The Milestone EU-Mercosur Trade Deal

9 December 2024

  • Argentina
  • Brazil
  • Italy
  • Uruguay
  • Distribution
  • Foreign investments
  • Tax

“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 :

  1. 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.
  2. 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.
  3. 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 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

https://youtu.be/ZmNjMrdKDJM?si=ySCcUf_Hz25nQN3Y

Summary

On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: “VBER”), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.

The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.

In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.

The general discipline of vertical agreements

Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.

However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.

The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.

In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called “hardcore restrictions” (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.

The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.

The innovations introduced by the new VBER to online platforms

The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.

While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).

With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 (“P2B Regulation”), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.

Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.

Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.

The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.

The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.

Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.

The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.

Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.

The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).

Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.

On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.

Impact and takeaways

The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.

The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.

Here, then, are some tips for managing contracts and relationships with online platforms:

  • the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
  • platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
  • the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which – as we have already seen – is still an open issue.

Summary

To avoid disputes with important suppliers, it is advisable to plan purchases over the medium and long term and not operate solely on the basis of orders and order confirmations. Planning makes it possible to agree on the duration of the ‘supply agreement, minimum volumes of products to be delivered and delivery schedules, prices, and the conditions under which prices can be varied over time.
The use of a framework purchase agreement can help avoid future uncertainties and allows various options to be used to manage commodity price fluctuations depending on the type of products , such as automatic price indexing or agreement to renegotiate in the event of commodity fluctuations beyond a certain set tolerance period.

I read in a press release: “These days, the glass industry is sending wine companies new unilateral contract amendments with price changes of 20%…”

What can one do to avoid the imposition of price increases by suppliers? 

  • Know your rights and act in an informed manner
  • Plan and organise your supply chain

Does my supplier have the right to increase prices?

If contracts have already been concluded, e.g., orders have already been confirmed by the supplier, the answer is often no.

It is not legitimate to request a price change. It is much less legitimate to communicate it unilaterally, with the threat of cancelling the order or not delivering the goods if the request is not granted.

What if he tells me it is force majeure?

That’s wrong: increased costs are not a force majeure but rather an unforeseen excessive onerousness, which hardly happens.

What if the supplier canceled the order, unilaterally increased the price, or did not deliver the goods?

He would be in breach of contract and liable to pay damages for violating his contractual obligations.

How can one avoid a tug-of-war with suppliers?

The tools are there. You have to know them and use them.

It is necessary to plan purchases in the medium term, agreeing with suppliers on a schedule in which are set out:

  • the quantities of products to be ordered
  • the delivery terms
  • the durationof the agreement
  • the pricesof the products or raw materials
  • the conditions under which prices can be varied

There is a very effective instrument to do so: a framework purchase agreement.

Using a framework purchase agreement, the parties negotiate the above elements, which will be valid for the agreed period.

Once the agreement is concluded, product orders will follow, governed by the framework agreement, without the need to renegotiate the content of individual deliveries each time.

For an in-depth discussion of this contract, see this article.

  • “Yes, but my suppliers will never sign it!”

Why not? Ask them to explain the reason.

This type of agreement is in the interest of both parties. It allows planning future orders and grants certainty as to whether, when, and how much the parties can change the price.

In contrast, acting without written agreements forces the parties to operate in an environment of uncertainty. Suppliers can request price increases from one day to the next and refuse supply if the changes are not accepted.

How are price changes for future supplies regulated?

Depending on the type of products or services and the raw materials or energy relevant in determining the final price, there are several possibilities.

  • The first option is to index the price automatically. E.g., if the cost of a barrel of Brent oil increases/decreases by 10%, the party concerned is entitled to request a corresponding adjustment of the product’s price in all orders placed as of the following week.
  • An alternative is to provide for a price renegotiation in the event of a fluctuation of the reference commodity. E.g., suppose the LME Aluminium index of the London Stock Exchange increases above a certain threshold. In that case, the interested party may request a price renegotiationfor orders in the period following the increase.

What if the parties do not agree on new prices?

It is possible to terminate the contract or refer the price determination to a third party, who would act as arbitrator and set the new prices for future orders.

Geraldo Fonseca

Practice areas

  • Corporate
  • Credit collection
  • Insolvency
  • International trade
  • Litigation
Contact Geraldo

Contact Geraldo





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    Germany – To which product category do Cannabidiol spray products belong?

