If a manufacturer chooses to sell online via its own e-commerce, it will certainly have to reckon with the reactions of its agents, likewise if the manufacturer sells to wholesalers or distributors who decide to put the purchased products online. Not to mention if this strategy is implemented by some agent who decides to start promoting sales with the help of the web.

This article will analyse what legal impacts online sales have on the 'traditional' sales network, examined from three points of view, that of the manufacturer, the third party and the agent.

1. Online sales by the manufacturer and impacts on sales agents.

Before analysing what are the legal repercussions in the event of a decision to put contractual products online, the following question should be answered: can the manufacturer sell in the areas where its agents operate?

To answer this question, one has to take a few steps back and understand how the principal may actually operate within the area granted to the exclusive agent.

- Read also: Area exclusivity in the agency contract.

Exclusivity is regulated in Art. 1743 of the Civil Code which prohibits the principal, unless otherwise agreed, from using the services of other agents within the territory. According to settled case law, this clause constitutes a natural element of the contract,1 does not only bind the principal not to appoint more than one agent within the same territory, but is also intended to protect the agent from any interference by the principal within the area, including the conclusion of business within the territory itself.((Cass. Civ. 2004 No. 14667.))

On the other hand, the regulation also provides that the agent is entitled to commissions even on business concluded by the principal directly with customers '.belonging to the reserved area or category or group of customers"(Art. 1748(2) of the Civil Code); this provision would seem to confer on the principal a 'free mandate' to sell directly within the territory, on the sole condition that he pays the agent the so-called indirect commissions.

Italian jurisprudence has arrived at a compromise that takes into account the opposing interests of the parties, as governed by the above-mentioned rules, holding that the freedom of the principal must be limited to the exercise of occasional sales within the territory, as it must be excluded that the principal may carry out systematic and organised sales there sales activities.2

Following this orientation, if the contract does not expressly recognise the principal's right to make direct sales (even in a structured manner) within the exclusive territory, the principal who decides to set up a sales strategy through channels online subject itself to the risk of being challenged by its agents, for breach of exclusivity, especially if the trade via web generates a substantial amount of sales.((See Cass. Civ. 2009 no. 8948 where it was "ruled out the existence of just cause for the agent's termination without notice from the agency relationship on the sole basis of the principal's failure to pay the small commissions on only nine contracts concluded directly and of a marginal total amount."))

The cue promoted by a part of the doctrine is very interesting,3 (which probably considers the orientation of the case law referred to above to be too aleatory and not in line with the literal wording of Art. 1748(2) of the Civil Code) according to which the principal should only be prohibited from engaging in genuine promotional activity, whereas it should be permissible to reply to questions from customers who spontaneously address the principal, thus extending the distinction between active and passive sales of antitrust law.

2. Online sales within the exclusive agent's territory through third-party distributors.

A somewhat different problem is to understand when sales by third parties within the agent's territory may constitute a breach of exclusivity.

As analysed above, unless otherwise agreed, the exclusive agent is entitled to formerly Art. 1748(2) of the Civil Code to commissions also on all sales that the principal makes within its territory; it is therefore common ground that if the principal makes sales to a wholesaler based in the contract territory, the agent may claim the right to payment of indirect commissions. In order to understand whether the customer (legal entity) may be considered to be within the territory, it is appropriate to refer to a fairly old judgment of the Court of Justice, ((Judgment Kotogeorgas v Kartonpak of 12.12.1996, Case C-104/95.)) more recently confirmed by the Court of Cassation,((Cass. Civ. 2012 no. 5670.)) which clarified that any legal entity having its head office in the territory in which the agent enjoys exclusivity belongs to the zone.

It is less clear and obvious whether this third party, once it has purchased products from the principal, makes sales online directly to customers in the agent's reserved area, the agent may claim the right to commission from the principal.

