and thus not to require, or in any case unreasonably induce, the concessionaire to make investments disproportionate to the type and duration of the contract and, on the other hand, the concessionaire to be compensated only for non-depreciated investments made on the basis of a principle of good faith.
With reference, on the other hand, to Article 4(b), the legislature makes a general reference to the goodwill of the concessionaire, without any relevance being given, once again, to the advantages which the concessionaire has brought to the grantor and which the latter enjoys following the termination of the relationship.
Moreover, a general reference is made to the dealer's "turnover" during the last five years of the relationship; it is clear that this is a very general figure, in itself detached from the dealer's own margin or profit, and in itself not necessarily related to the customers procured by the dealer during the term of the contract.
The temporal reference of five years, would seem to recall the period of analysis applied to commercial agents, in Art. 1751 of the Civil Code, with the only (but huge) distinction, that in that case reference is made to the average commission developed by the agent in that interval.
3.3. Mandatory standards and/or standards of necessary application?
As we have seen, Article 5-bis of the new law expressly assigns the new provisions on automotive distribution a mandatory character.
In this context, a relevant question arises concerning the application of the Rome I Regulation (Regulation (EC) No 593/2008) to the new legislation. In particular, the question arises as to whether these provisions can be regarded as 'rules of necessary application' within the meaning of Article 9 of the aforementioned Regulation, also known as 'internationally mandatory' rules.
According to this provision, mandatory rules are legal rules that a country considers crucial to safeguard its public interests, such as its political, social or economic organisation. In certain cases, national legislators may decide to give some of their mandatory rules an even stronger character by providing that they cannot be derogated from even by subjecting the contract to a foreign law. This means that, notwithstanding the contractual choice to apply a different law, a court may be obliged to apply such provisions if it considers them to be of 'necessary application' because they are crucial to safeguarding Italy's public interests.
One must therefore ask oneself (pending an appropriate jurisprudential and legislative development), whether the new provisions on automotive distribution should be considered not only mandatory (under Art. 5-bis) at national level, but also international, under Art. 9 of the Rome I Regulation.
Precisely in the area of sales concessions, an example of a rule of necessary application is the Belgian law of 27 July 1961, Article 4 of which imposes the internationally mandatory application of this rule in the case of disputes concerning the termination of concession contracts performed in Belgium, irrespective of the law contractually chosen by the parties. [7a]
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4. The dealer's indemnity in the German system.
While waiting for a jurisprudential development that refines and directs practitioners to interpret the new legislation, it is interesting to analyse how a system close to ours, which has recognised this allowance for several decades, works; all this without claiming to be German jurists, but with the simple intention of providing the reader with a general overview of this model.
4.1. The prerequisites of the concessionaire's right to indemnity.
In Germany, case law for years apply analogically the principles of agency indemnity, regulated by the § 89b HGB (Handelsgesetzbuch), also to the dealer. The provision in question is the German counterpart of Article 1751 of the Civil Code, both of which were reformed to implement the 1986 European Commercial Agency Directive.[8]
For the allowance to be recognised, German case law requires the following conditions to be met:
- the contract shall not be terminated by the principal due to serious default by the agent, or by the agent without justified reason, or there has been an assignment of the rights and obligations of the contract to a third party;
- the concessionaire must be integrated within the distribution network of the grantor;
- a transfer of the customer list must have taken place.
4.1.1. Dissolution of the relationship.
German case law applies by analogy the principles in agency law, whereby the purpose of the indemnity is to compensate the agent for the benefits that are transferred to the principal following the termination of the contract, since the agent can no longer benefit from the relationships it has established or developed with its customers.
The purpose of the indemnity, therefore, is on the one hand to compensate the agent for the loss of commission suffered by the agent due to the termination of the relationship, and on the other hand to provide the agent with compensation for the benefits derived from the customers acquired and/or developed by the agent. A prerequisite for the claim for indemnity, as set forth in subsection (3) of § 89b HGB, is the fact that the contract has not been terminated by the principal due to the agent's serious breach of contract, by the agent without justified reason, or by the assignment of the rights and obligations of the contract to a third party.
German case law, although the law does not expressly regulate it, has held that the indemnity is due in the event of termination of the relationship due to mutual disagreement, regardless of who first proposed the consensual termination of the relationship.[9]
These criteria are also faithfully applied to dealer contracts, including consensual termination of the relationship.[10] Therefore, even in the event of consensual termination of the contract, the authorised dealer will be entitled to an indemnity, provided that the other requirements, i.e. integration into the manufacturer's distribution network and the obligation to transfer customers, are met.
4.1.2. Integration within the network.
With regard to the requirement of integration within the distribution network, it is important to emphasise that the business relationship is not limited to a simple relationship between a seller and a regular customer, a deeper form of collaboration constituting a true integrated distribution agreement being necessary.
This implies that the authorised dealer is actively involved in the manufacturer's distribution system, so that the claim is intended to compensate the dealer not only for the loss of the benefits of customer relations, but also for the active contribution to the manufacturer's distribution network.
Read also: Dealer, distributor or regular customer?
German jurisprudence[11] over time has developed a number of examples of situations that could lead to, or at least lead to the assumption that there is a real integration in the distribution system of the grantor; here are some of them:
- be recognised as an authorised dealer;
- grant the producer/concessionaire authorisation to enter the business and storage premises at any time;
- be subject to minimum purchase obligations for the contractual products;
- have an obligation to store goods in the warehouse;
- set up and supervise authorised workshops in the contract territory;
- provide customer support and repair services;
- receive training from the producer/concessionaire;
- enhance, preserve and maintain the producer's brand;
- follow the manufacturer's sales guidelines and recommendations;
- have the possibility of selling the producer's products outside the contract territory;
- be assigned to a specific contractual territory, even in the absence of territorial exclusivity.
4.1.3. The transfer of customers.
Another basic requirement for the dealer or reseller to be entitled to severance pay is that there has been a transfer of customer data.
According to German case law,[12] it is not indispensable that the transfer of the customer list be explicitly provided for in the contract, but may arise implicitly as an obligation or be a practice adopted by the parties (e.g. if the dealer sends the names of customers to the manufacturer for warranty management or other after-sales service purposes).
This transfer of the customer list is a crucial element because it allows the manufacturer to maintain and develop the relationship with customers acquired by the dealer even after the relationship with the dealer or reseller has been terminated.
4.2. The calculation of the allowance.
The quantification of the allowance must be carried out considering the following parameters:
- advantages for the producerIt is necessary to assess whether the dealer has acquired new customers or consolidated existing ones, as required by § 89b HGB (and Art. 1751 of the Civil Code), by means of an analytical prognosis of the benefits derived from the acquired customers. It is up to the dealer to provide proof of developments for each individual customeras the production of a mere list of customers that the dealer has acquired or developed in the course of the relationship is not sufficient.[13] The estimate must then be based on the results of the last five years, in analogous application of § 89b HGB;
- the quantification of benefits must be done in a "fair" manner, assessing the losses incurred by the dealer as a result of the termination of the relationship. Applying the commercial agency discipline by analogy, the losses to be taken into account must be by commission-based' nature. Although, as is well known, the dealer is not remunerated through commissions, but rather marginalises on the discounts granted to him by the licensor, in order to be able to apply the principles of agency by analogy, it is necessary to calculate what the manufacturer would have paid to a commercial agent on the basis of the sales made by the dealer, if the distribution had taken place through an agency and the sales had been made in this way.
In this context, in order to calculate the allowances and to attempt to "commission" the dealer's revenues, all those remuneration components typical of the dealer and extraneous to the agent must be deducted from the discount. By way of example: expenses for personnel and equipment for the business, advertising, product presentation, assumption of sales, price fluctuation, credit or equivalent value risks, etc.[14]
The limit of the allowance corresponds to the average of the last five years.[15] It is important to emphasise that this is the commission that the dealer would have earned, not the turnover generated by the dealer. This is particularly important as it shifts the focus of analysis away from the dealer's total volume of business, to concentrate instead on actual net revenue.
