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US TARIFFS | Contractual clauses for managing price increases
14 March 2025
- Distribution
- Tax
On April 2, 2025, U.S. tariffs toward products from the EU will go into effect.
Given what happened with the tariffs imposed on Canada and Mexico, with a chase of announcements of entry into force and suspensions and new announcements, it is impossible to make even short-term predictions.
One must prepare oneself for the possibility of imposition of duty, which is a foreseeable and anticipated event and, as such, should be regulated in the contract. Failure to do so is likely to be very costly because there are no valid arguments for excusing the non-performance of contracts already concluded by invoking a situation of Force Majeure (which does not exist, because the performance has not become objectively impossible) or of supervening excessive onerousness or hardship: even in the case of increases well over 25 percent, tribunals around the world tend to rule out its invocation).
The caution that can be taken is to negotiate a price update clause, expressly referring, among other factors, to the eventual adoption of tariffs.
A useful clause may be the so-called Escalator or Price Adjustment Clause, by which the right to renegotiate the price is provided in the case of imposing a duty above a certain threshold, for example:
PRICE ADJUSTMENT CLAUSE
Triggering Event
A “Triggering Event” shall be deemed to occur if:
- There is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods or services by X% or more.
- Such an increase affects either (i) the Buyer directly or (ii) the Seller due to tariffs imposed on its upstream suppliers, materially impacting the cost of performance.
Trigger Mechanism
In the event of a Triggering Event:
- The affected Party shall notify the other Party in writing within thirty (30) days of the effective date of the customs duty change or the introduction of the new trade barrier.
- The notification must include supporting documentation demonstrating the financial impact of the Triggering Event.
Renegotiation Process
Upon receipt of a valid notification, the Parties shall engage in good-faith negotiations for sixty (60) days to agree on an adjusted price that reflects the increased costs.
Failure to Reach an Agreement
If the Parties fail to reach an agreement on the price adjustment within the prescribed sixty (60) days:
Option 1 – Contract Termination: Either Party shall have the right to terminate the contract by providing written notice to the other Party, without liability for damages, except for obligations already accrued up to the termination date.
Option 2 – Third-Party Arbitrator: The Parties shall appoint an independent third-party arbitrator with expertise in international trade and pricing. The arbitrator shall determine a fair market price, which shall be binding on both Parties. The cost of the arbitrator shall be borne equally by both Parties unless otherwise agreed.
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Another possible tool as an alternative to the clause just seen is the so-called Cost Sharing clause, for example:
COST SHARING CLAUSE
Triggering Event
A “Triggering Event” shall be deemed to occur if there is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods by [X]% or more. Such an increase will be borne by the Buyer by up to [X]%, while higher increases will be shared equally between the seller and buyer.
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It is appropriate for such clauses to be adapted on a case-by-case basis to best to reflect the scenarios that are expected to affect the price of the products, namely
- imposition of duty on U.S. entry
- imposition of duty on EU entry
but also indirect effects, such as where it is the seller who invokes price renegotiation, for example because the price of the product has increased due to the duty paid by one of its upstream suppliers in the supply chain, in which case it is crucial to identify which products are relevant and to document the increases resulting from the imposition of tariffs.
Duties are not paid by foreign governments (as Donald Trump repeatedly said on the electoral campaign) but by the importing companies of the country that issued the tax on the value of the imported product, i.e., in the case of the Trump administration’s recent round of tariffs, U.S. companies. Similarly, Canadian, Mexican, Chinese, and – probably – European companies will pay the import duties on U.S.-origin products levied by their respective countries as a trade retaliation measure against U.S. tariffs.
In this context, several scenarios open up, all of them problematic
- U.S. companies will pay the import taxes
- foreign companies exporting taxed products to the U.S., will see export volumes fall as a result of the price increase
- foreign companies that import products from the U.S., in turn, will pay tariffs imposed by their countries in retaliation to U.S. duties
- intermediate or end customers in markets affected by the tariffs will pay a higher price for imported products
Does the imposition of the duty constitute force majeure?
A frequent first objection of the party affected by the duty (it may be the buyer-importer or the one who resells the product after paying the duty), in such cases, is to invoke force majeure to evade the performance of the contract, which, as a result of the duty has become too onerous.
The application of the duty, however, does not fall under force majeure since we are not faced with an unforeseeable event, resulting in the objective impossibility of fulfilling the contract. The buyer/importer, in fact, can always fulfill the contract, with only the issue of price increase.
Does the imposition of the duty constitute a cause of hardship?
If a situation of excessive onerousness arises after the conclusion of the contract (hardship), the affected party has the right to demand a revision of the price or to terminate the contract.
Is this the case for tariffs? A case-by-case assessment is needed, leading to a finding of recurrence of hardship if an extraordinary and unforeseeable situation exists (in the case of the U.S. duties, which have been announced for months, it isn’t easy to support this) and the price, as a result of the application of the tariff, is manifestly excessive.
These are exceptional situations, rarely applied, and should be investigated further based on the law applicable to the contract. Generally, price fluctuations in international markets are part of business risk and do not constitute sufficient grounds for renegotiating concluded agreements, which remain binding unless the parties have included a hardship clause (discussed below).
Does the application of the tariff entail a right to renegotiate prices?
Contracts already concluded, such as orders already accepted and supply schedules with agreed prices for a certain period, are binding and must be fulfilled according to the original agreements.
In the absence of specific clauses in the contract, the party affected by the tariff is therefore obliged to comply with the previously agreed price and give fulfillment to the agreement.
The parties are free to renegotiate future contracts, e.g.
- the seller may give a discount to lessen the impact of the duty affecting the buyer-importer, or
- the buyer may agree to a price increase to compensate for a duty that the seller has paid to import a component or semi-finished product into his country, and then export the finished product
but this does not affect the validity of contracts already negotatied, which remain binding.
The situation is particularly delicate for companies in the middle of the supply chain, such as those who import raw materials or components from abroad (potentially subject to tariffs, including double duties in the case of repeated import and export) and resell the semi-finished or finished products, since they are not entitled to pass the cost on to the following link in the supply chain, unless this was expressly provided for in the contract with the customer.
What can be done in case of imposition of future duties affecting foreign suppliers or customers?
It is advisable to expressly provide for the right to renegotiate prices, if necessary by adding an addendum to the original agreement. This can be achieved, for example, by a clause providing that in case future events, including any duties, cause an increase in the overall cost of the product above a certain threshold (e.g., 10 percent), the party affected by the tariffs has the right to initiate a renegotiation of the price and, in the event of a failure to agree, can withdraw from the contract.
An example of a clause might be as follows:
Import Duties Adjustment
“If any new import duties, tariffs, or similar governmental charges are imposed after the conclusion of this Contract, and such measures increase a Party’s costs exceeding X% of the agreed price of the Products, the affected Party shall have the right to request an immediate renegotiation of the price. The Parties shall engage in good faith negotiations to reach a fair adjustment of the contractual price to reflect the increased costs.
If the Parties fail to reach an agreement within [X] days from the affected Party’s request for renegotiation, the latter shall have the right to terminate this Contract with [Y] days‘ written notice to other Party, without liability for damages, except for the fulfillment of obligations already accrued.”
“This agreement is not just an economic opportunity. It is a political necessity.” In the current geopolitical context of growing protectionism and significant regional conflicts, Ursula von der Leyen’s statement says a lot.
Even though there is still a long way to go before the agreement is approved internally in each bloc and comes into force, the milestone is highly significant. It took 25 years from the start of negotiations between Mercosur and the European Union to reach a consensus text. The impacts will be considerable. Together, the blocs represent a GDP of over 22 trillion dollars, and are home to over 700 million people.
Our aim here is to highlight, in a simplified manner, the most important information about the agreement’s content and its progress, which we will update here at each stage.
What is it?
The agreement was signed as a trade treaty, with the main goal of reducing import and export tariffs, eliminating bureaucratic barriers, and facilitating trade between Mercosur countries and European Union members. Additionally, the pact includes commitments in areas such as sustainability, labor rights, technological cooperation, and environmental protection.
Mercosur (Southern Common Market) is an economic bloc created in 1991 by Brazil, Argentina, Paraguay, and Uruguay. Now, Bolivia and Chile participate as associated members, accessing some trade agreements, but not fully integrated into the common market. On the other hand, the European Union, with its 27 members (20 of which have adopted the common currency), is a broader union with greater economic and social integration compared to Mercosur.
What does the EU Mercosur agreement include?
Trade in goods:
- Reduction or elimination of tariffs on products traded between the blocs, such as meat, grains, fruits, automobiles, wines, and dairy products (the expected reduction will affect over 90% of the traded goods between the blocks).