Also responding to this question was a more recent ruling of the European Court of Justice:

"Article 7(2), first indent, of the Council Directive 86/653/EEC of 18 December 1986on the coordination of the laws of the Member States relating to self-employed commercial agents, must be interpreted as meaning that a commercial agent entrusted with a specific geographical area is not entitled to commission for transactions concluded by clients in that area with a third party without the direct or indirect intervention of the principal."It follows that there will be a breach of exclusivity and the agent will only be entitled to indirect commission if there has been direct or indirect intervention by the principal in sales made in the territory by third parties,4 with the aim of effectively depriving the agent of business that the latter could have concluded.((See the principle established by the Court of Cassation sez. Lav. in judgment 2011 no. 11197.))

3. Online sales by commercial agents.

In contrast to distribution contracts, in agency contracts the principal may prevent the agent from carrying out online sales promotion activities (unless the agent, due to the manner in which he or she carries out his or her activities, is to be regarded as subject to antitrust law).

- Read also: Can a manufacturer prevent its distributors from selling online?

The question then arises, is the agent free to decide to start promoting online sales?

In fact, should an agent decide to do so, he or she will run afoul of what is the typical prerogative of the webi.e. that it is by its very nature visible everywhere and that any limitation aimed at preventing unjustified geographical blocks would even be contrary to European law.

- Read also:  Geoblocking: what is it and when does it apply?

On the other hand, as already explained at the beginning of this article, the agency relationship provides as a natural element of the contract the obligation of exclusivity to which the parties are bound and which any breach entails contractual offences. In particular, if the agent makes out-of-area sales, it will be in breach of the exclusivity covenant vis-à-vis the principal, since in such a case it will not be able to claim any commission being reserved exclusively for the agent of the area where it made the sale.

If, on the other hand, the contract provides for such out-of-area sales, the exclusive agent where the sale was made may bring an action against the principal for breach of the agreements between them.

Placing these principles in the online market, the question that arises is whether the mere existence of a website where sales of contractual products are offered (which by its nature is also visible outside the agent's assigned area) should be considered as a sales promotion activity that infringes the exclusivity of other agents.

To date, there appear to be no case law precedents that have answered this question, and in order to find a (at least plausible) solution, it is necessary to go back over the general principles on the subject of agency, recalling the principles dictated by antitrust law, taking into account the peculiarities of the market online.

Based on 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."((LGC No. 52.))

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 made to be found specifically in a certain territory or by a certain group of customers".((LGC No. 52.))

It would therefore be consistent with antitrust law and European competition law to hold that the agent's breach of exclusivity only arises in the case of 'active' sales promotion activities, since otherwise it would have to be held that the mere answering of questions from customers outside the area, who spontaneously approach the agent, would only result in the agent's commission not being recognised.

In view of what would in any case be the impact on the sales network of the establishment of an online distribution system, it is advisable to consider very carefully regulating contractual relations in a manner consistent and aligned with the actual distribution strategies to be implemented.

  1. Cass. Civ. 2012 no. 16432; Cass. Civ. 2002 no. 5920; Cass. Civ. 1994 no. 2634; Cass. Civ. 1992 no. 5083. [↩]
  2. For example, a recent Supreme Court ruling states that: "in matters of agency relationships, the principal may not operate, on a continuous basis, in the agent's area of competence but, pursuant to Article 1748(2) of the Civil Code, is only entitled to conclude, directly, individual deals, even if of significant size, the performance of which gives rise to the agent's right to receive so-called indirect commissions. It follows that, where the proponent's intervention is merely isolated, the right to payment of the commission is, in turn, episodic and not periodic in nature, and, as such, is subject to the ordinary limitation period under Art. 2946 of the Civil Code and not to the 'short' limitation period under Art. 2948(4) of the Civil Code. (Cass. Civ. 2008, no. 15069); see also Cass. Civ. 2009 no. 8948, Cass. Civ. 1993 no. 5591; on this subject cf. Bortolotti, Distribution Contracts, 2016, Walters Kluver. [↩]
  3. Baldi - Venice, Giuffrè Editore, p. 73 et seq. [↩]
  4. Cass. civ. 2017 No. 2288. [↩]