This approach takes into account the dealer's actual economic benefit, rather than relying on a generic figure that may not accurately reflect the dealer's commercial position. This distinction ensures that the allowance is calculated more accurately and truthfully, reflecting the dealer's actual earnings rather than the total amount of sales realised.
The allowance is then calculated on the basis of these benefits, following an approach similar to that used in the agency.
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[1] On this point, see Venezia, Il contratto di agenzia, 2016, p. 140, Giuffrè.
[2] I contratti di somministrazione di distribuzione, Bocchini and Gambino, 2011, p. 669, UTET.
[3] Concessione di Vendita, Franchising e altri contratti di distribuzione, Vol. II, Bortolotti, 2007, p. 42, CEDAM; In doctrine Il contratto di agenzia, Venezia - Baldi, 2015, p. 140, CEDAM.
[4] In doctrine Il contratto di agenzia, Venice - Baldi, 2015, p. 140, CEDAM; In jurisprudence Court of Appeal Rome, 14 March 2013.
[5] I contratti di somministrazione di distribuzione, Bocchini and Gambino, 2011, p. 669, UTET.
[6] See Trib. of Turin 15.9.1989 (which considered a term of 15 days to be congruous); Trib. of Trento 18.6.2012 (which considered a term of 6 months for a 10-year relationship to be congruous); Distribution contracts, Bortolotti, 2022, p. 659, Wolter Kluwer.
[7] Cass. Civ. 5.3.2009 'On the subject of contracts, the principle of objective good faith, i.e. of mutual loyalty of conduct, must govern the performance of the contract, as well as its formation and interpretation and, ultimately, accompany it at every stage. [...] The obligation of objective good faith or correctness constitutes, in fact, an autonomous legal duty, the expression of a general principle of social solidarity, the constitutionalisation of which is by now unquestionable (see in this sense, among others, Court of Cassation Civ. 2007 no. 3462.)"
[7a] On this point, Bortolotti, Il contratto internazionale, p. 47, 2012, CEDAM.
[8] Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents.
[9] On this point, compare Van Der Moolen, Handbuch des Vertriebsrechts, p. 599, 4th edition, 2016, C.H. Beck.
[10] BGH 23.7.1997 - VII ZR 130/96.
[11] BGH 8.5.2007 - KZR 14/04; BGH 22.10.2003 - VIII ZR 6/03; BGH 12.1.2000 - VII ZR 19/99; on this point see also Van Der Moolen, Handbuch des Vertriebsrechts, p. 600, 4th edition, 2016, C.H. Beck.
[12] BGH 12.1.2000 - VIII ZR 19/99.
[13] BGH 26.2.1997 - VII ZR 272/95.
[14] On this point, compare also Van Der Moolen, Handbuch des Vertriebsrechts, p. 621, 4th edition, 2016, C.H. Beck.
[15] BGH 11.12.1996 - VII ZR 22/96.
Selective online distribution: the Amazon.it case.
1. Selective distribution: the regulatory and jurisprudential context.
Based on the assumption that the goal of every manufacturer is to maximise its profit, there are cases in which this goal can only be achieved by restricting access to the official sales network to distributors and resellers with special requirements, so as to protect the image of excellence and product quality.
This tends to be the case for technically complex products - for which customer service is particularly important - and the manufacturer believes that the certainty of an adequate service can positively influence the purchaser's choices, or in the case of beauty or fashion products, where the protection of the product's image or prestige may be considered essential in order not to dissuade the consumer from purchasing a product that is offered together with goods of much lesser value.[1]
Here is the manufacturer's interest in creating a selective distribution within which, each authorised member undertakes to sell the contractual goods or services only to distributors selected on the basis of predetermined criteria, in order to safeguard, in the consumer's perception, the aura of exclusivity and prestige of the products, thanks precisely to a presentation of the goods to the public that enhances their aesthetic and functional specificity.
Although selective distribution is abstractly capable of restricting competition on the market (thus contrary to theArticle 101(1) TFEU), it is nevertheless regarded as a legitimate selling method (pursuant to Article 101(3) TFEU) provided that:
- the characteristics of the products actually require a selective distribution system, in view of their high level of quality and technologyin order to preserve their quality and ensure their proper use;
- the choice of dealers is made according to objective criteria of a qualitative nature, established indiscriminately for all potential resellers and applied in a manner non-discriminatory;
- the system proposes a result apt to improve competition and thus counterbalance the restrictions on competition to the same;
- the criteria imposed do not go beyond what is necessary.[2]
Under these conditions, therefore, a selective distribution system is permissible.
The first and main advantage (linked in fact to the very essence of selective distribution itself) is the fact that in such a system, the manufacturer may oblige those belonging to the network and, therefore, bound to it by a contractual relationship, not to promote sales to parties (other than end users) not belonging to the network (Art. 4(b)(iii)), subject however to the possibility of sales cross between authorised members (Art. 4(d)).[3] Therefore, in the event of a breach of contractual obligations, the manufacturer will have the possibility of retaliating against the non-performing member by resorting to the remedies typical of breach of contract.
- Read also: Selective distribution. A brief overview: advantages and disadvantages.
On the other hand, as far as relations with parties outside the network are concerned, with whom the producer by definition has no contractual relationship, it can now be affirmed without hesitation that the producer has the right to seek injunctive relief against the parallel distributorsif, and only if, the manner of resale is such as to damage the image of luxury and prestige - which the manufacturer seeks to defend precisely by adopting a selective distribution system - or if there is a confusing effect as to the existence of a commercial link between the proprietor of the trade mark and the unauthorised reseller.
As is well known, thearticle 5 c.p.i. - which in its first paragraph lays down the so-called principle of exhaustion, in its second paragraph provides for an exception, stating that the holder of an industrial property right may, if there are legitimate reasons, oppose the further commercialisation of its products already on the market, in particular if their condition is changed or altered; it is now common ground that selective distribution falls within this exception.[4]
- Read also: Parallel Sales in the EU. When and to what extent can a manufacturer control them?
The application of these principles to sales onlineThis has led to the consolidation of a guideline that considers unlawful, as constituting a serious restriction of competition, a contract that absolutely prevents the sale via web[5] and that a restriction on the distribution online would only be lawful if it aimed to make authorised dealers of a selective system comply with certain quality standards with the main purpose of safeguarding the image of the contractual products.
- Read also: Can a manufacturer prevent its distributors from selling online?
Given that online sales have been de facto 'cleared' by European jurisprudence, albeit with the limitations mentioned above, a further issue has arisen, namely whether parallel distributors can also claim the right to make sales via web. A recent judgment of the Court of Milan - applying the principles already well established in the field of 'traditional' sales - held that in relations extra-contractualthe proprietor of exclusive property rights, may only block sales to persons outside the selective sales network if there is actual prejudice to the luxury or prestige image of the trade mark, thus affirming that the failure to distinguish by a maerketplace (in this case amazon.co.uk) between luxury and inferior products can confuse the consumer and damage the prestige of the brand.[6]
2. The case Shiseido v. Amazon.
With order of 19 October 2020 (currently the subject of a complaint), the Court of Milan again confirmed its orientation, upholding the appeal brought by the licensees of trademarks including "Narciso Rodriguez" e "Dolce & Gabbana" for the manufacture and marketing of perfumery and cosmetics products, preventing 'amazon.it' from promoting and offering for sale products bearing its trademarks, which are the subject of selective distribution agreements.
The Court of Milan, in order to verify the existence of the fumus boni iurisIt established the existence of the following three requirements:
- if the products in question could qualify as luxurious;
- if the selective distributionof the applicant was legitimate;
- if the off-network sale would bring an effective damage to the reputation of the trade mark.
2.1. Ascertaining the luxury category of products.
The examination of this requirement was carried out, in this case, on the basis of quality indexes, finding, with reference to the trade marks 'D&D' and 'Narciso Rodriquez':
"the search for high quality materials, the care for packaging [...], the public presentation promoted at publicity level by personalities from the entertainment industry, the wide accreditation in the sector of reference deducible from [...] awards obtained, the consolidated recognition by the specialised press".
