Distributors law is concerned with all legal issues and questions which come up in connection with the business activities of an authorized dealer or distributor or authorized dealer. A distributor is a business person who will take over the distribution and sale of certain products on the basis of a specific authorized dealer’s contract or agreeement in his or her own name and for his or her own account combined with a concomitant obligation to promote such sales.
In consideration of the above-described legal status of the distributor these persons are in business life often also referred-to as contract dealers, general agents or specialized stock dealers.
It is an essential status quality of the distributor that he or she is an integrated part of the company’s sales networks in spite of the fact that he or she acts in his or her own name and for his or her own account. The basis for this cooperation with the company is normally a framework contract (authorized dealer’s contract) which defines and governs the parties’ mutual rights and obligations.
In practice questions or problems frequently arise in connection with either party claiming that these contractual obligations are or were not sufficiently met. While disputes in the case of commercial agents frequently arise in connection with the agent’s valid rights to entitlements to a commission, the issue of the distributor’s remuneration is less frequently a subject of disputes. The distributor’s remuneration is basically determined by the profit or trade margin which is to be achieved by the sale of the products concerned.
As far as the legal bases of the distributorship status are concerned these are only partly governed by statutory provisions. It is, however, to be noted that pertinent Regulations with European-wide validity do govern the motor vehicle trade (such as, e.g. Regulation 1400/2002).
Legal disputes may arise when a distributorship is terminated. In pertinent jurisdiction the principles governing the contractual compensation claims of commercial agents, which are stipulated in Section 89 b of the German Commercial Code are correspondingly also applied in cases of the termination of a distributor’s agreement, provided that certain prerequisites are met As a matter of principle it is required that the distributor constitutes an integrated part of the company’s business operations in a way which corresponds to the status of a commercial agent, with an additional obligation on the part of the distributor to let the company have and use hisown established clientele records when the agreement is terminated.
Pertinent jurisdiction also has recourse to a number of other legal provisions of the legislation for commercial agents, which are analogously applied for the distributor, and it is such issues which time and again result in legal disputes.