The Alerion Distribution Series by Catherine Robin and Johanna Guerrero – Commercial agent (episode 1)
Alerion invites you to follow the news on distribution law. To start this Serie, focus on the status of commercial agent. Inaugurated in 1958 in France, the status followed the European harmonization in 1986 and continues to evolve under the influence of the Court of Justice.
Episode 1 – Commercial agent status does not require the power to modify prices
Episode 2 – The possibility to derogate from the right to commission
Episode 3 – Compensation and serious misconduct of the agent
Episode 4 – Commercial agent operating outside the EU and French law
Episode 1
Commercial agent status does not require the power to modify prices
Under French and European Law, the commercial agent obtains compensation at the end of the relationship with the principal (French Commercial Code, Art. L 134-12, Directive 86/653/EEC of 18/12/1986).
Under French and European Law, the commercial agent obtains compensation at the end of the relationship with the principal (French Commercial Code, Art. L 134-12, Directive 86/653/EEC of 18/12/1986).
Until 2020, and despite criticisms, the French Cour de cassation, followed by the Cour d’appel of Paris, had consistently ruled that the intermediary who did not have the power to modify price and conditions of sale with the clients, could not be qualified as a commercial agent. Consequently, such intermediary could not obtain the said compensation, except if he brought the heavy and difficult proof of his diligences with the clients, and of his negotiations on the price and his power to modify it.
On June 4, 2020*, Court of Justice of the European Union adopted a position diametrically opposed and ruled that a person who sells goods in the name and on behalf of his principal does not necessarily need to be empowered to change prices to be granted the legal status of commercial agent.
The Cour de cassation* and the Cour d’appel of Paris* went then back on their case law and abandoned the condition of the power to change prices as a requirement for a commercial agent.
The distribution via a network of commercial agents is particularly suited to the national and international distribution of products and services. For the duration of the contract, the agent does not act in his own name and does not develop his own clientele but that of the principal, who can thus make his brands known and develop his sales on a national or foreign market according to a light mechanism (the agent is remunerated by a commission on sales) through the intermediary of an operator who is familiar with the functioning of this market.
At the end of the contract, the principal retains the clientele developed by the agent, which enables him to establish himself on a long-term basis on the market developed by the agent, through a local subsidiary or a local distributor who accepts the risk of distributing the products and services on its own behalf. On the other hand, the agent loses the fruits of his work but the status of commercial agent provided for by Directive (86/653/EEC of 18/12/1986) incorporated into the French Commercial Code (Art. L134-1 and following) enables him to obtain compensation which, according to French case law, is most often equal to 2 years’ commission calculated over the last 3 years of the contract. This amount is not mentioned in the law: circumstances may justify a lower amount.
This compensation is limited to commercial agency business and cannot be extended to other intermediaries or service providers.
Indeed, the commercial agent must look after the interests of the principal and act loyally and in good faith (Directive, Art. 3). In particular, the commercial agent must “make appropriate efforts to negotiate and, where appropriate, conclude the transactions for which he is responsible“. Although these operations do not necessarily involve the ability to modify the price of the goods, they require him to provide information and advice as well as to hold discussions with potential or existing customers to encourage sales. Only efforts and actions performed in this respect allow the agent to claim for the status of commercial agent and for commission fees on sales if he deploys them on a permanent basis. Thus, an agent who never visits customers or a service provider who is responsible only for advertising operations in a territory cannot claim either the status of commercial agent or any termination indemnity.
The Alerion Team in charge of Distribution and Commercial Contracts, Catherine Robin and Johanna Guerrero, are at the disposal of the French and foreign companies to draft and organise their commercial relationships.
*CJUE, June 4th, 2020, aff. C‑828/18, Trendsetteuse ; Cass. com. 12 mai 2021, 19-17.042 ; CA Paris 20 mai 2021 19/05011