The Court, on the one hand, held that such serious, precise and concordant evidence, pursuant to Article 2729 of the Civil Code, proved that such fragrances belonged to the high-end category (reserving the right to conduct a more detailed investigation at the merits stage) and, on the other hand, again using the same indices and parameters of assessment, declared that the aura of luxury had not been sufficiently proven with reference to the marks "Iseey Miyake", "Elie Sahh" e "Zadig&Voltaire', thus placing these fragrances in the high-end category.
2.2. Verification of selective distribution contracts.
After verifying the aura of prestige of the products in question, it was necessary to verify the actual existence of selective distribution.
According to European case law, in order to benefit from the exemptions of Article 101(3) of the Treaty, it is not sufficient that a manufacturer has made a significant promotional effort in favour of high-end products, but also the conclusion of agreements that effectively impose on other independent economic operators obligations restricting their freedom of competition, since, otherwise, each manufacturer could justify the use of a selective distribution system only on the basis of the promotional activities carried out, so that any restrictive infringement criterion would be justified by the fact that it was necessary to protect the marketing strategy desired by the manufacturer.[7]
Moreover, once the existence of a selective distribution system has been verified, according to a recent orientation of the Court of Appeal of Milan, the producer may only claim the advantages deriving from it, and thus derogate from the principle of exhaustion, if, in application, the existence of an effective vigilance exercised on the market by the manufacturer.[8]
In the present case, the Court analysed the clauses of the contracts and verified that the obligations imposed on authorised dealers appeared to be aimed solely at protecting the luxury aura of the trade marks, having been applied "objective, qualitative, non-discriminatory criteria proportionate to the luxury character of the products distributed" and therefore "confirms the regulatory and jurisprudential principles cited'.
In particular, limitations on brand and sign positioning, sales and advisory service, sales methods, use of advertising material, qualification of sales personnel and customer care were deemed appropriate.
The contracts provided for further restrictions on how sales could be made via internet, as only authorised dealers are allowed to carry out such activities. availability of at least three physical points of sale and only after specific authorisation by the licensee, who, once the admission procedure had been activated, still had to set up and operate the site in accordance with the contractually imposed standards (graphical quality of the site, quality space dedicated to competing luxury products of the same level, absence of products other than perfumery or beauty products).
The General Court held that the limitations imposed by Shiseido on its authorised retailers, including making the use of e-commerce conditional on the availability of at least three physical points of sale, did not appear to go beyond what was necessary, in view of the fact that (with reference to the requirement of physical points of sale) the same is admitted by the European Commission itself in paragraph 54 of the Guidelines of the Exemption Regulation.
2.3. Brand reputation bias.
The last element to be ascertained by the Court, which is necessary for the application for an injunction to be granted, is the existence of a concrete injury to the holder of the patent rights, since it is not sufficient to merely note the circumstance that the unauthorised seller does not comply with the standard imposed on authorised dealers.
Indeed, case law requires that the specific manner of sale must concretely damage the prestige of the trade marks in order for the proprietor to prevent the unauthorised reseller from further resale.[9]
For the purposes of the injury determination, Amazon was challenged:
- the absence of physical shops (relevant for the products in question, i.e. fragrances and cosmetics, also for possible allergy testing of products),
- the lack of a customer service concept similar to that provided in the real shop with the presentation of a capable person,
- the combination of the perfumes in question with other heterogeneous, non-luxury products (toilet paper, insecticides),
- the presence of advertising material of products of other brands, even of lower market segments, on the same Internet page where the perfumes in question are present.
Of particular interest is the fact that the General Court thus held that it was not so much the fact that other, even non-luxury products were sold within amazon that was decisive, but rather that in the same virtual space (web page), heterogeneous goods were presented, thus applying a well-established orientation of European case law to the 'virtual'.
In particular, the European Court of Justice had confirmed the possibility for entities outside the network to sell contractual products in multi-brand shops (in this case a hypermarket), provided that the sign of the retailer does not devalue its luxury image and the sale is made in a reserved department or space in order to enhance the qualities of the products.[10]
Applying this principle to the virtual means, in practice, having to ascertain not only that the good is sold in a 'proper' manner, reserving a virtual space appropriate to its allure luxury, but also that it is promoted and sold on a marketplace or e-commerce whose signage does not devalue its image.
3. Amazon is an 'active' hosting provider
An element of absolute importance is the fact that the Court in this order established the nature of Amazon as an 'information society service provider' within the meaning of the Directive No. 2000/31/EC (on this point see also the legal nature of online platforms: the Uber and Airbnb cases) and, in particular, recognising that subject's role as an 'active' hosting provider in relation to the activity of managing its own sales portal, even where the same is limited to the provision of intermediation services, i.e. it does not carry out active sales activities within the site, but as a provider of services to third parties using the platform to promote sales.[11]
The Court, in particular, established Amazon's role as an 'active' hosting provider,[12] and as such not subject to the liability exemptions outlined by Articles 14, 15 and 16 of Directive 2000/31/EC, in view of the fact that the platform (i) '(i)manages the storage and shipment of products", (ii) "operates a customer service for third-party sales listings, which is the only service the customer has to interface with the seller", (iii) "is also responsible for promotional activity through advertisements on third-party websites" and (iv) "allows consumers to infer the existence of a link between Amazon"and the companies producing the products sold on the platform.
Read also - The hosting contract and the hosting provider's liability profiles.
4. Some reflections
The judgement that is the subject of this brief commentary now aligns with a well-established jurisprudential orientation that, in fact, reflects the reality of commerce today, namely a steadily increasing thinning between in-store shopping experience and online.
One can understand how the online distribution of luxury and high-end products will be less and less able to disregard the careful and rigorous care of sales methods and adhere more and more to strict standards that in physical shops are now taken for granted, not only from a legal point of view, but (above all) from a cultural point of view.
Indeed, it would not even be conceivable that a designer shop could sell a high-fashion dress together with a packet of toilet paper, which still regularly happens online, without causing such a stir for the consumer, who is perhaps more focused on the price and not on the online shopping experience.
This element will increasingly have to be taken into account by manufacturers in their sales strategies
Such a ruling, read a few years from now, will probably raise eyebrows, as a user cannot even imagine that within the same (virtual) shop a high-end perfume could be sold in the same manner and on the same page, together with liquid plumber.
[1] On the subject, Pappalardo, The Competition Law of the European Union, p. 405 ff, 2018, UTET.
[2] On this point see ECJ, 12 December 1996, Galec v. EC Commission, para. 16, ECJ, 13 October 2011, Pierre Fabre Dermo-Cosmetique, para. 41, EU Guidelines Reg. 330/2010, para. 175.
[3] 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.
[4] Orders of 19 November 2018 and 18 December 2018 of the Court of Milan. with comment by Alice Fratti
[5] Court of Justice case, Pierre Fabre C-439/09.
[6] Court of Milan, 3 July 2019, with comment by RIVA, E-commerce and selective distribution agreements: the case 'Sisley v. Amazon', in Industrial Law, 1/2010, WoltersKluver.
[7] ECJ, 12 December 1996, Groupement d'achat Eduard Leclerc v. Cmmission, para. 111; see also Vichy v. Commission, judgment.
[8] Court of Appeal Milan, 25 November 2019, no. 5682.
[9] Court of Justice, 4 November 1997, Dior v. Evora.
[10] ECJ, 12 December 1996, Groupement d'achat Eduard Leclerc v. Cmmission.
[11] On this point, see also Traina Chiarini, Amazon is an 'active' hosting provider, according to the Business Court of Milan.
[12] To be contrasted with the passive hosting provider who, according to recital 42 of Directive 31/2000/EC, is to be qualified as such any service provider who does not exercise 'authority or control' and has a merely 'technical, automatic and passive role' and who 'neither knows nor controls the information transmitted or stored'.
The influencer (or youtuber) is a commercial agent: food for thought.
The influencer often carries out a sales promotion activity for a fee: does this make him a commercial agent?
In order to legally frame the figure of theinfluencerit is necessary to start with a brief analysis of their activity, trying to give it a, albeit generic, definition. L'influencer, as the word itself implies, is a person who is able to influence the opinions and attitudes of other people, because of his or her reputation and authority on certain issues or areas of interest.[1]
In particular, the marketing influencer is an industry expert (which can range from fashion, to travel, music, technology, etc.) that, with its posts, allows it to offer greater visibility to products or services it promotes, using the web channels it considers most appropriate and adequate (Instagram, Youtube, Facebook, a personal blog, etc.).