- Easier access to European high-tech and industrialized products.
Trade in services:
- Expands access to financial services, telecommunications, transportation, and consulting for businesses in both blocs.
Movement of people:
- Provides facilities for temporary visas for qualified workers, such as technology professionals and engineers, promoting talent exchange.
- Encourages educational and cultural cooperation programs.
Sustainability and environment:
- Includes commitments to combat deforestation and meet the goals of the Paris Agreement on climate change.
- Provides penalties for violations of environmental standards.
Intellectual property and regulations:
- Protects geographical indications for European cheese, wines, and South American coffee and cachaça.
- Harmonizes regulatory standards to reduce bureaucracy and avoid technical barriers.
Labor rights:
- Commitment to decent working conditions and compliance with International Labor Organization (ILO) standards.
Which benefits to expect?
- Access to new markets: Mercosur companies will have easier access to the European market, which has more than 450 million consumers, while European products will become more competitive in South America.
- Costs reduction: The elimination or reduction of tariffs could lower the prices of products such as wines, cheese, and automobiles and boost South American exports of meat, grains, and fruits.
- Strengthened diplomatic relations: The agreement symbolizes a bridge of cooperation between two regions historically connected by cultural and economic ties.
What’s next?
The signing is only the first step. For the agreement to come into force, it must be ratified by both blocs, and the approval process is quite distinct between them, since Mercosur does not have a common Council or Parliament.
In the European Union, the ratification process involves multiple institutional steps:
- Council of the European Union: Ministers from the member states will discuss and approve the text of the agreement. This step is crucial, as each country has representation and may raise specific national concerns.
- European Parliament: After approval by the Council, the European Parliament, composed of elected deputies, votes to ratify the agreement. The debate at this stage may include environmental, social, and economic impacts.
- National Parliaments: In cases where the agreement affects shared competencies between the bloc and member states (such as environmental regulations), it must also be approved by the parliaments of each member country. This can be challenging, given that countries like France and Ireland have already expressed specific concerns about agricultural and environmental issues.
In Mercosur, the approval depends on each member country:
- National Congresses: The agreement text is submitted to the parliaments of Brazil, Argentina, Paraguay, and Uruguay. Each congress evaluates independently, and approval depends on the political majority in each country.
- Political Context: Mercosur countries have diverse political realities. In Brazil, for example, environmental issues can spark heated debates, while in Argentina, the impact on agricultural competitiveness may be the focus of discussion.
- Regional Coordination: Even after national approval, it is necessary to ensure that all Mercosur members ratify the agreement, as the bloc acts as a single negotiating entity.
Stay tuned: you will find the update here as the processes advance.
When selling health-related products, the question frequently arises as to which product category, and therefore which regulatory regime, they fall under. This question often arises when distinguishing between food supplements and medicinal products. But in other constellations, too, difficult questions of demarcation arise, which must be answered with a view to legally compliant marketing.
In a highly interesting case, the Administrative Court (Verwaltungsgericht) of Düsseldorf, Germany, recently had to classify a CBD-containing (Cannabidiol) mouth spray that was explicitly advertised by its manufacturer as a “cosmetic” and therefore not suitable for human consumption. The Ingredients of the product were labelled: « Cannabis sativa seed oil, cannabidiol from cannabis extract, tincture or resin, cannabis sativa leaf extract ».
The Product is additionally also labelled as follows: “Cosmetic oral care spray with hemp leaf extract. » The Instructions for use are: « Spray a maximum of 3 sprays a day into the mouth as desired. Spit out after 30 seconds and do not swallow. »
A spray of the Product contains 10 mg CBD. This results in a maximum daily dose of 30 mg CBD as specified by the company.
At the same time, however, it was pointed out that the “consumption” of a spray shot was harmless to health.
The mouth spray could therefore be consumed like a food, but was declared as a “cosmetic”. This is precisely where the court had to examine whether the prohibition order based on food law was lawful.
For the definition of cosmetic products Article 2 sentence 4 lit. e) Regulation (EC) No. 178/2002 refers to Directive 76/768/EEC. This was replaced by Regulation (EC) No. 1223/2009. Cosmetic products are defined in Article 2(1)(a) as follows: “‘cosmetic product’ means any substance or mixture intended to be placed in contact with the external parts of the human body (epidermis, hair system, nails, lips and external genital organs) or with the teeth and the mucous membranes of the oral cavity with a view exclusively or mainly to cleaning them, perfuming them, changing their appearance, protecting them, keeping them in good condition or correcting body odours ”.
Here too, it is not the composition of the product that is decisive, but its intended purpose, which is to be determined on the basis of objective criteria according to general public opinion based on concrete evidence.
According to the system of Regulation (EC) No. 178/2002, Article 2 sentence 1 first defines foodstuffs in general and then excludes cosmetic products under sentence 4 lit. e). According to the definition in Regulation (EC) No. 1223/2009, cosmetic products must have an exclusive or at least predominant cosmetic purpose. It can be concluded from this system that the exclusivity or predominance must be positively established. If it is not possible to determine which purpose predominates, the product is a foodstuff.
The Düsseldorf Administrative Court had to deal with this question in the aforementioned legal dispute brought by the distributor against an official prohibition order in the form of a so-called general ruling („Allgemeinverfügung“). By notice dated July 11, 2020, the competent authority issued a general ruling prohibiting the marketing of foodstuffs containing “cannabidiol (as ‘CBD isolates’ or ‘hemp extracts enriched with CBD’)” in their urban area. The company, based in this city, offered the mouth spray described above.
In a ruling dated 25.10.2024 (Courts Ref. : 26 K 2072/23), the court dismissed the company’s claim. The court’s main arguments were :
- Classification as food: the CBD spray was correctly classified as food by the authority, as it was reasonable to expect that it could be swallowed despite indications to the contrary. According to an objective perception of the market, there is a now established expectation of an average informed, attentive and reasonable consumer to the effect that CBD oils are intended as “lifestyle” products for oral ingestion, from which consumers hope for positive health effects The labelling as “cosmetic” was refuted by the objective consumer expectations and the nature of the application.
- No medicinal product status: Due to the low dosage in this case (max. 30 mg CBD per day), the product was not classified as a functional medicinal product, as there was no sufficiently proven pharmacological effect.
- Legal basis of the injunction: The prohibition of the sale of the products by the defendant was based on a general order, which was confirmed as lawful by the court.
In the ruling, the court emphasizes the objective consumer expectation and clarifies that products cannot be exempted from a different regulatory classification by the authorities or the courts solely by their labelling.
Conclusion: The decision presented underlines the considerable importance of the “correct” classification of a health product in the respective legal product category. In addition to the classic distinction between foodstuffs (food supplements) and medicinal products, comparable issues also arise with other product types. In this case in the constellation of cosmetics versus food – combined with the special legal component of the use of CBD.
Commercial agents have specific regulations with rights and obligations that are “mandatory”: those who sign an agency contract cannot derogate from them. Answering whether an influencer can be an agent is essential because, if he or she is an agent, the agent regulations will apply to him or her.
Let’s take it one step at a time. The influencer we will talk about is the person who, with their actions and comments (blogs, social media accounts, videos, events, or a bit of everything), talks to their followers about the advantages of certain products or services identified with a certain third-party brand. In exchange for this, the influencer is paid.[1]
A commercial agent is someone who promotes the contracting of others’ products or services, does so in a stable way, and gets paid in return. He or she can also conclude the contract, but this is not essential.
The law imposes certain obligations and guarantees rights to those signing an agency contract. If the influencer is considered an “agent”, he or she should also have them. And there are several of them: for example, the duration, the notice to be given to terminate the contract, the obligations of the parties… And the most relevant, the right of the agent to receive compensation at the end of the relationship for the clientele that has been generated. If an influencer is an agent, he would also have this right.
How can an influencer be assessed as an agent? For that we must analyse two things: (a) the contract (and be careful because there is a contract, even if it is not written) and (b) how the parties have behaved.
The elements that, in my opinion, are most relevant to conclude that an influencer is an agent would be the following:
a) the influencer promotes the contracting of services or the purchase of products and does so independently.
The contract will indicate what the influencer must do. It will be clearer to consider him as an agent if his comments encourage contracting: for example, if they include a link to the manufacturer’s website, if he offers a discount code, if he allows orders to be placed with him. And if he does so as an independent “professional”, and not as an employee (with a timetable, means, instructions).
