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Distribution agreements in France

11 March 2016

There are different types of distribution agreements:

  • Exclusive Distribution Agreement: A foreign company agrees to deliver a product only to a single distributor within a given territory. The distributor agrees to purchase only from the supplier and not to sell a competing product.

Here the exclusivity is considered reciprocal. This kind of agreement can be chosen for a long term partnership.

  • Exclusive Purchase Agreement: In this type of agreement the distributor agrees to buy the relevant product exclusively from the supplier. The distributor must sell exclusively the supplier’s product and no competing ones.

However, the supplier would be able to endorse another distributor in the same given territory to sell its product.

  • Selective Distribution Agreement: In this case scenario, distributors are selected and approved by the supplier. The distributor will not be the exclusive seller of the product in a given territory. This agreement is the most commonly used in France.

As mentioned above, there are other competition laws that could affect your business.

Indeed, agreements and concerted practices or behavior between independent undertakings, which restrict or distort competition in a market, are prohibited.

Under French competition law, a supplier may freely organize his distribution network, provided the latter’s undertaking does not have as its object or effect the prevention, restriction or distortion of competition within a specific market.

Provided that both the supplier’s and the distributor’s market share do not exceed 30%, it is legitimate for a supplier to prohibit its exclusive distributors from making active sales into the territories exclusively allocated to other distributors or retained by the supplier himself.

Tied sellings (Ventes liées) is not prohibited as such, in business to business commercial relationships. However, if it amounts to an abuse of a dominant position, there may be penalties.

A minimum resale price imposed by a supplier is considered a restriction of competition, which would nullify the whole distribution agreement. Whereas, recommended minimum or maximum resale prices are generally allowed.

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