L'influencer Precisely because of the decisive role it plays within the communication processes, it is often commissioned by companies in the sector in which it operates to advertise their products, thus carrying out a sales promotion activity, which is remunerated through the payment of a fee.
Precisely because theinfluencer often carries out a sales promotion activity for a fee, typical of the better-known figure of the commercial agent, the question may arise as to whether theinfluencer (in certain hypotheses), may be accumulated to such a contractual figure (see on this point But are online platforms commercial agents?)
Before proceeding to this analysis, it is important to clarify that, with this article, we want to give some food for thought, mainly aimed at trying to better frame the new modes of intermediation, with the intention of 'monitoring' the development of distribution techniques, with the help of new technologies.
If the contractual relationship between the company and influencer is governed by a written agreement, the point of reference for the interpreter's activity must certainly be the text of the negotiated declaration in the first place.
In any case, although the negotiated text is the first parameter of interpretation, for a correct exegesis one must not limit oneself "to the literal text of the words" (Art. 1362 of the Civil Code), but it is necessary to seek, through an overall examination of the deed, by interpreting the clauses of the "one through the other" (Art. 1363 of the Civil Code), what was the result pursued by the conclusion of the agreement, i.e. what was "the common intention of the parties", i.e. the meaning they both attributed to the agreement[2].
In order to trace the will of the parties, it will be necessary to take into account how the relationship actually developed.influencer to the producing company by analysing some of the typical contractual elements of the agency, namely whether:
- there is or is not a consultancy activity in addition to sales promotion;
- there is an obligation of stability of tenure;
- the company has the power to dictate the market guidelines and strategies of theinfluencer;
- there is a contractual non-compete clause;
- there is a commission payment, based on sales made.
Since there is no single, 'decisive' element to understand whether a given relationship qualifies as an agency, it must be considering the different typical elements in the individual case of this contractual figure, bearing in mind that none of them alone allows the relationship to be correctly framed, but rather an overall assessment of all of them must be carried out.[3]
1. There is a consultancy activity alongside the promotion activity?
Sometimes the contractual relationships that bind the influencer to companies are governed by consultancy contracts, remunerated through the payment of a fixed fee, sometimes coupled with a variable fee, calibrated on the sales generated by the promotional activity of theinfluencer.
There is no doubt that often theinfluencer performs a genuine consulting activity, being a professional who knows the market of social and the company contacts him, not only for his notoriety, but also to understand how to advertise products through the use of digital platforms.
It is also true that it is far from unusual for published posts and videos to be 'accompanied' by a linkwhich redirects the consumer to a particular shop online (which can be either the manufacturer's or a third party's), where it is possible to purchase the product advertised by theinfluencer.
Any purchase by the consumer through the use of this link is tracked, thus enabling the parties to verify the sales actually realised through the promotional activity of theinfluenceron which variable remuneration may be calculated.
In that case, one would be faced with a so-called ' contractmixed"consisting of the merger of the causes of action of two contracts: a contract of brokerage and a contract for consulting services. According to case law, in the event the parties enter into a contract of this nature mixedthe same shall be subject to the unitary discipline of the prevailing contract. It is stated on this point that:
"The mixed contract, consisting of elements of different types of contract, is not only unique, but has a single and inseparable cause, in which the elements of the different types that constitute it are combined. It is subject to the prevailing contract and predominance is determined on the basis of economic or other indices, such as the "strength" of the type or the interest that moved the parties, unless the elements of the non-prevailing contract, regulated by its own rules, are incompatible with those of the prevailing contract."[4]
In the light of the above, in order to understand which category to subject the brokerage/consultancy relationship to, it will be necessary to refer to how the relationship has actually developed over the years and to verify whether or not the consultancy activity takes precedence over the brokerage activity, noting that, if so, it would be more complex to consider the relationship as an agency contract (Main differences between the agency contract and the commercial distribution contract).
2. Absence of an obligation of stability of tenure
To understand whether the relationship between the company and influencer may be subject to the agency discipline, it is certainly essential to ascertain that the sales promotion activity (and not only the positioning of the brand) is carried out with stability. As has already been discussed (cf. What is the difference between an agency contract and a business intermediary?) is precisely the obligation to promote sales with stability one of the distinctive elements of the agency contract. It is stated in case law that:
"while the agent is the part that assumes permanently the mandate to promote on behalf of the other (principal or principal), the conclusion of contracts in a specific area, the business procurer is the person who collects orders from customers and transmits them to the company from which he has been commissioned, without stability constraint (unlike the agent) and on an entirely occasional basis [...].
Thus, while the agent's service is stable, as he is obliged to carry out the activity of promoting contracts, the procurer's service is occasional, in the sense that it depends exclusively on the his initiative.[5]"
If ascertaining the stability of the assignment is already a complex activity in the case of brokering "traditional'.is certainly even more so if the promotion activity is carried out online. Consider the (not uncommon) case of a influencer reviewing a product on youtube. The activity they perform is to create a video and post it on the platform.
The effects of such promotional activity, in any event, last over time, sometimes for months or even years (normally until the product reviewed is superseded by a new product launched by the parent company, or until the video is deleted from the web). In such a case, one would need to understand whether or not this promotion activity that unfolds its effects over time can be considered 'stable' within the meaning of an agency relationship.
While it is certainly not easy to give an unequivocal answer to this question, it is certainly without doubt advisable to contractually regulate the manner of payment of remuneration on sales conveyed by this post realised after the termination of the relationship between influencer and company.
(On this subject, cf. The commercial agent's commissions for business concluded by the principal after termination of the relationship; ...but if the commercial agent has procured long-term contracts and the relationship is dissolved before their expiry...).
3. Duty of the principal to impart market guidelines and strategies
A second distinguishing point of the figure of the commercial agent is certainly constituted by the obligation he assumes to follow the instructions of the principal, who is the party responsible for deciding market policies and imparting commercial strategies to the distribution network. Article 1746(1) of the Civil Code expressly provides that the agent must:
"perform the task entrusted to him in accordance with the instructions received [...]'.[6]
In the agency relationship, it is the responsibility of the principal to devise sales and marketing strategies. marketingstrategies to which agents normally belong and to which they must adhere in the performance of their duties, always within the limits prescribed by the principal.
It follows that the agent has a duty to follow the principal's instructions and is obliged to act in accordance with his instructions, also with regard to the objectives to be pursued and the results to be achieved, and may not refrain from adopting certain sales methods or techniques. marketing developed by the principal.[7]
Once again, as analysed in point 1 of this article, it will be necessary to check very carefully whether theinfluencer is obliged to follow the general directives of the company, or is he himself directing the company in its choices of strategy and marketing in the area of its competence (on this subject cf. The agency contract and the employment relationship: distinguishing criteria and evaluation parameters.).
4. Absence of non-competition
Article 1742 of the Civil Code provides that:
"The principal may not use more than one agent in the same area and for the same line of business at the same time, nor may the agent take over the business of several competing undertakings in the same area and for the same line of business."
According to settled case law, the non-competition clause is a natural but not essential element of the agency contract[8]with the consequence that the parties are free to regulate their relations differently either by an express agreement or by concluding behaviour[9] (on this subject see also Area exclusivity in the agency contract e Agency contract, exclusivity and indirect commissions.).
Although an agent is normally free to act by promoting several competing products, such an 'open' mode of promotion is certainly anomalous and is found in a more limited number of contractual relationships.
Applying this principle to the present case, it could be said that if a influencer carries out its activities in favour of several competing companies, without any of the intermediaries raising any objection as to the manner in which they operate, this element could be a clue which, although in itself cannot absolutely exclude the relationship from being classified as an agency, if combined with those already analysed above, could be a component that could influence its classification
5. Payment of commissions
Where the contract expressly provides as a method of calculating the consideration of theinfluencer the commission payment, this alone cannot be regarded as a sufficient element to be able to identify the relationship as an agency. The parties, in fact, whether they wish to conclude an agency contract or a consultancy/service contract, may freely (formerly Article 1322 of the Civil Code) define the remuneration terms that they deem to be the most appropriate and suitable in the case at hand.
