Exclusive Distribution (Concession) Agreements in France Territory, Obligations, Termination

Exclusive distribution is the classic way for a producer to build a controlled network in France while leaving the day-to-day selling — and the commercial risk — to independent local distributors. The instrument is the concession: a contract by which a supplier (the concédant) grants a selected distributor (the concessionnaire) the exclusive right to distribute its products over a defined territory, under the supplier's supervision, in return for a genuine commercial effort. One early definition put it that the concessionaire "places its distribution business at the service of a trader or manufacturer called the concédant to ensure, exclusively, over a determined territory, for a limited period and under the concédant's supervision, the distribution of products whose resale monopoly is granted to it."

Two features make the concession demanding to handle. First, it has no dedicated statutory regime: its rules are those the courts have built and, for the rest, the ordinary law of contract — so the drafting, and the case law, carry the whole weight. Second, because the concession grants an exclusivity that by its nature restricts competition, it sits under the constant supervision of EU and French competition law, and in particular the block exemption of Regulation (EU) 2022/720. This guide addresses the concession as a contract; the competition-law framework of vertical agreements is developed in its own guide, to which we cross-refer where the analysis turns on it.

What defines an exclusive distribution (concession) agreement?

The concession creates an exclusivity of supply in favour of a selected distributor. From the classic definition, commentators deduced a relationship of reciprocal exclusivity — an exclusivity of supply owed by the concédant, and an exclusivity of purchase and resale owed by the concessionaire. But the point to hold is that the qualification requires only the first: the supplier's exclusivity of supply. The distributor's own purchase-and-resale exclusivity is a frequent feature, not a condition of the concession.

Underneath sits the concessionaire's defining role — it is a firm buyer-reseller, taking title to the products and reselling them to its own customers as a trader. That firm purchase for resale is what separates a concession from an agency, and it is dealt with in our overview guide.

Exclusive distribution and selective distribution — not the same thing

Exclusive distribution resembles selective distribution in that both restrict the number of distributors. But the mode of selection differs: selective distribution selects by criteria, exclusive distribution by the attribution of a territory. According to the Commission, the principal difference lies in the nature of the protection: an exclusive distributor is protected against active sales made by buyers located outside its exclusive territory, whereas a selective distributor is protected against active and passive sales made by non-approved distributors (Guidelines, point 145). It is possible to combine selective and exclusive distribution on the same territory — reserving a territory to one distributor and forbidding resale outside the network — as distinct from their mere coexistence on separate territories.

Territorial exclusivity: the essential element

Territorial exclusivity is an essential element of the concession. The territory should therefore be specified in the contract — on pain of nullity — although it is accepted that the grant of an exclusive right to operate over a territory may be proved by any means. Like every restriction of a freedom, the stipulation of an exclusivity is interpreted strictly.

The word "exclusivity" is itself ambiguous, because on the assigned territory it can bear on several different things: it may forbid the promoter from selling to end users, from delivering them, from opening a new point of sale, or from supplying other distributors. What the exclusivity actually covers must therefore be spelled out; an exclusivity clause that is merely assumed is fragile.

Changing the territory

The binding force of the contract prevents any unilateral modification of the territory in the absence of an adaptation clause. Where the concédant does provide an adaptation clause, it is subject to the requirement that the obligation be determinable — it must be capable of being "deduced from the contract or by reference to usage or the parties' prior dealings" (Civil Code, Art. 1163) — that is, by an objective determinability escaping the will of a single party.

Brand exclusivity and precontractual information

A concessionaire who operates its activity exclusively or almost exclusively under the concédant's mark enjoys the protection of Article L 330-3 of the Commercial Code, which requires the concédant to provide, before the contract is concluded, extensive information about the concession — and, in particular, about the scope of the agreed territorial exclusivity.

What does the exclusivity actually protect against?