It may be more difficult to consider him as an agent if he limits himself to talking about the benefits of the product or service, appearing in advertising as a brand image, and using a certain product, and speaking well of it. The important thing, in my opinion, is to examine whether the influencer’s activity is aimed at getting people to buy the product he or she is talking about, or whether what he or she is doing is more generic persuasion (appearing in advertising, lending his or her image to a product, carrying out demonstrations of its use), or even whether he or she is only seeking to promote himself or herself as a vehicle for general information (for example, influencers who make comparisons of products without trying to get people to buy one or the other). In the first case (trying to get people to buy the product) it would be easier to consider it as an “agent”, and less so in the other examples.
b) this “promotion” is done in a continuous or stable manner.
Be careful because this continuity or stability does not mean that the contract has to be of indefinite duration. Rather, it is the opposite of a sporadic relationship. A one-year contract may be sufficient, while several unconnected interventions, even if they last longer, may not be sufficient.
In this case, influencers who make occasional comments, who intervene with isolated actions, who limit themselves to making comparisons without promoting the purchase of one or the other, and even if all this leads to sales, even if their comments are frequent and even if they can have a great influence on the behavior of their followers, would be excluded as agents.
c) they receive remuneration for their activity.
An influencer who is remunerated based on sales (e.g., by promoting a discount code, a specific link, or referring to your website for orders) can more easily be considered as an agent. But also, if he or she only receives a fixed amount for their promotion. On the other hand, influencers who do not receive any remuneration from the brand (e.g. someone who talks about the benefits of a product in comparison with others, but without linking it to its promotion) would be excluded.
Conclusion
The borderline between what qualifies an influencer as an agent and what does not can be very thin, especially because contracts are often not unambiguous and sometimes their services are multiple. The most important thing is to carefully analyse the contract and the parties’ behaviour.
An influencer could be considered a commercial agent to the extent that his or her activity promotes the contracting of the product (not simply if he or she carries out informative or image work), that it is done on a stable basis (and not merely anecdotal or sporadic) and in exchange for remuneration.
To assess the specific situation, it is essential to analyse the contract (if it is written, this is easier) and the parties’ behaviour.
In short, to draw up a contract with an influencer or, if it has already been signed, but you want to conclude it, you will have to pay attention to these elements. As an influencer you may have a strong interest in being considered an agent at the end of the contract and thus be entitled to compensation, while as employer you will prefer the opposite.
FINAL NOTE. In Spain and at the date of this comment (9 June 2024) I am not aware of any judgement dealing with this issue. My proposal is based on my experience of more than 30 years advising and litigating on agency contracts. On the other hand, and as far as I know, there is at least one judgment in Rome (Italy) dealing with the matter: Tribunale di Roma; Sezione Lavoro 4º, St. 2615 of 4 March 2024; R. G. n. 38445/2022.
The commercial agent has the right to obtain certain information about the sales of the principal. The Spanish Law on Agency Contracts provides (15.2 LCA) that the agent has the right to demand to see the accounts of the principal in order to verify all matters relating to the commissions due to him. And also, to be provided with the information available to the principal and necessary to verify the amount of such commissions.
This article is in line with the 1986 Commercial Agents Directive, according to which (12.3) the agent is entitled to demand to be provided with all information at the disposal of the principal, particularly an extract from the books of account, which is necessary to verify the amount of commission due to the agent. This may not be altered to the detriment of the commercial agent by agreement.
The question is, does this right remain even after the termination of the agency contract? In other words: once the agency contract is terminated, can the agent request the information and documentation mentioned in these articles and is the Principal obliged to provide it?
In our opinion, the rule does not say anything that limits this right, rather the opposite is to be expected. Therefore, to the extent that there is still any possible commission that may arise from such verification, the answer must be yes. Let us see.
The right to demand the production of accounts exists so that the agent can verify the amount of commissions. And the agent is entitled to commissions for acts and operations concluded during the term of the contract (art. 12 LCA), but also for acts or operations concluded after the termination of the contract (art. 13 LCA), and for operations not carried out due to circumstances attributable to the principal (art. 17 LCA). In addition, the agent is entitled to have the commission accrued at the time when the act or transaction should have been executed (art. 14 LCA).
All these transactions can take place after the conclusion of the contract. Consider the usual situation where orders are placed during the contract but are accepted or executed afterwards. To reduce the agent’s right to be informed only during the term of the contract would be to limit his entitlement to the corresponding commission unduly. And it should be borne in mind that the amount of the commissions during the last five years may also influence the calculation of the client (goodwill) indemnity (art. 28 LCA), so that the agent’s interest in knowing them is twofold: what he would receive as commission, and what could increase the basis for future indemnity.
This has been confirmed, for example, by the Provincial Court (Audiencia Provincial) of Madrid (AAP 227/2017, of 29 June [ECLI:ES:APM:2017:2873A]) which textually states:
[…] art. 15.2 of the Agency Contract Act provides for the right of the agent to demand the exhibition of the Principal’s accounts in the particulars necessary to verify everything relating to the commissions corresponding to him, as well as to be provided with the information available to the Principal and necessary to verify the amount. This does not prevent, […], the agency contract having already been terminated, as this does not imply that commissions would cease to accrue for policies, contracted with the mediation of the agent, which remain in force.
The question then arises as to whether this right to information is unlimited in time. And here the answer would be in the negative. The limitation of the right to receive information would be linked to the statute of limitations of the right to claim the corresponding commission. If the right to receive the commission were undoubtedly time-barred, it could be argued that it would not be possible to receive information about it. But for such an exception, the statute of limitations must be clear, therefore, taking into account possible interruptions due to claims, even extrajudicial ones. In case of doubt, it will be necessary to recognise the right to demand the information, without prejudice to later invoking and recognising the impossibility of claiming the commission if the right is time-barred. And for this we must consider the limitation period for claiming commissions (in general, three years) and that of the right to claim compensation for clientele (one year).
In short: it does not seem that the right to receive information and to examine the principal’s documentation is limited by the term of the agency contract; although, on the other hand, it would be appropriate to analyse the possible limitation period for claiming commissions. In the absence of a clear answer to this question, the right to information should, in our opinion, prevail, without prejudice to the fact that the result may not entitle the claim because it is time-barred.
SUMMARY: In large-scale events such as the Paris Olympics certain companies will attempt to “wildly” associate their brand with the event through a practice called “ambush marketing”, defined by caselaw as “an advertising strategy implemented by a company in order to associate its commercial image with that of an event, and thus to benefit from the media impact of said event, without paying the related rights and without first obtaining the event organizer’s authorization” (Paris Court of Appeal, June 8, 2018, Case No 17/12912). A risky and punishable practice, that might sometimes yet be an option yet.
Key takeaways
- Ambush marketing might be a punished practice but is not prohibited as such;
- As a counterpart of their investment, sponsors and official partners benefit from an extensive legal protection against all forms of ambush marketing in the event concerned, through various general texts (counterfeiting, parasitism, intellectual property) or more specific ones (e.g. sport law);
- The Olympics Games are subject to specific regulations that further strengthen this protection, particularly in terms of intellectual property.
- But these rights are not absolute, and they are still thin opportunities for astute ambush marketing.
The protection offered to sponsors and official partners of sporting and cultural events from ambush marketing
With a budget of over 4 billion euros, the 2024 Olympic and Paralympic Games are financed mostly by various official partners and sponsors, who in return benefit from a right to use Olympic and Paralympic properties to be able to associate their own brand image and distinctive signs with these events.
Ambush marketing is not punishable as such under French law, but several scattered texts provide extensive protection against ambush marketing for sponsors and partners of sporting or cultural continental-wide or world-wide events. Indeed, sponsors are legitimately entitled to peacefully enjoy the rights offered to them in return for large-scale investments in events such as the FIFA or rugby World Cups, or the Olympic Games.
In particular, official sponsors and organizers of such events may invoke:
- the “classic” protections offered by intellectual property law (trademark law and copyright) in the context of infringement actions based on the French Intellectual Property Code,
- tort law (parasitism and unfair competition based on article 1240 of the French Civil Code);
- consumer law (misleading commercial practices) based on the French Consumer Code,
- but also more specific texts such as the protection of the exploitation rights of sports federations and sports event organizers derived from the events or competitions they organize, as set out in article L.333-1 of the French Sports Code, which gives sports event organizers an exploitation monopoly.