Suffice it to say that if the relationship were to be framed as an atypical contract for the provision of services, Article 1657 of the Civil Code on the subject of contracts gives the parties complete freedom to decide on the manner of payment and calculation of services, which may therefore also be of a commission nature.
That being said, it cannot however be denied that the payment of the activity by means of the acknowledgement of a commission is typical of the agency relationship and it must therefore not be excluded that this must be taken into account when interpreting the contractual relationship.
In the event, the relationship is only remunerated with a fee in fixed formAlthough the European directive does not exclude the reconciliation of this method of remuneration with the figure of the agent, Italian jurisprudence (criticised by part of the doctrine[10]) stated its opposition to this argument,[11] considering that in that case the intermediary would not assume any entrepreneurial risk, which is a distinguishing feature of the figure of the agent.
A different matter, however, if the relationship were to be remunerated through the payment of a mixed remunerationunder which a fixed component is combined with a variable component. Such a solution whereby the agent is assured a "guaranteed minimum"is considered lawful and compatible with the agency employment relationship.[12]
Those analysed above are only a few elements that allow the interpreter to understand how best to frame a "dubious" contractual relationship, which must however be carefully analysed in its entirety, verifying the individual elements that characterise such a complex and versatile contractual figure.
[1] https://www.glossariomarketing.it/significato/influencer/.
[2] TORRENTE - SCHLESINGER, Handbook of Private Law, § 311, GIUFFRE EDITORE.
[3] Bortolotti, Distribution Contracts, p. 129, 2016, Wolters Kluwer.
[4] See Trib. Cagliari, 4. 5.2017; Trib. Firenze Decreto, 2.11.2016, Trib. Taranto Sez. I, 11.8.2016, Trib. Milano Sez. VII, 29/02/2012; Cass. civ. United Sect., 12.5.2008, n. 11656.
[5] Tribunale di Firenze Sez. lavoro, 4.3.2014.
[6] This obligation is also found in Art. 5, para. 2, AEC Industry 2014 and Art. 3, para. 2, AEC Trade 2009.
[7] On this point see also Bortolotti, Distribution Contracts, Wolters Kluwer, 2016, p. 166 et seq.
[8] Cass. Civ. 2002 no. 5920, Cass. Civ. 1994 no. 2634, Cass. Civ. 1992 no. 5083.
[9] Cass. Civ. 2007 no. 21073, Cass. Civ. 1992 no. 5083.
[10] PERINA - BELLIGOLI, The Agency Relationship, p. 27, Giappichelli Editore; Saracini-Toffoletto, p. 327 ff.
[11] Cass. Civ. 1986 no. 3507; Cass. Civ. 1991 no. 10588; Cass. Civ. 2012 no. 12776. The latter judgment went so far as to admit that "in the agency relationship the parties may provide for a form of remuneration for the agent's services other than a commission determined as a percentage of the amount of business concluded (such as a fixed sum for each contract concluded), but without going so far as to acknowledge that remuneration in the form of a commission can be entirely replaced by a fixed remuneration.
[12] See on this point Cass. Civ. 1975 no. 1346; Cass. Civ. 1980 no. 34; Trib. Di Milano 9 September 2011.
The legal nature of online platforms: the Uber and Airbnb cases
With the Airbnb and Uber judgments, the Court of Justice ruled on the legal qualification of two very important online platforms. In this article, we are going to understand to what extent an online platform can be qualified as an 'information society' and when not.
One of the founding principles of the EU internal market is the free movement of goods and services. As we have already discussed some of the problems that the European legislator has had to deal with in trying to find a balance between the principle of free trade in goods and the interest of producers in creating competitive distribution networks (The mixed system: when the manufacturer chooses to adopt both exclusive and selective distribution), this article intends to focus attention on how the principle of free movement of services coordinate with the operation of platforms onlinewhich increasingly characterise the economic fabric of the internal market.
To do so, one must probably start from the origins of European law, which, with the introduction of the internal market (Art. 26 of the TFUE), aimed at guaranteeing any entity operating in a Member State to carry out an economic activity in another Member State (Art. 54 - Freedom of establishment) and offer its services there (Art. 56 - Services)[1].
With the 2006/123/EC[2] (relative
services in the internal market) Europe wanted to strengthen the principle of the
freedom to provide services[3], considering
that the pursuit of this objective "aims to establish increasingly
between the states and peoples of Europe and to ensure economic progress
and social"[4]as well as
to eliminate "barriers in the internal market [that] prevent the
providers, in particular small and medium-sized enterprises, to expand beyond the
national borders and make full use of the single market. "[5]
To understand whether the services offered by the platforms online, who increasingly play the role of intermediaries with the end user, fall under the definition of 'services" referred to in Article 56 TFEU and Article 4 of Directive 2006/123 and are therefore addressees of the protections guaranteed by those rules, it is first necessary to give a definition of 'platform online". Indeed, if one searches within the European legislation, the only definition provided to us is that of "online brokerage"referred to in Article 2 of Regulation 2019/1150[6]this rule qualifies this activity as that performed by "information society services', pursuant to Article 1(1)(b) of the directive 2015/1535[7]which in turn is taken from Article 2(a) of the Directive 2000/31[8] on e-commerce.
It is therefore at the term 'information society service" that one must resort to in order to begin to give legal status to such entities; it is qualified (by the above-mentioned directives) as any service "normally provided for remuneration, at a distance[9]electronically[10] and at the individual request of a recipient of services."
The EU after having defined, albeit generically, the concept of information societywith Directive 2000/31 considered it appropriate to ensure that the free market for services is also ensured for entities operating online and, in order to induce Member States to remove restrictions on the cross-border movement of services rendered by the information societyArticle 2 stipulated that Member States may not adopt measures restricting this exercise unless they are necessary for reasons of public policy, public health, public security or consumer protection (Art. 3).
Furthermore, it provided that the Member State must (subject to nullity of the measure)[11] having previously notified the Commission and the Member State in whose territory the service provider in question is established of its intention to take the restrictive measures in question (Article 3(b), second indent).
It follows from this that it is of paramount importance to understand whether a platform online may or may not be qualified as information societysince only in the latter case will the person enjoy the above-mentioned specific protections recognised by European law on the free movement of services.
On this point, it should be noted that the Court of Justice was recently asked about this very issue, in relation to the mediation services provided by the digital platforms Uber Spain, Uber France and Airbnb Ireland. We will now briefly analyse these rulings in order to try to understand what is the ratio which led the Court to take opposite decisions on (apparently) very similar situations.
1. The Uber Spain and Uber France cases.
With two 'twin' decisions, Uber Spain of 20.12.2017[12] and Uber France of 10.4.2018[13]the Court of Justice was called upon to decide whether the UberPop service, which is provided via an international platform, should be assessed as transport service and in that case subject to national legislation making the carrying out of that activity conditional on the hauliers obtaining a licence, or a service of the information societywith the consequent requirement of prior approval by the Commission of national regulatory measures prohibiting such activity.
The European Court of Justice in its first analysis acknowledged that:
"an intermediary service enabling the transmission, by means of a smartphone application, of information relating to the booking of a transport service between the passenger and the non-professional driver, who, using his own vehicle, will carry out the transport, meets, in principle, the criteria to be qualified as an 'information society service'."[14]
In any case, the
Court continues its reasoning by analysing in a
detailed what brokerage services actually are
provided through the use of the Uber application, noting that the company did not
is limited merely to putting in contact (and thus mediating) the
carrier and the transported, but also:
- select non-professional drivers
using their own vehicle and with the help of theapp of Uber,
provide a transport service to persons intending to make a
movement in the urban area, which otherwise they could not have resorted
to these services; - fixed if nothing else the price
maximum running; - receives payment of the customer and subsequently
pays it to its driver; - exercises control on the quality of
vehicles and their drivers and their behaviour; - in some cases may exercise against
their drivers exclusion from service.