Here the concession meets competition law, and the answer is a matter of degree. Because the concession grants a territory to a single distributor, it restricts competition, and it is exempted only within limits. Regulation (EU) 2022/720 — applicable where each party's market share does not exceed 30%, absent a significant anti-competitive effect and any hardcore restriction — exempts the vertical restraint constituted by a territorial exclusivity, but only to the extent that the exclusivity is limited (Art. 4(b)(i)).

Absolute exclusivity is prohibited

A territorial exclusivity is exemptable only if it does not create a "lock-out" effect by limiting consumers' ability to turn to an alternative source of supply (Art. 101(1) TFEU), which would impede the free movement of goods that is the first objective of the internal market (Art. 34 TFEU). An absolute territorial exclusivity — one that would protect the beneficiary against every form of sale on its territory, including passive sales, and would forbid it from acting outside its own territory — is condemned. Regulation (EU) 2022/720 stresses the gravity of the harm, providing that such a restriction is objectionable "whatever the market share of the undertakings concerned." The case law bears this out with heavy fines against measures partitioning the internal market — Opel (Commission, 20 Sept. 2000: €43m), Volkswagen (CFI, 6 July 2000: €90m), and Peugeot (CFI, 9 July 2009, T-450/05: a bonus rewarding the concessionaire for resales within its territory — €45m). Equally condemned are the practices designed to hinder any resale — in particular passive resale — outside the territory: the use of intellectual-property rights or technical measures to that end, the marking of products or sale conditions with "export prohibited", and the obligation on a concessionaire to transfer to the concédant any order received from another territory (see also CJEC, 20 June 1978, Tepea; CJEC, 12 July 1979, BMW). Also caught is the clause by which the concédant undertakes not to respond to the demand of resellers — wherever they are located — wishing to commercialise the products in the conceded territory.

Limited (normal) exclusivity — active versus passive sales

Only the "normal" territorial exclusivity is exemptable: the concessionaire may be protected against active sales into its territory by the concédant and by other concessionaires, but it must tolerate passive sales from other concessionaires. Under Regulation (EU) 2022/720, active sales mean the active targeting of customers — by visits, letters, emails, calls, or targeted advertising and promotion, online or offline, including a website whose top-level domain corresponds to specific territories, or offering on a website languages commonly used on specific territories different from those where the buyer is established (Art. 1(1)(f)). Passive sales are those responding to spontaneous requests from individual customers, including delivery without the sale having been initiated by active targeting (Art. 1(1)(m)). Where a concessionaire suffers active sales into its territory by another concessionaire, it may act in delictual liability against that other concessionaire and, where appropriate, against a knowing third party (Art. L 442-2), and in contractual liability against the concédant that failed to enforce the obligation.

What the exclusivity cannot reach

The exclusivity also has an upper and an outer limit. It sits below not only absolute exclusivity but also a "reinforced" exclusivity that would protect the concessionaire against every sale made in its territory by another concessionaire: the concessionaire must bear the passive resales of other concessionaires, defined negatively as those that are not active. And it confers no protection at all against a distributor that does not belong to the network — all the more so because a ban on concessionaires reselling to out-of-network distributors is itself, in EU competition law, a hardcore restriction.

A recurring modern question is the concédant's own website. Where the contract merely forbids installing another point of sale on the concessionaire's territory, the concédant's creation of a website is not a fault: the case law does not equate a website with the establishment of a point of sale in the protected sector, nor treat it as a breach of the territorial exclusivity, provided the site is not oriented specifically to reach the clientele situated on that territory.

The full mechanics of the block exemption, the market-share test and the hardcore restrictions are developed in our guide on vertical agreements and the EU vertical rules.

What are the concessionaire's obligations?

The concession pursues the good commercialisation of the concédant's products, and to that end it stipulates obligations on the concessionaire — and, as the next section shows, on the concédant too. The concessionaire is a buyer-reseller, so its obligations turn on the purchase of the concédant's products and their resale. Because the concédant entrusts it with the reputation of the mark as well as the distribution of the goods, these obligations are typically backed by the concédant's supervision of the concessionaire's selling effort.