The following ambush marketing practices were sanctioned on the abovementioned grounds:
- The use of a tennis competition name and of the trademark associated with it during the sporting event: The organization of online bets, by an online betting operator, on the Roland Garros tournament, using the protected sign and trademark Roland Garros to target the matches on which the bets were organized. The unlawful exploitation of the sporting event, was punished and 400 K€ were allowed as damages, based on article L. 333-1 of the French Sports Code, since only the French Tennis Federation (F.F.T.) owns the right to exploit Roland Garros. The use of the trademark was also punished as counterfeiting (with 300 K€ damages) and parasitism (with 500 K€ damages) (Paris Court of Appeal, Oct. 14, 2009, Case No 08/19179);
- An advertising campaign taking place during a film festival and reproducing the event’s trademark: The organization, during the Cannes Film Festival, of a digital advertising campaign by a cosmetics brand through the publication on its social networks of videos showing the beauty makeovers of the brand’s muses, in some of which the official poster of the Cannes Film Festival was visible, one of which reproduced the registered trademark of the “Palme d’Or”, was punished on the grounds of copyright infringement and parasitism with a 50 K€ indemnity (Paris Judicial Court, Dec. 11, 2020, Case No19/08543);
- An advertising campaign aimed at falsely claiming to be an official partner of an event: The use, during the Cannes Film Festival, of the slogan “official hairdresser for women” together with the expressions “Cannes” and “Cannes Festival”, and other publications falsely leading the public to believe that the hairdresser was an official partner, to the detriment of the only official hairdresser of the Cannes festival, was punished on the grounds of unfair competition and parasitism with a 50 K€ indemnity (Paris Court of Appeal, June 8, 2018, Case No 17/12912).
These financial penalties may be combined with injunctions to cease these behaviors, and/or publication in the press under penalty.
An even greater protection for the Paris 2024 Olympic Games
The Paris 2024 Olympic Games are also subject to specific regulations.
Firstly, Article L.141-5 of the French Sports Code, enacted for the benefit of the “Comité national olympique et sportif français” (CNOSF) and the “Comité de l’organisation des Jeux Olympiques et Paralympiques de Paris 2024” (COJOP), protects Olympic signs such as the national Olympic emblems, but also the emblems, the flag, motto and Olympic symbol, Olympic anthem, logo, mascot, slogan and posters of the Olympic Games, the year of the Olympic Games “city + year”, the terms “Jeux Olympiques”, “Olympisme”, “Olympiade”, “JO”, “olympique”, “olympien” and “olympienne”. Under no circumstances may these signs be reproduced or even imitated by third-party companies. The COJOP has also published a guide to the protection of the Olympic trademark, outlining the protected symbols, trademarks and signs, as well as the protection of the official partners of the Olympic Games.
Secondly, Law no. 2018-202 of March 26, 2018 on the organization of the 2024 Olympic and Paralympic Games adds even more specific prohibitions, such as the reservation for official sponsors of advertising space located near Olympic venues, or located on the Olympic and Paralympic torch route. This protection is unique in the context of the Olympic Games, but usually unregulated in the context of simple sporting events.
The following practices, for example, have already been sanctioned on the above-mentioned grounds:
- Reproduction of a logo imitating the well-known “Olympic” trademark on a clothing collection: The marketing of a collection of clothing, during the 2016 Olympic Games, bearing a logo (five hearts in the colors of the 5 Olympic colors intersecting in the image of the Olympic logo) imitating the Olympic symbol in association with the words “RIO” and “RIO 2016”, was punished on the grounds of parasitism (10 K€ damages) and articles L. 141-5 of the French Sports Code (35 K€) and L. 713-1 of the French Intellectual Property Code (10 K€ damages) (Paris Judicial Court, June 7, 2018, Case No16/10605);
- The organization of a contest on social networks using protected symbols: During the 2018 Olympic Games in PyeongChang, a car rental company organized an online game inviting Internet users to nominate the athletes they wanted to win a clock radio, associated with the hashtags “#JO2018” (“#OJ2018”), “#Jeuxolympiques” (“#Olympicsgame”) or “C’est parti pour les jeux Olympiques” (“let’s go for the Olympic Games”) without authorization from the CNOSF, owner of these distinctive signs under the 2018 law and article L.141-5 of the French Sport Code and punished on these grounds with 20 K€ damages and of 10 K€ damages for parasitism (Paris Judicial Court, May 29, 2020, n°18/14115).
These regulations offer official partners greater protection for their investments against ambush marketing practices from non-official sponsors.
Some marketing operations might be exempted
An analysis of case law and promotional practices nonetheless reveals the contours of certain advertising practices that could be authorized (i.e. not sanctioned by the above-mentioned texts), provided they are skillfully prepared and presented. Here are a few exemples :
- Communication in an offbeat or humorous tone: An offbeat or even humorous approach can help to avoid the above-mentioned sanctions:
In 2016, for example, the Intersnack group’s Vico potato chips brand launched a promotional campaign around the slogan “Vico, partner of home fans” in the run-up to the Euro and Olympic Games.
Irish online betting company Paddy Power had sponsored a simple egg-in-the-spoon race in “London” (… a village in Burgundy, France), to display in London during the 2012 Olympics the slogan “Official Sponsor of the largest athletics event in London this year! There you go, we said it. (Ahem, London France that is)“. At the time, the Olympic Games organizing committee failed to stop the promotional poster campaign.
During Euro 2016, for which Carlsberg was the official sponsor, the Dutch group Heineken marketed a range of beer bottles in the colors of the flags of 21 countries that had “marked its history”, the majority of which were however participating in the competition.
- Communication of information for advertising purposes: The use of the results of a rugby match and the announcement of a forthcoming match in a newspaper to promote a motor vehicle and its distinctive features was deemed lawful: “France 13 Angleterre 24 – the Fiat 500 congratulates England on its victory and looks forward to seeing the French team on March 9 for France-Italy” (France 13 Angleterre 24 – la Fiat 500 félicite l’Angleterre pour sa victoire et donne rendez-vous à l’équipe de France le 9 mars pour France-Italie) the judges having considered that this publication “merely reproduces a current sporting result, acquired and made public on the front page of the sports newspaper, and refers to a future match also known as already announced by the newspaper in a news article” (Court of cassation, May 20, 2014, Case No 13-12.102).
- Sponsorship of athletes, including those taking part in Olympic competitions: Subject to compliance with the applicable regulatory framework, particularly as regards models, any company may enter into partnerships with athletes taking part in the Olympic Games, for example by donating clothing bearing the desired logo or brand, which they could wear during their participation in the various events. Athletes may also, under certain conditions, broadcast acknowledgements from their partner (even if unofficial). Rule 40 of the Olympic Charter governs the use of athletes’, coaches’ and officials’ images for advertising purposes during the Olympic Games.
The combined legal and marketing approach to the conception and preparation of the message of such a communication operation is essential to avoid legal proceedings, particularly on the grounds of parasitism; one might therefore legitimately contemplate advertising campaigns, particularly clever, or even malicious ones.
In this first episode of Legalmondo’s Distribution Talks series, I spoke with Ignacio Alonso, a Madrid-based lawyer with extensive experience in international commercial distribution.
Main discussion points:
- in Spain, there is no specific law for distribution agreements, which are governed by the general rules of the Commercial Code;
- therefore, it is essential to draft a clear and comprehensive contract, which will be the primary source of the parties’ rights and obligations;
- it is also good to be aware of Spanish case law on commercial distribution, which in some cases applies the law on commercial agency by analogy.
- the most common issues involving foreign producers distributing in Spain arise at the time of termination of the relationship, mainly because case law grants the terminated distributor an indemnity of clientele or goodwill if similar prerequisites to those in the agency regulations apply.
- another frequent dispute concerns the adequacy of the notice period for terminating the contract, especially if there is no agreement between the parties: the advice is to follow what the agency regulations stipulate and thus establish a minimum notice period of one month for each year of the contract’s duration, up to 6 months for agreements lasting more than five years;
- regarding dispute resolution tools, mediation is an option that should be carefully considered because it is quick, inexpensive, and allows a shared solution to be sought flexibly without disrupting the business relationship.
- if mediation fails, the parties can provide for recourse to arbitration or state court. The choice depends on the case’s specific circumstances, and one factor in favor of jurisdiction is the possibility of appeal, which is excluded in the case of arbitration.
Go deeper
- Goodwill or clientele indemnity, when it is due and how to calculate it: see this article and on our blog;
- Practical Guide on International Distribution Contract: Spain report
- Practical Guide on International Agency Contract: Spain report
- Mediation: The importance of mediation in distribution contracts
- How to negotiate and draft an international distribution agreement: 7 lessons from the history of Nike
The Milestone EU-Mercosur Trade Deal
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Argentina -
Brazil -
Italy -
Uruguay
Germany – To which product category do Cannabidiol spray products belong?