The Court, having analysed the report in its entirety, therefore came to the conclusion that:
"the brokerage service in
discussion [must] be considered as an integral part of a service
total of which the main element was a transport service, and
therefore fulfilling the qualification of 'information society service' not
[...] but to the service aspect of 'transport quality'.Pursuant to
Article 2(2)(d) of Directive 2006/123'.[15]
In view of this
legal classification of the service provided by Uber, the Court held
legitimate regulatory measures that the Spanish and French states had
enacted to prohibit and repress the exercise of this activity, taking into account
that transport services are explicitly excluded from the scope of
implementation of directive 2006/123[16] (and therefore
neither subject to the obligation to inform the Commission under Article 3
of Directive 2000/31).
2. The caso Airbnb of 21.12.2019
The same procedure
argumentation was followed by the Court in a similar case,[17] where one
found itself engaged in deciding on the legal framework of the
intermediation service provided by Airbnb Ireland through the
its electronic platform, with which they are put in contact, behind
remuneration, potential tenants with landlords, professional or otherwise, who
offer short-term accommodation services.
The issue had arisen because the French Association for Accommodation and Professional Tourism (AHTOP) had filed a complaint against Airbnb Ireland, complaining that the Irish-registered company was carrying out a real estate mediation activity on French territory, which is subject under domestic law (Law Houget) to a licensing obligation.
Airbnb Ireland, denying that it was acting as a real estate agent, entered an appearance claiming the right to freedom of establishment and arguing that the law was inapplicable to it Houget because of its incompatibility with Directive 2000/31, claiming to operate in French territory only as information society.
The Court, echoing what was decided in the previous Uber rulings, again affirmed the principle of law that in order to be able to recognise the legal nature of information societyit is not enough that they are only if the four conditions are met cumulative as referred to in Article 1(1)(b) of the aforementioned Directive 2015/1535, but it is also necessary to verify whether it appears that:
"said
mediation service is an integral part of an overall service the
which main element is a service to which a different
legal qualification".
The Court held that the services provided by the platform related to presenting offers in a coordinated manner, with the addition of tools for searching, locating and comparing them, constitutes themain element of the service and cannot therefore be considered merely ancillary to a service to which the different legal guise of provision of accommodation must be applied.[18] In contrast, all these services (analysed in detail in recital 19 of the judgment)[19] represent the real added value of the electronic platform that allows it to stand out from its competitors.[20]
Following this reasoning, the Court held that Airbnb Ireland cannot be classified as a real estate agentThe purpose of its activity is not only to rent accommodation, but to provide an instrument facilitating the conclusion of contracts concerning future transactions. It is stated on this point that:
"a service such as that provided by the
Airbnb Ireland is not at all indispensable to the realisation of
accommodation services from the point of view of both tenants and landlords
who have recourse to it, since both have numerous other channels [...].
The mere fact that Airbnb Ireland enters into direct competition with
the latter channelsproviding its users, i.e. both landlords and
to tenants, an innovative service based on the particularities of a business
information society business does not allow us to derive from this
the indispensable character for the provision of a service of
accommodation."
Given the legal nature of Airbnb Ireland's information societythe Court declared that it was not subject to the licensing requirement imposed by French law (Loi Houget), as restricting the free movement of services, also noting that this regulatory measure had in any event not been notified to the Commission in accordance with Article 3 of Directive 2000/31.
Very interestingly, the Court came to a different decision to the Uber case, recognising the nature of information society serviceon the assumption that Airbnb Ireland does not exert a decisive influence on the conditions of the provision of accommodation services to which its mediation service relates, taking into account that the same neither directly nor indirectly determines prices of lettings, nor does it carry out the selection of landlords or accommodation offered for rent on its platform.[21]
From the study of the two judgments, it can therefore be seen that it is the independence and the failure to control on the entity using the electronic platform to promote its service, a central element in understanding whether the platform online whether or not it provides an intermediary service, which can be classified as service of information society and that this must be assessed by analysing the relationship in its entirety.
The above rulings are certainly of great significance not only from a legal point of view, as they lay the foundations for framing figures who increasingly occupy a fundamental role in our economic and social fabric.
[1] Art. 56
TFRUE "Within the framework of the following provisions, restrictions on the free
provision of services within the Union are prohibited in respect of the
nationals of Member States established in a Member State other than the one
of the recipient of the service. "
[2] Directive
2006/123/EC of the European Parliament and of the Council of 12 December 2006,
on services in the internal market.
[3] This directive
defines in Art. 4(1) as "service' means any activity
unpaid economic activity referred to in Article 50 of the Treaty provided normally
against remuneration. "
[4] Id.
Recital 1.
[5] Id.
Recital 2.
[6]
Regulation of 20 June 2019, promoting fairness and transparency for the
commercial users of online brokering services, effective as of
from 12.7.2020.
[7]
Directive that repealed and replaced the previous directive
98/34/ECwhich defined services
[8]
Directive 2000/31/EC of the European Parliament on certain legal aspects
of information society services, in particular trade
electronic commerce in the internal market ('e-commerce directive')
[9] La
directive definesremotely"a service provided without the
simultaneous presence of the parties.
[10] La
directive defines: "electronically": a service sent originally
and received at destination by means of electronic processing equipment
(including digital compression) and data storage, and that it is
entirely transmitted, forwarded and received by wire, radio, optical means
or other electromagnetic means.
[11] Cf.
on the point Judgment
of 19.12.2019 Airbnb Irland UC vs. Association pour un hébergemen et un
tourisme professionnels (AHTOP).
[12] Judgment
of 20 December 2017, Associación Profesional Elite Taxi vs. Uber Systems
SpainSL,
[13] Judgment
of 10 April 2018, Uber France s.a.s.
[14] Id. 19
[15] Id. 40.
[16] Cf.
Art. 2(2)(d) Directive 2006/123
[17] Judgment
of 19.12.2019 Airbnb Ireland UC vs. Association pour un hébergemen et un
tourisme professionnels.
[18] Judgment
of 19.12.2019 Airbnb Irland UC vs. Association pour un hébergemen et un
tourisme professionnels (AHTOP), No. 54
[19] Id. In
recital 19 lists in an analytical manner the services actually offered by
Airbnb that are "In addition to the service of connecting
landlords and tenants via its electronic centralisation platform
of the offers, Airbnb Ireland proposes a number of other
services, such as a scheme defining the content of their offer, in
option, a photography service, likewise as an option, insurance for
liability as well as a guarantee for damages up to an amount of
to EUR 800 000. In addition, it provides them with a service
optional to estimate the price of their rental in the light of the averages of
market from that platform. Moreover, if a lessor accepts a
lessee, the latter transfers to Airbnb Payments UK the price of the
lease to which must be added an amount, ranging from 6% to 12% of said
amount, by way of fees and service charged to Airbnb Ireland.
Airbnb Payments UK holds the funds on behalf of the lessor after which, 24
hours after the tenant enters the accommodation, it transmits them to the landlord
by bank transfer, thus enabling the tenant to be sure of the existence
of the asset and to the lessor the guarantee of payment. Finally, Airbnb Ireland has
established a system whereby the lessor and the lessee can
make a judgement by means of a grade ranging from zero to five stars, grade
available on the electronic platform in question. "
[20] Id. 64
[21] Id. 68
Sale of assets, jurisdiction and Incoterms (Wx-Works, FCA, CTP and CIF).
How the inclusion of an Inconterms clause (ex-works, FCA, CIF) may affect jurisdiction in the case of the sale of movable goods? A brief overview of European legislation and developments in Italian and European case law.
1. Jurisdiction, Sale and Incoterms: A Brief Overview of European Legislation
In the case of the sale of goods within Europe, the parties may agree in advance which courts will have jurisdiction to decide on any disputes that may arise between them. This principle of forum-shopping is governed by Article 25 of the Regulation EU 1215/2012,[1] which provides as a condition of validity that the agreement conferring jurisdiction has been:
- concluded in writing or evidenced in writing;[2]
- in a form permitted by the practices established between the parties; or
- in international trade, in a form permitted by a usage which the parties knew or ought to have known and which, in that context, is widely known and regularly observed by the parties to contracts of the same type in the trade concerned.