Purchase quotas and minima

The concessionaire may be bound to buy a determined quantity through a quota or minimum-purchase clause. Absent precision in the clause, this purchase obligation is generally analysed as an obligation of means expressing a target to be reached, though it is sometimes treated as an obligation of result whose non-performance engages the concessionaire's liability. Where the quotas or minima are fixed unilaterally by the concédant, the judge reviews whether they are reasonable and binding.

Exclusive purchase (mono-brand) and multi-brand concessions

The concessionaire often undertakes to buy only the concédant's products (monomarquisme); the contract then carries a reciprocal exclusivity of supply and purchase which, according to the Commission, can create a market "lock-out" effect for competing suppliers, especially where the exclusive-distributor network is dense or there is a cumulative effect (Guidelines, points 128 and 130). An exclusive-purchase tie is therefore not a free-standing convenience but a competition-sensitive term whose validity depends on the surrounding market — developed in our guide on exclusive purchase and supply. Absent a stipulation to the contrary — which an exclusive-purchase undertaking would supply — the concessionaire is free to sell products other than the concédant's: a multi-brand concession.

Resale — and how far the concédant may reach into pricing

On resale, the concédant's control has a firm ceiling. Any prescription requiring a minimum resale price would be rigorously sanctioned, and could even attract the application of a social-law status in the concessionaire's favour. What is permitted is the imposition of a maximum resale price or the recommendation of a resale price, provided they "do not amount to a fixed or minimum sale price as a result of pressure from, or incentives offered by, either party" (Regulation, Art. 4(a)). Resale-price control is treated in full in our dedicated guide on imposed prices.

A related principle limits how tightly the network can be closed on the consumer's side: the consumer's freedom to obtain supply from the concessionaire of its choice must be reinforced by the possibility of obtaining, from any other concessionaire, the service and the guarantee attached to the product. A network cannot be designed so as to trap the buyer's after-sales and warranty with a single member.

What are the concédant's obligations?

In granting a territorial exclusivity, the concédant entrusts the concessionaire not only with the distribution of its products but with the reputation of its mark — and it takes on obligations in return.

Supply and respect for the exclusivity

The concédant owes the exclusivity of supply that defines the concession, and it must not undermine the territorial exclusivity it has granted. Where the concédant itself sells to resellers or consumers it delivers into the conceded territory, it breaches the concessionaire's protection: it may then be liable, and exposes itself to termination of the contract (Cass. 1re civ., 15 March 1988). It is often agreed that the concédant will transfer to the concessionaire any orders received from a consumer situated in the exclusive zone (an order-transfer clause), so that resellers or consumers in the conceded territory may be supplied directly by the concédant only where delivery takes place outside the territory and they bear the transport costs themselves.

The case law has sanctioned the concédant for selling into the concessionaire's territory — whether to consumers (Cass. com., 2 Oct. 1973) or to non-concessionaire distributors (CA Amiens, 13 Dec. 1973; Cass. com., 19 Dec. 1989). One point remains unsettled: whether the concessionaire, faced with such a breach, may suspend payment of the sums it owes the concédant. The courts have hesitated — a Paris decision favouring the concessionaire (CA Paris, 6 May 1994), a Court of Cassation decision favouring the concédant (Cass. com., 1 Dec. 1992).

Supervision of the network — and the risk of doing too little

The concédant can incur liability not only by interfering with the exclusivity but by its laxity in supervising the network: for example, where it exercises insufficient control, where it fails to enforce the termination provided for the concessionaire's default although it knew or could not ignore that default, or where it does not ensure that the concessionaire correctly applies a promotional offer run for the whole network. The concession is a relationship of collaboration, and the concédant's duties run in both directions.

Does the concessionaire have any right to renewal?

No — and this is one of the hardest features of the concession for distributors to accept. Save a contrary clause or tacit renewal, the concessionaire has no right to the renewal of a fixed-term contract that expires at its agreed term (Civil Code, Art. 1212, al. 2). The concédant may decide to end the relationship at that date, and owes the concessionaire, as of right, no indemnity compensating any loss of clientele (Cass. com., 9 Jan. 1985), even where it gives no justification for its position.