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Germany
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Hong Kong 
France 
Vietnam 
International distribution agreements | 7 lessons from the history of Nike
- Contracts
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Italy
China Contact Roberto
How to manage the impact of tariffs on the international supply chain
9 February 2025
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Italy
- Distribution
On April 2, 2025, U.S. tariffs toward products from the EU will go into effect.
Given what happened with the tariffs imposed on Canada and Mexico, with a chase of announcements of entry into force and suspensions and new announcements, it is impossible to make even short-term predictions.
One must prepare oneself for the possibility of imposition of duty, which is a foreseeable and anticipated event and, as such, should be regulated in the contract. Failure to do so is likely to be very costly because there are no valid arguments for excusing the non-performance of contracts already concluded by invoking a situation of Force Majeure (which does not exist, because the performance has not become objectively impossible) or of supervening excessive onerousness or hardship: even in the case of increases well over 25 percent, tribunals around the world tend to rule out its invocation).
The caution that can be taken is to negotiate a price update clause, expressly referring, among other factors, to the eventual adoption of tariffs.
A useful clause may be the so-called Escalator or Price Adjustment Clause, by which the right to renegotiate the price is provided in the case of imposing a duty above a certain threshold, for example:
PRICE ADJUSTMENT CLAUSE
Triggering Event
A “Triggering Event” shall be deemed to occur if:
- There is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods or services by X% or more.
- Such an increase affects either (i) the Buyer directly or (ii) the Seller due to tariffs imposed on its upstream suppliers, materially impacting the cost of performance.
Trigger Mechanism
In the event of a Triggering Event:
- The affected Party shall notify the other Party in writing within thirty (30) days of the effective date of the customs duty change or the introduction of the new trade barrier.
- The notification must include supporting documentation demonstrating the financial impact of the Triggering Event.
Renegotiation Process
Upon receipt of a valid notification, the Parties shall engage in good-faith negotiations for sixty (60) days to agree on an adjusted price that reflects the increased costs.
Failure to Reach an Agreement
If the Parties fail to reach an agreement on the price adjustment within the prescribed sixty (60) days:
Option 1 – Contract Termination: Either Party shall have the right to terminate the contract by providing written notice to the other Party, without liability for damages, except for obligations already accrued up to the termination date.
Option 2 – Third-Party Arbitrator: The Parties shall appoint an independent third-party arbitrator with expertise in international trade and pricing. The arbitrator shall determine a fair market price, which shall be binding on both Parties. The cost of the arbitrator shall be borne equally by both Parties unless otherwise agreed.
***
Another possible tool as an alternative to the clause just seen is the so-called Cost Sharing clause, for example:
COST SHARING CLAUSE
Triggering Event
A “Triggering Event” shall be deemed to occur if there is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods by [X]% or more. Such an increase will be borne by the Buyer by up to [X]%, while higher increases will be shared equally between the seller and buyer.
***
It is appropriate for such clauses to be adapted on a case-by-case basis to best to reflect the scenarios that are expected to affect the price of the products, namely
- imposition of duty on U.S. entry
- imposition of duty on EU entry
but also indirect effects, such as where it is the seller who invokes price renegotiation, for example because the price of the product has increased due to the duty paid by one of its upstream suppliers in the supply chain, in which case it is crucial to identify which products are relevant and to document the increases resulting from the imposition of tariffs.
Duties are not paid by foreign governments (as Donald Trump repeatedly said on the electoral campaign) but by the importing companies of the country that issued the tax on the value of the imported product, i.e., in the case of the Trump administration’s recent round of tariffs, U.S. companies. Similarly, Canadian, Mexican, Chinese, and – probably – European companies will pay the import duties on U.S.-origin products levied by their respective countries as a trade retaliation measure against U.S. tariffs.
In this context, several scenarios open up, all of them problematic
- U.S. companies will pay the import taxes
- foreign companies exporting taxed products to the U.S., will see export volumes fall as a result of the price increase
- foreign companies that import products from the U.S., in turn, will pay tariffs imposed by their countries in retaliation to U.S. duties
- intermediate or end customers in markets affected by the tariffs will pay a higher price for imported products
Does the imposition of the duty constitute force majeure?
A frequent first objection of the party affected by the duty (it may be the buyer-importer or the one who resells the product after paying the duty), in such cases, is to invoke force majeure to evade the performance of the contract, which, as a result of the duty has become too onerous.
The application of the duty, however, does not fall under force majeure since we are not faced with an unforeseeable event, resulting in the objective impossibility of fulfilling the contract. The buyer/importer, in fact, can always fulfill the contract, with only the issue of price increase.
Does the imposition of the duty constitute a cause of hardship?
If a situation of excessive onerousness arises after the conclusion of the contract (hardship), the affected party has the right to demand a revision of the price or to terminate the contract.
Is this the case for tariffs? A case-by-case assessment is needed, leading to a finding of recurrence of hardship if an extraordinary and unforeseeable situation exists (in the case of the U.S. duties, which have been announced for months, it isn’t easy to support this) and the price, as a result of the application of the tariff, is manifestly excessive.
These are exceptional situations, rarely applied, and should be investigated further based on the law applicable to the contract. Generally, price fluctuations in international markets are part of business risk and do not constitute sufficient grounds for renegotiating concluded agreements, which remain binding unless the parties have included a hardship clause (discussed below).
Does the application of the tariff entail a right to renegotiate prices?
Contracts already concluded, such as orders already accepted and supply schedules with agreed prices for a certain period, are binding and must be fulfilled according to the original agreements.
In the absence of specific clauses in the contract, the party affected by the tariff is therefore obliged to comply with the previously agreed price and give fulfillment to the agreement.
The parties are free to renegotiate future contracts, e.g.
- the seller may give a discount to lessen the impact of the duty affecting the buyer-importer, or
- the buyer may agree to a price increase to compensate for a duty that the seller has paid to import a component or semi-finished product into his country, and then export the finished product
but this does not affect the validity of contracts already negotatied, which remain binding.
The situation is particularly delicate for companies in the middle of the supply chain, such as those who import raw materials or components from abroad (potentially subject to tariffs, including double duties in the case of repeated import and export) and resell the semi-finished or finished products, since they are not entitled to pass the cost on to the following link in the supply chain, unless this was expressly provided for in the contract with the customer.
What can be done in case of imposition of future duties affecting foreign suppliers or customers?
It is advisable to expressly provide for the right to renegotiate prices, if necessary by adding an addendum to the original agreement. This can be achieved, for example, by a clause providing that in case future events, including any duties, cause an increase in the overall cost of the product above a certain threshold (e.g., 10 percent), the party affected by the tariffs has the right to initiate a renegotiation of the price and, in the event of a failure to agree, can withdraw from the contract.
An example of a clause might be as follows:
Import Duties Adjustment
“If any new import duties, tariffs, or similar governmental charges are imposed after the conclusion of this Contract, and such measures increase a Party’s costs exceeding X% of the agreed price of the Products, the affected Party shall have the right to request an immediate renegotiation of the price. The Parties shall engage in good faith negotiations to reach a fair adjustment of the contractual price to reflect the increased costs.
If the Parties fail to reach an agreement within [X] days from the affected Party’s request for renegotiation, the latter shall have the right to terminate this Contract with [Y] days‘ written notice to other Party, without liability for damages, except for the fulfillment of obligations already accrued.”
“This agreement is not just an economic opportunity. It is a political necessity.” In the current geopolitical context of growing protectionism and significant regional conflicts, Ursula von der Leyen’s statement says a lot.
Even though there is still a long way to go before the agreement is approved internally in each bloc and comes into force, the milestone is highly significant. It took 25 years from the start of negotiations between Mercosur and the European Union to reach a consensus text. The impacts will be considerable. Together, the blocs represent a GDP of over 22 trillion dollars, and are home to over 700 million people.
Our aim here is to highlight, in a simplified manner, the most important information about the agreement’s content and its progress, which we will update here at each stage.
What is it?
The agreement was signed as a trade treaty, with the main goal of reducing import and export tariffs, eliminating bureaucratic barriers, and facilitating trade between Mercosur countries and European Union members. Additionally, the pact includes commitments in areas such as sustainability, labor rights, technological cooperation, and environmental protection.
Mercosur (Southern Common Market) is an economic bloc created in 1991 by Brazil, Argentina, Paraguay, and Uruguay. Now, Bolivia and Chile participate as associated members, accessing some trade agreements, but not fully integrated into the common market. On the other hand, the European Union, with its 27 members (20 of which have adopted the common currency), is a broader union with greater economic and social integration compared to Mercosur.