If the parties have not expressly made that choice, jurisdiction will be governed primarily by the following principles:
- the general principle of the defendant's forum (Art. 4 of the Regulation) and
- the principle of the''performance of the obligation in courto' (Art. 7 of the Regulation).
With specific regard to this second option, Article 7 of the Regulation provides that a person domiciled in one Member State may be sued in another Member State:
- in contractual matters, before the court of the place of performance of the sued obligation;[3]
- For the purposes of the application of this provision and unless otherwise agreed, the place of performance of the obligation in suit is: in the case of the sale of goodsthe place, located in a Member State, where the goods have been or should have been delivered according to contract. "[4]
Reading this provision, it is not fully understood what is to be understood by "place of delivery"That is to say, whether that place is to be regarded as the place where the physical delivery to the seller took place, or whether the place of delivery to the carrier can be regarded as sufficient.
To solve this dilemma, the Court of Justice came to the rescue,[5] stating that:
"Article 5(1)(b), first indent, of Regulation No. 44/2001[6] must be interpreted as meaning that, in the case of distance selling, the place where the goods were delivered or should have been delivered under the contract must be determined on the basis of the provisions of that contract.
If it is not possible determine the place of delivery on that basis, without reference to the substantive law applicable to the contract,[7] such a place is that of the material delivery of goods by which the purchaser obtained or should have obtained the power to dispose effectively of those goods at the final destination of the sale transaction. "
2. Sale of goods, jurisdiction and incoterms: the pronouncements of the United Sections and the Court of Justice.
Italian jurisprudence has adapted to this principle: the United Sections of the Supreme Court of Cassation have established that on the subject of the international sale of movable goods, when the contract concerns goods to be transported (unless otherwise agreed by the parties), the "place of delivery"must be identified in the place of final delivery of goodsi.e. where the goods become materially and not merely legally available to the purchaser, resulting in jurisdiction
"of the court of the [place of final delivery of the goods] with respect to all disputes mutually arising out of the contract, including disputes concerning payment for the goods sold."[8]
Having established this principle, in 2011 the Court of Justice[9] a new question was submitted, namely whether in the context of the examination of a contract, in order to determine the place of delivery, the court should also take into account the Incoterms. The Court ruled as follows:
'the national court seised must take into account all the relevant terms and clauses of that contract which are capable of clearly identifying that place, including generally recognised terms and clauses enshrined in the customs of international trade, such as Incoterms ('International Commercial Terms'), drawn up by the International Chamber of Commerce, in the version published in 2000."
In particular,
"with regard to Incoterm "Ex-Works, [...] this clause also includes [...] the provisions of paragraphs A4 and B4, entitled "Delivery" and "Taking delivery" respectively, which refer to the same place and thus make it possible to identify the place of delivery of the goods."
The EU Court therefore ruled that the Incoterms, may be an element enabling the court to understand whether or not the parties have agreed on a place of delivery different from the final place of delivery. In particular, with the parties' acceptance of the term "ex-works Iconterms", the parties agree that the physical delivery of the goods must take place at the seller's place of business and, therefore, in the event that the parties do not agree, the court having jurisdiction will be that of the seller's place of business.
National jurisprudence has accepted this orientation, specifying, however, that the general principle of physical delivery can only be derogated from if this is apparent on the basis of a "clear and explicit' contractual determination. The Supreme Court[10] therefore denied that it can "the unilateral ex Works wording on invoices issued by the selling party takes on value," since this method of delivery must have been agreed upon by the parties.
The Court of Cassation, held that these characteristics of clarity, do not result from all the terms in the Incotermsin order to be valid also for the purposes of determining jurisdiction and, therefore, to take precedence, it must be clear, explicit and unequivocal.
It was therefore denied that the CTP clauses,[11] CIF[12] and FCA[13] manifest a clear and unambiguous will of the parties to determine the place of delivery of the goodsas an exception to the factual criterion of final delivery, since such clauses are rather intended to regulate the passing of risk on to the buyer.[14]
[1] Regulation that replaced the previous EU Regulation 44/2001.
[2] With reference to the written form, it "includes any communication by electronic means that permits a durable record of the agreement conferring jurisdiction" under Art. 25.2 of Reg. The Court of Justice has clarified that the purpose of this article is "that of putting certain forms of electronic communication on an equal footing with the written form, with a view to simplifying the conclusion of contracts by electronic means, since the communication of information is accessible via a screen.
So that electronic communication can offer the same guarantees, in particular with regard to evidence, it is sufficient that it is 'possible' to save and print the information prior to the conclusion of the contract. " (CG EU 21.5.2015, CarsOnTheWeb.Deutschland GmbH). The Un. sec. of the Supreme Court 2009 No. 19447They also held that the written form required by Article 23.2 of Reg. 01/44 could be supplemented by the recording of the invoices issued by the other party on the company's internal electronic systems.
[3] European case law has held that where there are several obligations arising from the same contract "the court seised, in determining its jurisdiction, will be guided by the principle that the accessory follows the principal; in other words, it will be the principal obligation, among the various obligations in quesitone, that will determine jurisdiction'. CJ EU 15.1.1987, Shenavai; 15.6.2017 Saale Kareda.
[4] This clause, likewise, incorporates that of Art. 5(1)(b) of Regulation 44/2001. In particular, with this provision the Community legislature intended to break explicitly, for contracts of sale, with the past solution whereby the place of performance was determined, for each of the disputed obligations, in accordance with the private international law of the court seised.
By designating the place of performance, the EU legislator wished to centralise jurisdiction at the place of performance and to determine a single jurisdiction for all claims based on the contract of sale. On this subject see also CJEU 3.5.2008, Color Drack. On this point see Pirruccio, Contracts unusable if Incoterms clauses are not explicit, Law Guide, 35-36, 2019, Gruppo24Ore.)
[5] Judgment Car. Trim GmbH C-381/08.
[6] This provision was also taken up by Article 7(1)(b) of Regulation 1215/2012.
[7] According to doctrine (Pirruccio(op. cit.) for the purpose of identifying the "place of delivery" of the goods, it is not possible to refer to the definitions of national law (such as Art. 1510 of the Civil Code), the application of which would risk defeating the purpose of the Regulation. Attention (!), the latter provision, on the other hand, may be used (at least as a defence) in the event that the sale is non-EU in character and, therefore, the Regulation does not apply: see Cass. Civ. 1982 no. 7040.
[8] Cass. Civ. Sec. Un. 2009 no. 21191, Cass. Civ. 2014 no. 1134. Attention(!) in case of non-application of European law (e.g. for sales extra EU): contra Cass. Civ. sez. Un. 2011 no. 22883.
[9]Judgment Electrosteel Europe SA - Case C-87/10.
[10] Cass. Civ. Order No. 24279 of 2014.
[11] Court of Padua, 3.5.2012.
[12] Cass. Civ. 2018 No. 32362.
[13] Cass. Civ. 2019 no. 17566.
[14] On this subject, see also http://www.membrettilex.com/ruolo-degli-incoterms-2010-nella-determinazione-del-giudice-competente/.
Selective and exclusive distribution: does the mixed system work?
What happens if a manufacturer applies a mixed system (selective and exclusive distribution) within Europe? What are the main advantages and disadvantages?
As has already been pointed out, the European legislator has always
committed to finding a balance between the principle of free trade of
goods and the producers' interest in creating distribution networks
competitive.
The compromise reached by the legislator is now governed by the Regulation
330/2010 on vertical sales, which determines which agreements between undertakings
belonging to the same distribution network are subject to the prohibition of
agreements imposed by theart.
101(1) of the European Treaty and which, instead, benefit from the exemption
from this prohibition (formerly Art. 103(3)).
In essence, the producer is given a choice between two modes
of distribution: a general one that can be used by any type of producer (the
exclusive) and a particular one for specific situations (the selective one) (cf.
on the point La
selective distribution. A brief overview: risks and benefits e Clauses
exclusivity and vertical economic agreements in the European context: e-commerce and
territorial exclusivity).
With the exclusive distributionsupplier divides the markets into
which it operates through the appointment of exclusive distributors, who undertake to
to purchase goods and promote their sale in a manner that tends to
free.
