FRANCE: From franchise to sales agent through a “commission-affiliation”: an interesting decision of the Paris Court of Appeal.

Didier FERRIER | FRANCE | 2006-12-15


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Indeed, under this type of agreement, the principal, unlike the franchisor, remains the owner of the products that are offered to consumers via the distributor (i.e., the “commissionaire-affiliate”), and thus maintains control over both the availability and the sales price of the products.

In the abovementioned case (Paris Court of Appeals, 5th Chamber, Section A, September 13, 2006, SAS Chattawak v. Société Chantal Pieri), the Paris Court of Appeals re-characterized the commissionaire-affiliate, formerly a franchisee, as a sales agent.
The principal in that case contended that the contract contained elements characteristic of both a commission-based relationship, as the sales were made in the name of the commission agent and on behalf of the principal, and of an affiliation, as each distributor was a member of the network organized by the principal.

The judges noted, first, that most of the provisions were as characteristic of an agency relationship as of a commission-based relationship, i.e.: the independence of the distributor, who owns his own business; the distributor’s exclusive right to procure supplies under the supplier’s trade name; the distributor’s obligation to sell exclusively to consumers; the consignment of products to which the supplier retains title; the supplier’s setting of sales prices; and the remuneration of the distributor in the form of commissions.

The judges then noted that the distributor used the supplier’s corporate name not only as a shop sign (displayed at the sales outlet: “to the exclusion of any other sign”) but also in all its relations with its other suppliers (bank statements) and its customers (cash register receipts), such that it clearly acted, both in contract and in fact, on behalf and in the name of the supplier, and consequently had the status of a sales agent.

Therefore, pursuant to Article L. 134-12 of the Commercial Code, which deals with sales agency, the supplier’s termination of the contract had to give rise to an indemnification of the distributor. In the case before the Court, this indemnification, was set, in accordance with judicial custom, at an amount equal to two years of commissions.

Didier Ferrier, IDI Country Expert for France.

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