What does the EU Mercosur agreement include?
Trade in goods:
- Reduction or elimination of tariffs on products traded between the blocs, such as meat, grains, fruits, automobiles, wines, and dairy products (the expected reduction will affect over 90% of the traded goods between the blocks).
- Easier access to European high-tech and industrialized products.
Trade in services:
- Expands access to financial services, telecommunications, transportation, and consulting for businesses in both blocs.
Movement of people:
- Provides facilities for temporary visas for qualified workers, such as technology professionals and engineers, promoting talent exchange.
- Encourages educational and cultural cooperation programs.
Sustainability and environment:
- Includes commitments to combat deforestation and meet the goals of the Paris Agreement on climate change.
- Provides penalties for violations of environmental standards.
Intellectual property and regulations:
- Protects geographical indications for European cheese, wines, and South American coffee and cachaça.
- Harmonizes regulatory standards to reduce bureaucracy and avoid technical barriers.
Labor rights:
- Commitment to decent working conditions and compliance with International Labor Organization (ILO) standards.
Which benefits to expect?
- Access to new markets: Mercosur companies will have easier access to the European market, which has more than 450 million consumers, while European products will become more competitive in South America.
- Costs reduction: The elimination or reduction of tariffs could lower the prices of products such as wines, cheese, and automobiles and boost South American exports of meat, grains, and fruits.
- Strengthened diplomatic relations: The agreement symbolizes a bridge of cooperation between two regions historically connected by cultural and economic ties.
What’s next?
The signing is only the first step. For the agreement to come into force, it must be ratified by both blocs, and the approval process is quite distinct between them, since Mercosur does not have a common Council or Parliament.
In the European Union, the ratification process involves multiple institutional steps:
- Council of the European Union: Ministers from the member states will discuss and approve the text of the agreement. This step is crucial, as each country has representation and may raise specific national concerns.
- European Parliament: After approval by the Council, the European Parliament, composed of elected deputies, votes to ratify the agreement. The debate at this stage may include environmental, social, and economic impacts.
- National Parliaments: In cases where the agreement affects shared competencies between the bloc and member states (such as environmental regulations), it must also be approved by the parliaments of each member country. This can be challenging, given that countries like France and Ireland have already expressed specific concerns about agricultural and environmental issues.
In Mercosur, the approval depends on each member country:
- National Congresses: The agreement text is submitted to the parliaments of Brazil, Argentina, Paraguay, and Uruguay. Each congress evaluates independently, and approval depends on the political majority in each country.
- Political Context: Mercosur countries have diverse political realities. In Brazil, for example, environmental issues can spark heated debates, while in Argentina, the impact on agricultural competitiveness may be the focus of discussion.
- Regional Coordination: Even after national approval, it is necessary to ensure that all Mercosur members ratify the agreement, as the bloc acts as a single negotiating entity.
Stay tuned: you will find the update here as the processes advance.
When selling health-related products, the question frequently arises as to which product category, and therefore which regulatory regime, they fall under. This question often arises when distinguishing between food supplements and medicinal products. But in other constellations, too, difficult questions of demarcation arise, which must be answered with a view to legally compliant marketing.
In a highly interesting case, the Administrative Court (Verwaltungsgericht) of Düsseldorf, Germany, recently had to classify a CBD-containing (Cannabidiol) mouth spray that was explicitly advertised by its manufacturer as a “cosmetic” and therefore not suitable for human consumption. The Ingredients of the product were labelled: « Cannabis sativa seed oil, cannabidiol from cannabis extract, tincture or resin, cannabis sativa leaf extract ».
The Product is additionally also labelled as follows: “Cosmetic oral care spray with hemp leaf extract. » The Instructions for use are: « Spray a maximum of 3 sprays a day into the mouth as desired. Spit out after 30 seconds and do not swallow. »
A spray of the Product contains 10 mg CBD. This results in a maximum daily dose of 30 mg CBD as specified by the company.
At the same time, however, it was pointed out that the “consumption” of a spray shot was harmless to health.
The mouth spray could therefore be consumed like a food, but was declared as a “cosmetic”. This is precisely where the court had to examine whether the prohibition order based on food law was lawful.
For the definition of cosmetic products Article 2 sentence 4 lit. e) Regulation (EC) No. 178/2002 refers to Directive 76/768/EEC. This was replaced by Regulation (EC) No. 1223/2009. Cosmetic products are defined in Article 2(1)(a) as follows: “‘cosmetic product’ means any substance or mixture intended to be placed in contact with the external parts of the human body (epidermis, hair system, nails, lips and external genital organs) or with the teeth and the mucous membranes of the oral cavity with a view exclusively or mainly to cleaning them, perfuming them, changing their appearance, protecting them, keeping them in good condition or correcting body odours ”.
Here too, it is not the composition of the product that is decisive, but its intended purpose, which is to be determined on the basis of objective criteria according to general public opinion based on concrete evidence.
According to the system of Regulation (EC) No. 178/2002, Article 2 sentence 1 first defines foodstuffs in general and then excludes cosmetic products under sentence 4 lit. e). According to the definition in Regulation (EC) No. 1223/2009, cosmetic products must have an exclusive or at least predominant cosmetic purpose. It can be concluded from this system that the exclusivity or predominance must be positively established. If it is not possible to determine which purpose predominates, the product is a foodstuff.
The Düsseldorf Administrative Court had to deal with this question in the aforementioned legal dispute brought by the distributor against an official prohibition order in the form of a so-called general ruling („Allgemeinverfügung“). By notice dated July 11, 2020, the competent authority issued a general ruling prohibiting the marketing of foodstuffs containing “cannabidiol (as ‘CBD isolates’ or ‘hemp extracts enriched with CBD’)” in their urban area. The company, based in this city, offered the mouth spray described above.
In a ruling dated 25.10.2024 (Courts Ref. : 26 K 2072/23), the court dismissed the company’s claim. The court’s main arguments were :
- Classification as food: the CBD spray was correctly classified as food by the authority, as it was reasonable to expect that it could be swallowed despite indications to the contrary. According to an objective perception of the market, there is a now established expectation of an average informed, attentive and reasonable consumer to the effect that CBD oils are intended as “lifestyle” products for oral ingestion, from which consumers hope for positive health effects The labelling as “cosmetic” was refuted by the objective consumer expectations and the nature of the application.
- No medicinal product status: Due to the low dosage in this case (max. 30 mg CBD per day), the product was not classified as a functional medicinal product, as there was no sufficiently proven pharmacological effect.
- Legal basis of the injunction: The prohibition of the sale of the products by the defendant was based on a general order, which was confirmed as lawful by the court.
In the ruling, the court emphasizes the objective consumer expectation and clarifies that products cannot be exempted from a different regulatory classification by the authorities or the courts solely by their labelling.
Conclusion: The decision presented underlines the considerable importance of the “correct” classification of a health product in the respective legal product category. In addition to the classic distinction between foodstuffs (food supplements) and medicinal products, comparable issues also arise with other product types. In this case in the constellation of cosmetics versus food – combined with the special legal component of the use of CBD.
Commercial agents have specific regulations with rights and obligations that are “mandatory”: those who sign an agency contract cannot derogate from them. Answering whether an influencer can be an agent is essential because, if he or she is an agent, the agent regulations will apply to him or her.
Let’s take it one step at a time. The influencer we will talk about is the person who, with their actions and comments (blogs, social media accounts, videos, events, or a bit of everything), talks to their followers about the advantages of certain products or services identified with a certain third-party brand. In exchange for this, the influencer is paid.[1]
A commercial agent is someone who promotes the contracting of others’ products or services, does so in a stable way, and gets paid in return. He or she can also conclude the contract, but this is not essential.
The law imposes certain obligations and guarantees rights to those signing an agency contract. If the influencer is considered an “agent”, he or she should also have them. And there are several of them: for example, the duration, the notice to be given to terminate the contract, the obligations of the parties… And the most relevant, the right of the agent to receive compensation at the end of the relationship for the clientele that has been generated. If an influencer is an agent, he would also have this right.
How can an influencer be assessed as an agent? For that we must analyse two things: (a) the contract (and be careful because there is a contract, even if it is not written) and (b) how the parties have behaved.
The elements that, in my opinion, are most relevant to conclude that an influencer is an agent would be the following:
a) the influencer promotes the contracting of services or the purchase of products and does so independently.
The contract will indicate what the influencer must do. It will be clearer to consider him as an agent if his comments encourage contracting: for example, if they include a link to the manufacturer’s website, if he offers a discount code, if he allows orders to be placed with him. And if he does so as an independent “professional”, and not as an employee (with a timetable, means, instructions).