    30 November 2024

    • Germany
    • Distribution
    • Pharmaceutical Law

    “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 :

    1. 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.
    2. 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.
    3. 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 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

    https://youtu.be/ZmNjMrdKDJM?si=ySCcUf_Hz25nQN3Y

    Summary

    On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: “VBER”), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.

    The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.

    In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.

    The general discipline of vertical agreements

    Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.

    However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.

    The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.

    In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called “hardcore restrictions” (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.

    The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.

    The innovations introduced by the new VBER to online platforms

    The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.

    While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).

    With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 (“P2B Regulation”), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.

    Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.

    Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.

    The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.

    The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.

    Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.

    The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.

    Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.

    The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).

    Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.

    On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.

    Impact and takeaways

    The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.

    The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.

    Here, then, are some tips for managing contracts and relationships with online platforms:

    • the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
    • platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
    • the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which – as we have already seen – is still an open issue.

    Summary

    To avoid disputes with important suppliers, it is advisable to plan purchases over the medium and long term and not operate solely on the basis of orders and order confirmations. Planning makes it possible to agree on the duration of the ‘supply agreement, minimum volumes of products to be delivered and delivery schedules, prices, and the conditions under which prices can be varied over time.
    The use of a framework purchase agreement can help avoid future uncertainties and allows various options to be used to manage commodity price fluctuations depending on the type of products , such as automatic price indexing or agreement to renegotiate in the event of commodity fluctuations beyond a certain set tolerance period.

    I read in a press release: “These days, the glass industry is sending wine companies new unilateral contract amendments with price changes of 20%…”

    What can one do to avoid the imposition of price increases by suppliers? 

    • Know your rights and act in an informed manner
    • Plan and organise your supply chain

    Does my supplier have the right to increase prices?

    If contracts have already been concluded, e.g., orders have already been confirmed by the supplier, the answer is often no.

    It is not legitimate to request a price change. It is much less legitimate to communicate it unilaterally, with the threat of cancelling the order or not delivering the goods if the request is not granted.

    What if he tells me it is force majeure?

    That’s wrong: increased costs are not a force majeure but rather an unforeseen excessive onerousness, which hardly happens.

    What if the supplier canceled the order, unilaterally increased the price, or did not deliver the goods?

    He would be in breach of contract and liable to pay damages for violating his contractual obligations.

    How can one avoid a tug-of-war with suppliers?

    The tools are there. You have to know them and use them.

    It is necessary to plan purchases in the medium term, agreeing with suppliers on a schedule in which are set out:

    • the quantities of products to be ordered
    • the delivery terms
    • the durationof the agreement
    • the pricesof the products or raw materials
    • the conditions under which prices can be varied

    There is a very effective instrument to do so: a framework purchase agreement.

    Using a framework purchase agreement, the parties negotiate the above elements, which will be valid for the agreed period.

    Once the agreement is concluded, product orders will follow, governed by the framework agreement, without the need to renegotiate the content of individual deliveries each time.

    For an in-depth discussion of this contract, see this article.

    • “Yes, but my suppliers will never sign it!”

    Why not? Ask them to explain the reason.

    This type of agreement is in the interest of both parties. It allows planning future orders and grants certainty as to whether, when, and how much the parties can change the price.

    In contrast, acting without written agreements forces the parties to operate in an environment of uncertainty. Suppliers can request price increases from one day to the next and refuse supply if the changes are not accepted.

    How are price changes for future supplies regulated?

    Depending on the type of products or services and the raw materials or energy relevant in determining the final price, there are several possibilities.

    • The first option is to index the price automatically. E.g., if the cost of a barrel of Brent oil increases/decreases by 10%, the party concerned is entitled to request a corresponding adjustment of the product’s price in all orders placed as of the following week.
    • An alternative is to provide for a price renegotiation in the event of a fluctuation of the reference commodity. E.g., suppose the LME Aluminium index of the London Stock Exchange increases above a certain threshold. In that case, the interested party may request a price renegotiationfor orders in the period following the increase.

    What if the parties do not agree on new prices?

    It is possible to terminate the contract or refer the price determination to a third party, who would act as arbitrator and set the new prices for future orders.

    Matthia Hesshaus

    Practice areas

    • Administrative Law
    • Antitrust
    • Pharmaceutical Law
    Contact Matthia