Sales concession

first metro in Paris, a concession for Empain

1 The sales concession is an agreement whereby the grantor grants the concessionaire the right to sell products in its own name and for its own account, which the grantor makes or distributes itself. It is essentially a framework agreement in which the parties conclude successive sales.

2.There are different types of concession contracts: selective distribution contracts on the one hand, and exclusive concession contracts on the other.

The selective distribution means that the distributor will only supply selected distributors. These selected distributors then agree to not supply to unauthorized distributors in a specified area.

In the context of an exclusive sales concession, the concede agrees to supply its products to only one distributor within a specified area. Usually the distributor is prohibited from selling in other exclusive territories.

3 The existence of such a framework agreement can be proved by any legal means.[1] Among other things the following elements may indicate the existence of such an agreement: determination of the price policy by the grantor, demarcation of a specific territory, holding regular discussions with a view to determining a joint objective, obligations regarding the turnover, obligations regarding publicity, staff training, shop fitting or presentation of products….

4. The qualification of a concession agreement has important consequences, especially with regard to the termination of the agreement. For example, the concessionaire can claim a substantial termination period or replacement fee, a foreclosure fee and compensation for other costs incurred in the event that the grantor cancels the agreement unilaterally.

The notice period granted must be of such magnitude that it must allow the concessionaire to find an equivalent source of income that has equivalent consequences as the lost concession. When the break in the cooperation is a fact, compensation is therefore awarded for that notice period. The concessionaire is then entitled to the semi-gross profit (= net profit plus the incompressible costs associated with the operation of the concession - e.g. personnel costs), determined on the basis of a reference period before the termination) and calculated for the length of that term. That term is determined, among other things, in function of the term to reorganize.[2], to enable him to fulfill his commitments with third parties and to obtain a net income equivalent to the loss of income, if necessary by conversion of his activities.[3] (and in full the fair additional compensation for the added value of clientele that remains after termination, operating costs that continue to provide benefits to the grantor, and the mourning fee for the dismissal of personnel).

The concessionaire is also entitled to an equitable additional payment, for the added value in terms of clientele staying at the concessionaire, a compensation for operating costs that may yield benefits after the termination (e.g. publicity costs), and the mourning fee (for the staff that the concessionaire has had to fire - it is not required that he has actually paid the mourning fee).

5. This specific Belgian legislation, which provides a strong protection to the concessionaire, is even mandatory law (ie an agreement that would contain a different regulation is considered non-existent). Article 4 of the law states that the concessionaire with a concession over Belgium or part of it, can summon the grantor to appear before the court of his residence. This court will then exclusively apply Belgian law. When sales take place in several countries, including Belgium, only sales on Belgian territory are taken into account. (3)

Hence, many written concession contracts in an international context will provide for the application of arbitration or submission to the law of the grantor.

[1] Antwerp, 28.6.2018, RABG 2020/11-12, pg. 950

[2] Corporate Court Antwerp, 6.12.2019, RABG 2020/11-12, pg 969

[3] Antwerp, 25.3.2019, RABG, 2020/11-12, pg 912; Ghent, 31.10.2018, RABG, 2020/11-12, pg.922