European distribution rights law
COMPENSATION CLAIMS (Section 89b HGB [German Commercial Law]): One of the most important points of dispute when it comes to distribution law is the extent to which authorised dealers or franchisees can demand compensation for customers gained when ending the contractual relationship in the same way as a commercial agent can.
To recap: By means of the right to claim compensation, a commercial agent has a claim to compensation, that cannot be ruled out contractually, for the advantages that the business gained from the business relationship with newly acquired clients, unless legal exceptions apply. This claim can amount to the equivalent of the average annual commission earned.
Authorised dealers and franchisees may, under certain conditions, claim such compensation. This always applies if an authorised dealer or franchisee is included in the contractual relationship in the same way as a commercial agent and there is an obligation to transfer clients.
a) Anonymous mass business
According to the decision of the Federal Court of Justice (BGH) handed down on 5 February 2015, this right cannot be asserted if a customer base forms part of the business takeover and there is, in principle, an anonymous mass business (backshops). The reasoning behind this assessment is that one only wants to obligate the franchisor to pay compensation if the franchisor takes over the franchisee’s customer base on the basis of a relevant contractual agreement when ending the franchise and is able to use it for their own purposes. This is not the case in a de facto continuation of the business where customers are not recorded by name. This represents an important practical clarification. In future, it will be important to test the boundaries of this case law.
Practical tip: Companies should obtain advice regarding the possible effects of this case law as compensation claims here can be substantial.
Author: Dr. Kay Jacobsen