Exclusive Purchase & Supply Agreements in France — the 10-Year Cap, Price Rules & Single-Branding

An exclusive-purchase agreement — a contrat d'achat exclusif — organises a distributor's purchases of a supplier's products with a view to their resale, and binds the distributor to source those products only from that supplier. It is a commitment on the buying side, and it should not be confused with an exclusivity of sale: a supplier can be the distributor's sole source without the distributor being anyone's sole outlet. The characteristic performance of the contract is the supply of products, and the distributor remains a legally independent trader who buys to resell on its own account and at its own risk.

The exclusive-purchase tie is tested on two levels at once, and both matter to whether it holds. The ordinary law of contract protects the tied distributor — historically by capping the duration of certain exclusivity commitments at ten years, and by insisting that the distributor remain master of its resale prices. Competition law treats the tie as a vertical restraint — a "single-branding" or non-compete obligation — that forecloses competing suppliers, and exempts it only within a market-share ceiling and, as a rule, a five-year limit. A tie that is unobjectionable on one level can fail on the other. This guide takes them in turn.

What is an exclusive-purchase agreement — and what does it force?

The exclusive-purchase contract is treated as a convention distinct from the sales it generates: the parties agree "to ensure between them a flow of business whose general terms they lay down, but not the precise quantum or all the conditions." It is a framework — but an unusual one. In the relationship between supplier and distributor, the exclusive-purchase contract does not merely prepare the conclusion of later sales; it imposes them. Because the distributor must necessarily buy the supplier's products simply to carry on its business, the contract fixes the conditions under which sales will necessarily be concluded — not merely those under which sales might eventually be concluded. On that footing it has been described not as a simple "framework contract" but as a "matrix contract".

How the tie is created

The exclusivity may be stipulated directly, or it may result indirectly — for example from a penalty clause whose effect is, in fact, to amount to an exclusivity commitment. The Commission's Vertical Guidelines give examples of clauses considered to create a purchasing exclusivity, characterised as "single-branding" (monomarquisme) (Guidelines, points 298 and following).

Must the distributor remain free to set its resale prices?

Yes — and this is a defining feature of the tie, not an optional one. The distributor is legally independent because it bears the risk of its buy-to-resell activity, and to that end it must remain master of its resale prices. A supplier that imposed the resale prices, or that limited the distributor's freedom in setting them, would expose itself to two distinct consequences.

• The application of social law. Where the supplier controls the resale price, the distributor may be subjected to a dual status — social and commercial. The consequence is not a windfall for the distributor: it cannot cumulate the advantages attaching to the quality of an employee with those attaching to the situation of an independent distributor. The two statuses coexist, but the benefits do not stack.
• The prohibition on imposed resale prices. Imposing a minimum resale price is separately caught by the rule against imposed prices (Article L 442-6), developed in our guide on resale-price maintenance.

What a supplier may do on price is therefore narrow: it may recommend a resale price, or impose a maximum, but it may not fix or impose a minimum, and it may not so constrain the distributor's pricing that the distributor ceases to be an independent trader. The line is the same one that runs through every French distribution contract, and it is not softened by the presence of a purchasing tie.

What price does the tied distributor pay — and can the supplier set it?

Because an exclusive-purchase contract extends its effects over time, the price the distributor pays is often fixed by the supplier after the contract is formed — which historically generated a long line of litigation over price indeterminacy. The requirement of a determined price was first affirmed in this field in 1970 and then applied ever more rigorously, in the disputes between oil companies and filling-station operators: contracts stipulating no price were challenged, and the Court of Cassation annulled them, sanctioning the supplier's arbitrary power in unilaterally determining the price (former Articles 1591 and 1174 of the Civil Code). The courts later distinguished the framework contract from the application contracts, but continued to sanction price indeterminacy in the framework contract, and ultimately held that the nullity of the framework contract entailed that of the application contracts.

The modern position

The reform of the law of obligations resolved the debate. Article 1164 of the Civil Code now allows a unilateral determination of the price in framework contracts, while sanctioning an abuse in its unilateral fixing by damages and, where appropriate, resolution of the contract. A "catalogue price" clause — providing that later sales will apply the prices fixed unilaterally by the supplier in its tariff in force at the time of order — is accordingly valid in framework contracts. Since these developments, little case law has been rendered on unilateral price-fixing, which reveals how far the earlier litigation on indeterminacy had been a pretext.