What might look like grounds for a renewal claim are, in law, irrelevant. It matters little that the contract had been renewed several times before (Cass. com., 9 Dec. 1969), how long the contractual relationship had lasted (CA Paris, 24 Jan. 1983), or that dealings continued after the contract ended. Where the concédant has promised to tell the concessionaire before a given date whether it will sign a new contract, it is enough for it to communicate its intention: it need not spell out the content of its proposals before that date (Cass. com., 4 May 1982). No obligation to give reasons weighs on the concédant, whether for its refusal to renew or for its choice of a new concessionaire, and this holds even in a case of wrongful or abusive rupture — only the circumstances of the rupture, not the decision to end it, can give rise to damages. What crosses the line is a non-renewal decided with an intention to harm, or even with blameworthy levity (Cass. com., 9 Feb. 1981; Cass. com., 2 July 1991; Cass. com., 23 May 2000).

Renewal on modified terms

The concédant that may decline to renew may also, without committing a fault, offer a renewal on modified terms — even terms unacceptable to the former concessionaire (Cass. com., 6 June 2001). Modifications the courts have accepted include a limitation of the conceded sector and of the scope of the exclusivity (Cass. com., 26 Oct. 1982), the designation of a second concessionaire for the same sector (Cass. com., 17 Nov. 1980), an obligation to sell additional products, and the removal of the ability to represent a competing mark (Cass. com., 4 June 1980) — subject always to reasonable notice and to the absence of bad faith. Other accepted modifications include assigning a defined regional sector for one of the conceded branches (Cass. com., 4 May 1982) and withdrawing credit facilities previously granted. The concessionaire, for its part, is at fault if it fails to supply information requested for drawing up the new contract or does not respond to the concédant's offer.

Where offering modified terms tips into bad faith

The freedom to offer a less favourable renewal is not unlimited. It has been held wrongful, for instance, to announce to a concessionaire whose contract had already been renewed seven times without modification that its zone of activity would be considerably reduced (Cass. com., 11 July 1978); or, having first obtained from the concessionaire that it terminate early and without indemnity one of two contracts that had bound the parties for some thirty years, in exchange for a promise that the other would be renewed at its expiry, then to refuse to renew that other contract. The line is between adapting the network, which the concédant may do, and using the renewal to destabilise or mislead a partner, which it may not.

When and how can a concession be terminated?

The answer turns first on whether the contract is for a fixed or an indefinite term.

Fixed-term concession

A fixed-term concession must be performed to its term in accordance with its stipulations; anticipated termination is a breach unless justified. In practice the concédant relies on a resolutory clause allowing immediate termination for the concessionaire's grave fault. Terminations have been upheld where the concessionaire issued dishonoured bills of exchange and failed to pay (Cass. com., 3 Dec. 1979), where the concessionaire was criminally convicted for deceit on the substantial qualities of the goods sold under a resolutory clause for grave fault, and where a car concessionaire breached the base obligations of new-vehicle sales and after-sales service that the contract made resolutory on pain of termination. Failing to honour accepted bills of exchange given in return for the concédant's deliveries has likewise justified termination. But the judge must check that the conditions to which the parties subordinated the resolution are actually met (CA Paris, 4 Nov. 1982), and that the breach reproached to the concessionaire does not itself result from the concédant's conduct. A breach of a confidentiality undertaking has justified termination (Cass. com., 6 Apr. 2022, no. 20-18.135).

Where one party has made the continuation of the contractual relationship impossible by grave and repeated breaches, the other must have the rupture judicially pronounced — while being authorised, where appropriate, not to respect the exclusivity in the meantime. A word of caution for the concédant: it must apply the agreed sanction strictly, or at least reserve its later application while stressing the exceptional character of its tolerance — because the courts sometimes find abusive a termination that invokes a resolutory clause left unapplied until then. And the concédant must determine the grounds of resolution with care: it should neither gravely sanction benign defaults nor tolerate very grave ones.

