Furthermore, distribution agreements must comply with Spanish Competition Law and, where appropriate, with specific sectoral regulations.
Distribution are usually continuing obligations / continuing performance contracts (tracto sucesivo) in nature and may contain an exclusivity clause for the distributor, as well as certain territorial restrictions. Sometimes, the manufacturer may hold a dominant position in the market while the distributor may be in a situation of economic dependency. However, neither market dominance nor economic dependency violate, in themselves, antitrust and unfair competition regulations.
Such unfair behaviour could occur, if these situations were to be exploited, for example if the manufacturer used its position of market dominance to impose unfair contractual conditions for the economically dependent distributor. Contractual termination without notice could equally be seen as unfair if the distributor is economically dependent and exclusivity has been agreed.
The Spanish Unfair Competition Act (Ley de Competencia Desleal, LCD) establishes in article 16.2 that the exploitation of a situation of economic dependency of a company is considered unfair when the latter does not have an equivalent alternative for the exercise of its activity. In this way, dependency will be presumed to have been exploited when a manufacturer, in addition to the usual discounts or conditions, must regularly grant its distributor additional advantages not granted to other, similar distributors.
Economic dependency occurs, when due to the market power exercised by the manufacturer, the distributor lacks an equivalent alternative for carrying out its activity in the market. In this sense, it is necessary to identify the relevant market and determine whether there really is a situation of economic dependency. Such analysis would allow for the assessment whether there were equivalent alternatives for the economically dependent distributor.
If the existence of economic dependency has been proven, the unilateral termination of the contract without notice or the threat of termination would also be considered unfair if no special advantages are granted by the manufacturer (see article 16.3 of the LCD). Termination of the contract without notice leads to the definition of the corresponding contractual responsibilities, regardless of whether the distributor takes legal action to request a declaration of unfair behaviour and compensation for damages for the harm caused to their competitive position.
Ana Parés López de Lemos
Partner | Abogada