Commercial distribution law covers several different distribution methods.

Traditionally, they include:

The commercial agency contract

is a contract in which the distributor, called the sales agent, acts in the name of and on behalf of a manufacturer called the "principal". The contract is normally based on the agent's role as a sales intermediary. This role consists essentially in taking orders from customers and forwarding them to the manufacturer who then delivers directly to the customers. The manufacturer also invoices customers directly and the agent is remunerated with a commission on sales.

Agency contracts are fully regulated by the Code of Economic Law (Title X, Book 1). The protection granted to the sales agent at the end of the contract consists primarily of:

  • The obligation to comply with a notice period at the end of the contract of one month per year of seniority up to a maximum of six months;
  • The obligation to pay the agent an eviction penalty if, over the course of the relationship, the agent developed business for the principal and the increase in clientele will benefit the latter in the future. The amount of the eviction penalty can be up to one year of commission calculated on the average for the past five years.

The dealership contract

is a contract under which the distributor, called the dealer, buys and resells the products of a manufacturer, called the licensor, under their own name and on their own behalf. The dealer assumes more risk than an agent, notably in the event of non-payment. They normally own their own stock and the contract may specify that it cannot be returned at the end of the relationship. The dealer invoices products to their customers at a price which they are free to set.

Distribution contracts are far less regulated. The law (Book 10, Title 3 of the Code of Economic Law) only sets out specific procedures for contract termination.

  • Fixed-term contracts are deemed to be indefinite after the third renewal.
  • In addition, an indefinite contract can only be terminated via a "reasonable" notice period agreed jointly by the parties at the end of the contract or, in the event that no agreement is reached, by a judge who will decide "equitably". The notice period is generally between three and 36 months depending on the weight of the dealership in the dealer's overall business, the product’s name recognition, the difficulty of finding a substitute product, the length of the relationship, etc.
  • Like agents, dealers can demand compensation for loss of customers at the end of the contract if they can prove that they increased the manufacturer's client base and that the latter will continue to benefit from it after contract termination. The law does not provide for any specific method to calculate the compensation, simply stating that it must be set fairly.

Franchise contracts

are not regulated with respect to franchisee protection at the end of the contract. The franchise has become a very common distribution method. In a franchise, the franchisor develops an original process based on substantial know-how. They provide the process to retailers who wish to set up their business within a network which already enjoys a certain degree of brand recognition and which can provide support. The issue of whether or not a franchise is entitled to the same protection as a dealer is controversial. As a result, the franchisee will only be protected by the provisions of the contract or common law at the end of the contract.

These different types of contracts are all governed by the Pre-contractual Information for Commercial Cooperation Agreements Act (Book X, Title of the Code of Economic Law) which requires that the principal, manufacturer or franchisor provide their future partner, at least one month before contract signature, with a "Pre-contractual Information Document" (PID) describing the main provisions of the proposed contract and information about their distribution system and the status of their network. The draft contract must also be provided.

If the PID and the draft contract are not provided, the contract can become null and void within two years of signature. The law also allows for sanctions if provisions of the Contractual Information Document are incomplete or inaccurate.