Indefinite-term concession

An indefinite-term concession may be terminated at any time, subject to no abuse. Whatever the usage or the stipulations, the concédant must observe a reasonable period of notice before terminating, to allow the concessionaire to reorient its activity, notably by finding new suppliers. In concession matters the courts generally retained a notice of around six months, though sometimes less or more according to the economic context of the relationship. That case-law standard now runs alongside Article L 442-1, II of the Commercial Code, which imposes a written notice for the termination of any established commercial relationship and requires account to be taken of the seniority of the relationship and, where relevant, the importance of the investments required of the concessionaire and the product-rotation cycles. The abrupt-termination regime is treated in our flagship guide.

Abusive termination

Even a termination that conforms to the contract or to usage can be abusive where it is carried out in conditions that reveal indelicate conduct by the concédant and harm the concessionaire — for example, denigrating the former concessionaire's activity or person on the occasion of the rupture, applying a no-notice resolution clause for a breach it had until then tolerated, deliberately leading the concessionaire to believe the contract would be renewed unchanged while major modifications were planned, or deliberately obstructing the takeover of the concessionaire's business by a third party. The sanction, however, is not forced continuation of the contract but only reparation of the loss the concessionaire suffers — a loss found in the circumstances of the rupture, not in the decision to terminate, which remains the concédant's right.

What happens to a concession in insolvency or on a sale of the business?

The concession is an intuitu personae contract — concluded in consideration of the person of the distributor — but that character yields, in part, to the law of business difficulties. Where the concessionaire enters collective proceedings, the intuitu personae of a current contract cannot prevent the administrator from requiring its performance (Commercial Code, Arts. L 622-13 and L 641-11-1). Nor can it, in principle, prevent the judicial transfer of the contract on a sale of the business: the case law holds that the intuitu personae of the contract cannot in principle obstruct the assignment provided for by Article L 642-7, that provision being of public order — unless the change of contracting party makes the proper performance of the contract impossible, which calls for a concrete examination.

There are limits. If the contract has already come to an end — and, of course, in a non-fraudulent way — before the filing, the administrator cannot require its resumption. And the administrator cannot demand continuation where the termination is precisely justified by the opening of the collective proceedings itself.

Transferring the concession, and the distributor's business

Outside insolvency, the assignment of the concession itself is shaped by its intuitu personae character. A distinct question is whether the distributor holds a business (fonds de commerce) of its own: the point is debated, but a well-known decision recognised that a distributor — in that case a franchisee — was the holder of a fonds de commerce that it retained despite the termination of the distribution contract. Because the concédant can incur liability for deliberately obstructing the takeover of the concessionaire's business by a third party, the treatment of the distributor's business on exit is a live issue to plan for at the outset.

Getting the concession right: a drafting check

Because the concession has no statutory regime, the protections and the exposures live or die in the drafting. The features below are the ones the case law and the block exemption make decisive; each is a point on which a robust concession fixes matters in writing. It is an orientation aid, not a substitute for advice on a specific contract.

• The supplier's exclusivity of supply is expressly granted.
• The territory is defined in writing, and what the exclusivity covers is spelled out.
• The exclusivity is "limited" — it does not purport to block passive sales (no absolute exclusivity).
• Both parties' market shares are at or below 30% (block-exemption safe harbour).
• No minimum resale price is imposed — only, at most, a maximum or a recommended price.
• Any purchase quotas/minima are reasonable, and any adaptation clause is objectively determinable.
• Duration, renewal and a notice period are set, with the abrupt-termination rule in mind.
• Pre-contractual information under Article L 330-3 was given before signing (mark-exclusive concessionaire).

Each item reflects a rule stated in this guide. Gaps are not automatically fatal, but each is a point on which concessions are challenged. Indicative only; not legal advice.