It may be more difficult to consider him as an agent if he limits himself to talking about the benefits of the product or service, appearing in advertising as a brand image, and using a certain product, and speaking well of it. The important thing, in my opinion, is to examine whether the influencer’s activity is aimed at getting people to buy the product he or she is talking about, or whether what he or she is doing is more generic persuasion (appearing in advertising, lending his or her image to a product, carrying out demonstrations of its use), or even whether he or she is only seeking to promote himself or herself as a vehicle for general information (for example, influencers who make comparisons of products without trying to get people to buy one or the other). In the first case (trying to get people to buy the product) it would be easier to consider it as an “agent”, and less so in the other examples.
b) this “promotion” is done in a continuous or stable manner.
Be careful because this continuity or stability does not mean that the contract has to be of indefinite duration. Rather, it is the opposite of a sporadic relationship. A one-year contract may be sufficient, while several unconnected interventions, even if they last longer, may not be sufficient.
In this case, influencers who make occasional comments, who intervene with isolated actions, who limit themselves to making comparisons without promoting the purchase of one or the other, and even if all this leads to sales, even if their comments are frequent and even if they can have a great influence on the behavior of their followers, would be excluded as agents.
c) they receive remuneration for their activity.
An influencer who is remunerated based on sales (e.g., by promoting a discount code, a specific link, or referring to your website for orders) can more easily be considered as an agent. But also, if he or she only receives a fixed amount for their promotion. On the other hand, influencers who do not receive any remuneration from the brand (e.g. someone who talks about the benefits of a product in comparison with others, but without linking it to its promotion) would be excluded.
Conclusion
The borderline between what qualifies an influencer as an agent and what does not can be very thin, especially because contracts are often not unambiguous and sometimes their services are multiple. The most important thing is to carefully analyse the contract and the parties’ behaviour.
An influencer could be considered a commercial agent to the extent that his or her activity promotes the contracting of the product (not simply if he or she carries out informative or image work), that it is done on a stable basis (and not merely anecdotal or sporadic) and in exchange for remuneration.
To assess the specific situation, it is essential to analyse the contract (if it is written, this is easier) and the parties’ behaviour.
In short, to draw up a contract with an influencer or, if it has already been signed, but you want to conclude it, you will have to pay attention to these elements. As an influencer you may have a strong interest in being considered an agent at the end of the contract and thus be entitled to compensation, while as employer you will prefer the opposite.
FINAL NOTE. In Spain and at the date of this comment (9 June 2024) I am not aware of any judgement dealing with this issue. My proposal is based on my experience of more than 30 years advising and litigating on agency contracts. On the other hand, and as far as I know, there is at least one judgment in Rome (Italy) dealing with the matter: Tribunale di Roma; Sezione Lavoro 4º, St. 2615 of 4 March 2024; R. G. n. 38445/2022.
The commercial agent has the right to obtain certain information about the sales of the principal. The Spanish Law on Agency Contracts provides (15.2 LCA) that the agent has the right to demand to see the accounts of the principal in order to verify all matters relating to the commissions due to him. And also, to be provided with the information available to the principal and necessary to verify the amount of such commissions.
This article is in line with the 1986 Commercial Agents Directive, according to which (12.3) the agent is entitled to demand to be provided with all information at the disposal of the principal, particularly an extract from the books of account, which is necessary to verify the amount of commission due to the agent. This may not be altered to the detriment of the commercial agent by agreement.
The question is, does this right remain even after the termination of the agency contract? In other words: once the agency contract is terminated, can the agent request the information and documentation mentioned in these articles and is the Principal obliged to provide it?
In our opinion, the rule does not say anything that limits this right, rather the opposite is to be expected. Therefore, to the extent that there is still any possible commission that may arise from such verification, the answer must be yes. Let us see.
The right to demand the production of accounts exists so that the agent can verify the amount of commissions. And the agent is entitled to commissions for acts and operations concluded during the term of the contract (art. 12 LCA), but also for acts or operations concluded after the termination of the contract (art. 13 LCA), and for operations not carried out due to circumstances attributable to the principal (art. 17 LCA). In addition, the agent is entitled to have the commission accrued at the time when the act or transaction should have been executed (art. 14 LCA).
All these transactions can take place after the conclusion of the contract. Consider the usual situation where orders are placed during the contract but are accepted or executed afterwards. To reduce the agent’s right to be informed only during the term of the contract would be to limit his entitlement to the corresponding commission unduly. And it should be borne in mind that the amount of the commissions during the last five years may also influence the calculation of the client (goodwill) indemnity (art. 28 LCA), so that the agent’s interest in knowing them is twofold: what he would receive as commission, and what could increase the basis for future indemnity.
This has been confirmed, for example, by the Provincial Court (Audiencia Provincial) of Madrid (AAP 227/2017, of 29 June [ECLI:ES:APM:2017:2873A]) which textually states:
[…] art. 15.2 of the Agency Contract Act provides for the right of the agent to demand the exhibition of the Principal’s accounts in the particulars necessary to verify everything relating to the commissions corresponding to him, as well as to be provided with the information available to the Principal and necessary to verify the amount. This does not prevent, […], the agency contract having already been terminated, as this does not imply that commissions would cease to accrue for policies, contracted with the mediation of the agent, which remain in force.
The question then arises as to whether this right to information is unlimited in time. And here the answer would be in the negative. The limitation of the right to receive information would be linked to the statute of limitations of the right to claim the corresponding commission. If the right to receive the commission were undoubtedly time-barred, it could be argued that it would not be possible to receive information about it. But for such an exception, the statute of limitations must be clear, therefore, taking into account possible interruptions due to claims, even extrajudicial ones. In case of doubt, it will be necessary to recognise the right to demand the information, without prejudice to later invoking and recognising the impossibility of claiming the commission if the right is time-barred. And for this we must consider the limitation period for claiming commissions (in general, three years) and that of the right to claim compensation for clientele (one year).
In short: it does not seem that the right to receive information and to examine the principal’s documentation is limited by the term of the agency contract; although, on the other hand, it would be appropriate to analyse the possible limitation period for claiming commissions. In the absence of a clear answer to this question, the right to information should, in our opinion, prevail, without prejudice to the fact that the result may not entitle the claim because it is time-barred.
SUMMARY: In large-scale events such as the Paris Olympics certain companies will attempt to “wildly” associate their brand with the event through a practice called “ambush marketing”, defined by caselaw as “an advertising strategy implemented by a company in order to associate its commercial image with that of an event, and thus to benefit from the media impact of said event, without paying the related rights and without first obtaining the event organizer’s authorization” (Paris Court of Appeal, June 8, 2018, Case No 17/12912). A risky and punishable practice, that might sometimes yet be an option yet.
Key takeaways
- Ambush marketing might be a punished practice but is not prohibited as such;
- As a counterpart of their investment, sponsors and official partners benefit from an extensive legal protection against all forms of ambush marketing in the event concerned, through various general texts (counterfeiting, parasitism, intellectual property) or more specific ones (e.g. sport law);
- The Olympics Games are subject to specific regulations that further strengthen this protection, particularly in terms of intellectual property.
- But these rights are not absolute, and they are still thin opportunities for astute ambush marketing.
The protection offered to sponsors and official partners of sporting and cultural events from ambush marketing
With a budget of over 4 billion euros, the 2024 Olympic and Paralympic Games are financed mostly by various official partners and sponsors, who in return benefit from a right to use Olympic and Paralympic properties to be able to associate their own brand image and distinctive signs with these events.
Ambush marketing is not punishable as such under French law, but several scattered texts provide extensive protection against ambush marketing for sponsors and partners of sporting or cultural continental-wide or world-wide events. Indeed, sponsors are legitimately entitled to peacefully enjoy the rights offered to them in return for large-scale investments in events such as the FIFA or rugby World Cups, or the Olympic Games.
In particular, official sponsors and organizers of such events may invoke:
- the “classic” protections offered by intellectual property law (trademark law and copyright) in the context of infringement actions based on the French Intellectual Property Code,
- tort law (parasitism and unfair competition based on article 1240 of the French Civil Code);
- consumer law (misleading commercial practices) based on the French Consumer Code,
- but also more specific texts such as the protection of the exploitation rights of sports federations and sports event organizers derived from the events or competitions they organize, as set out in article L.333-1 of the French Sports Code, which gives sports event organizers an exploitation monopoly.
