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Current situation of the law governing authorised dealers

Current situation of the law governing authorised dealers

If we compare the different distribution systems, we notice a trend towards the authorised dealer system, with franchise systems also showing steady growth. Commercial agent systems are declining sharply in most areas. This creates not insignificant legal problems as only the law governing commercial agents is harmonised across Europe and a legal framework for the law governing authorised dealers and franchises only exists in a few European countries. The law governing authorised dealers is predominantly case law and varies greatly across Europe. At European level, there is the highly restricted so-called Vertical Block Exemption Regulation (Commission Regulation (EU) No. 330/2010). There are also a few sector-specific European Regulations. The European Regulation for the motor vehicle sector, the Motor Vehicle Block Exemption (Regulation (EC) No. 1400/2002), has always been important here, as many other sectors have also drawn on it. However, this Regulation was recently abolished, opening up the way for manufacturer-friendly contractual conditions.

Several European countries, in particular Austria, have recently developed their own provisions for the law governing authorised dealers. Although such initiatives by individual countries are admirable, they are increasingly leading to non-unified treatment of the law governing authorised dealers in Europe.

In Germany, the law governing authorised dealers is based on case law, with the main legal precedents all relating to the motor vehicle sector, which is now in a state of flux following the abolition of the Motor Vehicle Block Exemption. It remains to be seen whether, and if so to what extent, some of these decisions will be reviewed.

In contracts for authorised dealers, manufacturers are increasingly inserting clauses imposing qualitative standards on dealers (e.g. fitting-out of showrooms, stock, corporate identity, availability of contract goods or staff training). We often also find a clause in which the manufacturer reserves the right to alter the standards agreed on the formation of the contract unilaterally while the contract is in force, even if this would involve substantial investment on the part of the dealer. However, such unilateral amendment clauses are mostly ineffective. If failure to meet the standard brings the risk of not insignificant damage to the distribution per se or the reputation of the manufacturer, in certain circumstances this may constitute grounds for extraordinary cancellation.

Such contracts also often contain clauses by which the manufacturer influences the remuneration system (e.g. changes to margins or bonuses). Dealers will still accept such clauses, which are highly questionable from a legal point of view, because dealers are commercially dependent on the manufacturer.

Since the abolition of the Motor Vehicle Block Exemption, manufacturers are once more in the position to agree non-compete clauses with their authorised dealers and such clauses are now regularly found in all sectors. This makes the dealer even more dependent on the manufacturer, with major retailers also no longer distributing brands that impose a non-compete clause on them.

Another – typically German – problem is the widespread buy-back obligation for dealers under leasing agreements negotiated by them with lessors. This obligation is to be found in many contracts for authorised dealers in the motor vehicle sector in Germany and has even led to insolvencies of retailers since the fall in used-car prices. Nevertheless, German case law mainly upholds the effectiveness of these clauses.

The change in the framework of cartel law and the change in the economic situation are leading to a marked change or even worsening of the commercial and legal situation of authorised dealerships. It is no accident that, at least at national level, the need for provisions to protect dealers is being discussed or – in the case of Austria – acted on. In the next few years, this will lead to a confusing patchwork of approaches in Europe. In view of the fact that authorised dealer systems represent the majority of distribution systems in Europe, it is to be hoped that harmonisation will be established at European level.

By Susanne Hermsen

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