Commercial agents: Definition of negotiating power

The facts

Two copanies ATL Location (ATL) and Samuel William Auto Lease (SWAL) were, since 7 November 2005 and 29 September 2005, acting as agents of Avis Location de Voitures (Avis), a car and commercial vehicle rental company.

They acted in the name and on behalf of Avis and operated only in certain geographical areas. The other areas were represented by branches of Avis.
ATL, SWAL and the Avis branches used a computer system called “Wizard” which enabled them to collect all useful information relating to vehicles, agents and customers in real time.

This software was the property of Avis, which made it available to the entire network.

As early as 2013, ATL and SWAL accused Avis of having violated the provisions of Article L.134-1 of the French Commercial Code by, among other things, denying them access to the most profitable categories of vehicles and by using the “Wizard” system to its advantage to the detriment of its agents.

On 22 December 2014, ATL and SWAL summoned Avis by bailiff’s writ in order to obtain compensation for their loss.

On 28 November 2016, the Paris Court ordered ATL and SWAL to pay damages to AVIS.

On 20 December 2016, ATL and SWAL appealed against this decision.

The Paris Court of Appeal held that ATL and SWAL didn’t have the status of commercial agent because they had no discretionary negotiating power.

The companies ATL and SWAL brought an action before the Court of Cassation asking it to rule on their negotiating power and the refusal by the Court of Appeal to recognize them as commercial agents.

The Court of Cassation overruled the decision of the Paris Court of Appeal.

The Court of Cassation relies on Article L.134-1 of the Commercial Code and on the interpretation of the power to negotiate made by the CJEU in its decision of 4 June 2020 (Court of Justice of the European Union, 4 June 2020, case C-828/18).

Firstly, it recalls that “the main tasks of a commercial agent are to bring new customers to the principal and to develop operations with existing customers“.

It then adds that “the performance of these tasks may be carried out by the commercial agent by means of information and advice as well as discussions, which are likely to promote the conclusion of the commercial transaction on behalf of the principal, even if the commercial agent does not have the power to modify the prices of the goods sold or the services rendered

In this case, the companies ATL and SWAL had lost their claim against AVIS because they did not have discretionary negotiating power.

The origin of the formula, although not mentioned, can be found in the CJEU decision of 4 June 2020 in paragraphs 33 and 34:

It is apparent from a combined reading of Articles 4(3) and 17(2)(a) of Directive 86/653 that the commercial agent’s main tasks are to bring the principle new customers and to increase the volume of business with existing customers.

However, as was highlighted, in essence, by the Austrian Government in its written observations, it is possible for the commercial agent to accomplish those tasks by providing information and advice as well as through discussions, aimed at facilitating the conclusion of the transaction for the sale of goods on behalf of the principal, without the commercial agent having the power to change the prices of those goods.

This solution of the Court of Cassation confirms the broad conception of negotiation given by the CJEU. It is sufficient to bring in new clients and to develop business with existing ones, by means of information and advice and discussions. It is not necessary to have a discretionary capacity to negotiate contracts on behalf of the principal or to have real control over the rates charged.

It is very close to the common meaning given to the term which is “To discuss something with someone with a view to establishing it, to obtain it” (Larousse definition)

This definition nevertheless makes it possible to distinguish the commercial agent from other forms of intermediation and more particularly from the broker. The latter does not deal for his client. He merely brings him closer to his co-contractor. He would thus have no other mission than to present the products and services of a company and to transmit information on these products and services to potential clients.

The risk of this new definition is that it would overextend the protective regime of the commercial agent and thus create too much uncertainty for the qualification of many existing contracts.

This definition could include many service providers who participate in the commercial development of another company. Some service and intermediation contracts could be reclassified as commercial agent contracts.

Special attention will therefore need to be paid to contracts with commercial intermediaries. Existing contracts will need to be reviewed in the light of these new decisions to determine whether the contractual relationship is now likely to be classified as a commercial agency contract.


Cowritten by Cécile de Braquilanges and Olivier Vibert

IFL-Avocats, Paris

Is your law-firm not yet a Eurojuris member?

Contact us!