The following ambush marketing practices were sanctioned on the abovementioned grounds:
- The use of a tennis competition name and of the trademark associated with it during the sporting event: The organization of online bets, by an online betting operator, on the Roland Garros tournament, using the protected sign and trademark Roland Garros to target the matches on which the bets were organized. The unlawful exploitation of the sporting event, was punished and 400 K€ were allowed as damages, based on article L. 333-1 of the French Sports Code, since only the French Tennis Federation (F.F.T.) owns the right to exploit Roland Garros. The use of the trademark was also punished as counterfeiting (with 300 K€ damages) and parasitism (with 500 K€ damages) (Paris Court of Appeal, Oct. 14, 2009, Case No 08/19179);
- An advertising campaign taking place during a film festival and reproducing the event’s trademark: The organization, during the Cannes Film Festival, of a digital advertising campaign by a cosmetics brand through the publication on its social networks of videos showing the beauty makeovers of the brand’s muses, in some of which the official poster of the Cannes Film Festival was visible, one of which reproduced the registered trademark of the “Palme d’Or”, was punished on the grounds of copyright infringement and parasitism with a 50 K€ indemnity (Paris Judicial Court, Dec. 11, 2020, Case No19/08543);
- An advertising campaign aimed at falsely claiming to be an official partner of an event: The use, during the Cannes Film Festival, of the slogan “official hairdresser for women” together with the expressions “Cannes” and “Cannes Festival”, and other publications falsely leading the public to believe that the hairdresser was an official partner, to the detriment of the only official hairdresser of the Cannes festival, was punished on the grounds of unfair competition and parasitism with a 50 K€ indemnity (Paris Court of Appeal, June 8, 2018, Case No 17/12912).
These financial penalties may be combined with injunctions to cease these behaviors, and/or publication in the press under penalty.
An even greater protection for the Paris 2024 Olympic Games
The Paris 2024 Olympic Games are also subject to specific regulations.
Firstly, Article L.141-5 of the French Sports Code, enacted for the benefit of the “Comité national olympique et sportif français” (CNOSF) and the “Comité de l’organisation des Jeux Olympiques et Paralympiques de Paris 2024” (COJOP), protects Olympic signs such as the national Olympic emblems, but also the emblems, the flag, motto and Olympic symbol, Olympic anthem, logo, mascot, slogan and posters of the Olympic Games, the year of the Olympic Games “city + year”, the terms “Jeux Olympiques”, “Olympisme”, “Olympiade”, “JO”, “olympique”, “olympien” and “olympienne”. Under no circumstances may these signs be reproduced or even imitated by third-party companies. The COJOP has also published a guide to the protection of the Olympic trademark, outlining the protected symbols, trademarks and signs, as well as the protection of the official partners of the Olympic Games.
Secondly, Law no. 2018-202 of March 26, 2018 on the organization of the 2024 Olympic and Paralympic Games adds even more specific prohibitions, such as the reservation for official sponsors of advertising space located near Olympic venues, or located on the Olympic and Paralympic torch route. This protection is unique in the context of the Olympic Games, but usually unregulated in the context of simple sporting events.
The following practices, for example, have already been sanctioned on the above-mentioned grounds:
- Reproduction of a logo imitating the well-known “Olympic” trademark on a clothing collection: The marketing of a collection of clothing, during the 2016 Olympic Games, bearing a logo (five hearts in the colors of the 5 Olympic colors intersecting in the image of the Olympic logo) imitating the Olympic symbol in association with the words “RIO” and “RIO 2016”, was punished on the grounds of parasitism (10 K€ damages) and articles L. 141-5 of the French Sports Code (35 K€) and L. 713-1 of the French Intellectual Property Code (10 K€ damages) (Paris Judicial Court, June 7, 2018, Case No16/10605);
- The organization of a contest on social networks using protected symbols: During the 2018 Olympic Games in PyeongChang, a car rental company organized an online game inviting Internet users to nominate the athletes they wanted to win a clock radio, associated with the hashtags “#JO2018” (“#OJ2018”), “#Jeuxolympiques” (“#Olympicsgame”) or “C’est parti pour les jeux Olympiques” (“let’s go for the Olympic Games”) without authorization from the CNOSF, owner of these distinctive signs under the 2018 law and article L.141-5 of the French Sport Code and punished on these grounds with 20 K€ damages and of 10 K€ damages for parasitism (Paris Judicial Court, May 29, 2020, n°18/14115).
These regulations offer official partners greater protection for their investments against ambush marketing practices from non-official sponsors.
Some marketing operations might be exempted
An analysis of case law and promotional practices nonetheless reveals the contours of certain advertising practices that could be authorized (i.e. not sanctioned by the above-mentioned texts), provided they are skillfully prepared and presented. Here are a few exemples :
- Communication in an offbeat or humorous tone: An offbeat or even humorous approach can help to avoid the above-mentioned sanctions:
In 2016, for example, the Intersnack group’s Vico potato chips brand launched a promotional campaign around the slogan “Vico, partner of home fans” in the run-up to the Euro and Olympic Games.
Irish online betting company Paddy Power had sponsored a simple egg-in-the-spoon race in “London” (… a village in Burgundy, France), to display in London during the 2012 Olympics the slogan “Official Sponsor of the largest athletics event in London this year! There you go, we said it. (Ahem, London France that is)“. At the time, the Olympic Games organizing committee failed to stop the promotional poster campaign.
During Euro 2016, for which Carlsberg was the official sponsor, the Dutch group Heineken marketed a range of beer bottles in the colors of the flags of 21 countries that had “marked its history”, the majority of which were however participating in the competition.
- Communication of information for advertising purposes: The use of the results of a rugby match and the announcement of a forthcoming match in a newspaper to promote a motor vehicle and its distinctive features was deemed lawful: “France 13 Angleterre 24 – the Fiat 500 congratulates England on its victory and looks forward to seeing the French team on March 9 for France-Italy” (France 13 Angleterre 24 – la Fiat 500 félicite l’Angleterre pour sa victoire et donne rendez-vous à l’équipe de France le 9 mars pour France-Italie) the judges having considered that this publication “merely reproduces a current sporting result, acquired and made public on the front page of the sports newspaper, and refers to a future match also known as already announced by the newspaper in a news article” (Court of cassation, May 20, 2014, Case No 13-12.102).
- Sponsorship of athletes, including those taking part in Olympic competitions: Subject to compliance with the applicable regulatory framework, particularly as regards models, any company may enter into partnerships with athletes taking part in the Olympic Games, for example by donating clothing bearing the desired logo or brand, which they could wear during their participation in the various events. Athletes may also, under certain conditions, broadcast acknowledgements from their partner (even if unofficial). Rule 40 of the Olympic Charter governs the use of athletes’, coaches’ and officials’ images for advertising purposes during the Olympic Games.
The combined legal and marketing approach to the conception and preparation of the message of such a communication operation is essential to avoid legal proceedings, particularly on the grounds of parasitism; one might therefore legitimately contemplate advertising campaigns, particularly clever, or even malicious ones.
In this first episode of Legalmondo’s Distribution Talks series, I spoke with Ignacio Alonso, a Madrid-based lawyer with extensive experience in international commercial distribution.
Main discussion points:
- in Spain, there is no specific law for distribution agreements, which are governed by the general rules of the Commercial Code;
- therefore, it is essential to draft a clear and comprehensive contract, which will be the primary source of the parties’ rights and obligations;
- it is also good to be aware of Spanish case law on commercial distribution, which in some cases applies the law on commercial agency by analogy.
- the most common issues involving foreign producers distributing in Spain arise at the time of termination of the relationship, mainly because case law grants the terminated distributor an indemnity of clientele or goodwill if similar prerequisites to those in the agency regulations apply.
- another frequent dispute concerns the adequacy of the notice period for terminating the contract, especially if there is no agreement between the parties: the advice is to follow what the agency regulations stipulate and thus establish a minimum notice period of one month for each year of the contract’s duration, up to 6 months for agreements lasting more than five years;
- regarding dispute resolution tools, mediation is an option that should be carefully considered because it is quick, inexpensive, and allows a shared solution to be sought flexibly without disrupting the business relationship.
- if mediation fails, the parties can provide for recourse to arbitration or state court. The choice depends on the case’s specific circumstances, and one factor in favor of jurisdiction is the possibility of appeal, which is excluded in the case of arbitration.
Go deeper
- Goodwill or clientele indemnity, when it is due and how to calculate it: see this article and on our blog;
- Practical Guide on International Distribution Contract: Spain report
- Practical Guide on International Agency Contract: Spain report
- Mediation: The importance of mediation in distribution contracts
- How to negotiate and draft an international distribution agreement: 7 lessons from the history of Nike