Article 4(a) of the Regulation provides, in fact, that the producer shall not
can restrict, neither directly nor indirectly,[1] the
power of the exclusive distributor to determine the resale price,
without prejudice to the possibility of imposing a maximum price or recommending a
sale price.[2]
The manufacturer will also not be able to prevent, formerly Article 4(a) of the
Regulations, which the distributor make
of active sales[3]
within the territory, without prejudice to the right to reserve for itself customers
management and prevent them from retailing, in order to maintain this
level of the commercial chain, as distinct from the retail level.[4]
Finally, the distributor shall also have the right to make
sales outside the territory, provided they constitute a response
to unsolicited orders from individual customers outside the
territory (cd. sales
passive).[5]
It is clear that such freedom of the exclusive distributor is often incompatible
with what are the interests of certain types of producers, in
particular of those in the luxury sector or who develop products that are technically very
complexeswho will be more interested in, rather than a
widespread distribution, to the fact that their products are resold
only from authorised dealers.
Like
has already been dealt withexceptionally for specific situations
is provided for the producer to create a system of distribution
selectivewhich allows him, formerly Article 4(b)(iii), to prohibit members of the selective system from
sell to unauthorised distributors in the territory that the manufacturer has
reserved for such a system: in a selective system, assets can only pass
from the hands of one company admitted to the network to those of another, or to
those of the end user.[6]
In observance of the principle of free trade in goods, as
counterpart of the producer's right to impose such limitations on the
freedom of resale of members of the system, the Regulation:
- Article 4(b)(iv) confers on them the freedom to carry out the so-called cross-sellingwhich consist of unhindered procurement from "other designated distributors in the network, operating at the same or a different level of trade'.[7];
- Article 4(c) prevents the manufacturer from restricting to members of a selective distribution system, operating in the retail trade, the active or passive sales to end users.[8]
That being said, very often a producer, for practical, managerial and economic reasons, is unable to apply a single distribution system for the entire European market and reserves selective distribution only for those countries that are most strategic for him. In this context, the question arises, firstly, whether such a 'mixed' system is legitimate and, secondly, what risks are attached to it.
1. Mixed systems within the same territory.
The adoption of a mixed system within the same territory would lead to a conflict of interest between the exclusive distributor, which would have the right to be protected from active sales within its territory, and the selective distributor, which would have the right to make active and passive sales within the exclusive territory, pursuant to Article 4(c) of the Regulation.
The Commission questioned the legitimacy of a mixed system and clarified through the Guidelines that such a combination is not admissible "within the territory in which the supplier operates selective distribution [...] as it would make it a restriction of active or passive sales by resellers". incompatible with Article 4(c).[9]
2. Mixed systems in different EU territories.
Given that the Guidelines' prohibition on applying a mixed system refers only to the circumstance that it is developed within the same territory, it is implicitly inferred that the right antitrust does not prohibit the producer to create a mixed system within the different Member States.
This does not detract from the fact that this choice, although legitimate, may nevertheless create problems of no small importance, consisting mainly of the producer's inability to control:
- sales from the exclusive territory to the selective territory;
- sales from the selective territory, directed to the exclusive territory.
The individual cases are briefly analysed below.
a) Sales from the exclusive territory, directed to the selective territory.
The fact that the exclusive distributor may not be prevented from making passive sales outside the territory, and thus also within a selective distribution system that the manufacturer has reserved for another territory, is rather self-evident.
More controversial (and commercially impactful) is the
question of whether the exclusive distributor can also sales
active within the selective territory and, therefore, also carry out
real commercial campaigns within that territory. From a reading
Strictly speaking, Article 4(b)(i) of the Regulation prohibits the
exclusive distributors to make active sales "in the territory
exclusive customers reserved for the supplier or by the supplier
attributed to another buyer' and does not extend this prohibition to the
distribution system.
To date, there are no case law precedents that have clarified this question, which remains open. In any event, it is believed that a contractual clause requiring the exclusive distributor to make active sales in the selective system, which, due to the manner in which they are presented to the public, may be legitimate, do not harm the image luxury and prestige of the manufacturer's products (on this point see also Online sales by unauthorised distributors. The Amazon, L'Oréal and Sisley cases.).
b) Sales from the selective territory to the exclusive territory.
The problems for the exclusive producer, should the producer create
a mixed market, are essentially related to the fact that:
- in the first place, formerly Article 4(c) of
Regulation, the manufacturer may not prohibit authorised retailers from
making passive and active sales within the EU. The question arises whether
these should also include the sales within the
exclusive territoryor if the distributor's exclusivity protects him from
such sales actions; - secondly, the manufacturer may prohibit, formerly
Art. 4(b)(iii), sales of members of the selective system to resellers
unauthorised within the territory that the producer has
reserved for that system. It follows from a restrictive reading of the rule,
this prohibition would not seem to be able to be extended to the sales that the
selected distributors outside the distribution system
selectiveIf this interpretation were to be followed, authorised distributors could
sell freely within a different territory recognised in
exclusive to a distributor appointed by the manufacturer.
With reference to the above points, it should be noted that the
Guidelines state that "to retailers in a distribution system
selective [...] no restrictions can be imposed except to protect a
exclusive distribution system operated elsewhere."[10]
There is a serious uncertainty of interpretation,
given that a reading of the statutory text inclines towards the view that the
holder of an exclusive right does not have the right to be protected from 'invasion
zone' by selective distributors, whereas the Guidelines would make
leaning in the opposite direction.[11]
The only thing that is certain is that the risks to create a mixed system are very high and that if such a distribution strategy is adopted by the manufacturer, in the medium to long term it would lead to great difficulties in the management, especially of the parallel sales and reciprocal and continuous area invasions.
[1] Article 4(a) provides, in fact, that the taxation
of fixed prices, it cannot take place even indirectly, as a result of
pressure exerted or inducements offered by one of the parties. The Orientations,
No. 48 list numerous examples of such measures and, in particular, "agreements
setting the distributor's margin, or the maximum level of discounts that
the distributor may charge from a prescribed price level; the
the granting of discounts or reimbursement of promotional costs by the
supplier to respect a given price level; the price linkage
resale prices imposed on competitors' resale prices; threats,
intimidation, warnings, penalties, postponement or suspension of deliveries or
termination of contracts in relation to compliance with a given level of
price"In case law, the Commission's decision is referred to, Yamaha Case, 16.7.2003in which I was recognised as an imposition
indirect pricing the following clause: premiums/bonus "will be
granted only to retailers who have applied, in their actions
advertising, normal margins' and that "publicity actions and
promotions involving discounts in excess of 15% would not be
considered normal."
[2] Importantly, the Guidelines, No. 225
justify this choice of the European legislator, considering that ''imposition
of resale prices may [...] reduce dynamism and innovation to the level
distribution [and thus] prevent more efficient retailers from entering the
market and/or to acquire sufficient size at low prices." Other
song, it is also acknowledged that "Sometimes the imposition of
resale prices not only has the effect of restricting competition but can
lead, in particular if determined by the supplier, to increases in
efficiency, which will be assessed pursuant to Article 101(1). 3 [...].
Resale price maintenance plus avoidance of free-riding
[...]. According to the Best Doctrine
(Pappalardo, 356, op. cit.) pending decisions to verify
with this openness of the Commission, certainly the basis of the approach
open and positive of the Commission, it is preferable to consider it as the
confirmation of the absence of prohibitions in EU competition law
automatic.
[3] Cf.
Orientations, no. 51.
[4] On this point, see also Guidelines, no. 55.
[5] Cf. Guidelines, no. 51.
[6] Cf. Pappalardo, Competition Law
of the European Union, p. 363, 2018, UTET.
[7] On this point, the Guidelines, no. 58, state that '[...]
an agreement or concerted practice may not have as its direct or
indirectly to prevent or limit the active or passive sales of the
contractual products between the selected distributors, who must remain
free to purchase these products from other designated distributors in the network,
operating at the same or a different level of the business chain. "
[9] N. 57.
[10] Orientations,
n. 56.
[11] On
Point cf. Pappalardo, op. cit., 364.
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 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]
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[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
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'..