The older cases still mark the boundary of a lawful price mechanism: what mattered was whether the price rested on a criterion independent of the will of a single party. A clause fixing the price of an exclusive-purchase beer contract by reference, among other things, to "the hourly wage of the brewery worker" was condemned, because that wage — fixed by negotiations within the firm between union representatives and the employer — depended in part on the will of the employer-seller (Cass. com., 2 Nov. 1993). By contrast, where a price was to be fixed by reference to the real value of the undertaking and the evolution of its results — elements independent of the sole will of the parties — the criterion was objective and the price determinable, so that a court could, without substituting itself for the parties, charge an expert with quantifying it (Cass. com., 10 March 1998).

The consequence of nullity was severe. Because the framework contract's nullity was retroactive and carried down the application contracts, and because the distributor — having never bought — never owned the products, the resale price it had obtained from final customers had to be restituted to the supplier; the distributor could then claim, as a mandatary, the costs, remuneration and share of losses owed to it by the supplier as principal.

Abuse in the price

The control has shifted from the existence of a price to its abuse. As early as 1992 the Court of Cassation upheld damages against a supplier that, by selling its products too dearly to a distributor bound by an exclusive-purchase tie, did not allow it "to practise competitive resale prices" (Cass. com., 3 Nov. 1992) — a solution that makes sense where the supplier's pricing gravely compromises the distributor's activity, though it looks excessive where the distributor's activity is not affected. It is, moreover, possible that an abuse in price-fixing be sanctioned as a significant imbalance under Article L 442-1, I, 2° of the Commercial Code, which has been held to apply to economic imbalance.

The ten-year cap: Article L 330-1

The tied distributor's dependence grows the longer the exclusivity lasts, so French law bounded that duration in the abstract. Article L 330-1 of the Commercial Code, from a law of 14 October 1943, limits "to a maximum of ten years the duration of validity of any exclusivity clause by which the purchaser, assignee or lessee of movable goods undertakes, vis-à-vis its seller, assignor or lessor, not to use similar or complementary objects from another supplier." The parties remain free, at the end of the ten years, to conclude a fresh exclusive-purchase contract for a further period not exceeding ten years, or for an indefinite term.

Stopping the cap being outflanked

To prevent the duration being forcibly prolonged by combining complementary contracts of different lengths, Article L 330-2 adds that where the contract containing the exclusivity commitment is followed, between the same parties, by other analogous commitments bearing on the same kind of goods, the exclusivity clauses in those later conventions end on the same date as the one in the first contract. The provision was inspired by the dependence in which French shoe manufacturers had found themselves toward the American supplier of manufacturing equipment and spare parts (United Shoes Machinery Company), which held two exclusive-purchase conventions of different durations — one on the equipment, one on the spare parts — the mismatch forcing the manufacturers to renew each at its term.

The "common maturity" the provision imposes does not require the contracts to be for a fixed term. Three situations are possible: the contracts may all be fixed-term, the maturity of one entailing the maturity or lapse of the others depending on whether their terms coincide; they may all be indefinite, the termination of one entailing that of the others; or some may be fixed-term and others indefinite, the non-renewal of a fixed-term one or the termination of an indefinite one entailing the lapse or termination of the rest.

Does the ten-year cap even apply to distribution?

This is the genuine uncertainty, and it should be flagged rather than smoothed over. The doctrine stressed early on that Articles L 330-1 and L 330-2 cannot govern exclusive-purchase contracts in the distribution sector, because their object was to limit the duration of relationships for the purchase of materials — that is, goods intended to be used by the buyer, not resold. That reading matches the text's origins and its very words, which speak of the "use of similar or complementary objects". On that view, a purchase-for-resale distribution tie falls outside the ten-year cap.

The case law, however, went the other way: it extended the provision to all exclusive-purchase contracts, even those concluded with a view to resale in the state of the goods, and to contracts carrying a purchasing exclusivity indirectly or incidentally. So, as the law stands, a distribution tie is generally treated as subject to the cap — while the doctrinal objection remains live.

What happens if a tie exceeds ten years

The sanction is itself uncertain. Sometimes the judges annul the clause fixing the excessive duration; sometimes they annul the contract containing it, or declare the clause or contract lapsed — but the tendency of the case law is rather to reduce the duration of the commitment to the legal maximum rather than to strike it down. Whatever the sanction, it may be sought by anyone with an interest — including the supplier, even where it was the one that stipulated the clause.

The distributor's other protections

Duration aside, a tied distributor that felt trapped once argued that its consent had been vitiated, but the courts always rejected claims of duress (Cass. com., 20 May 1980), lésion (Cass. com., 8 Dec. 1966) or fraud (Cass. com., 25 Feb. 1986) founded on economic imbalance alone. The recognition, in the general law, of "economic violence" (Civil Code, Art. 1143) reopens the question — there is violence where a party, abusing the state of dependence of its counterpart, obtains a commitment it would not otherwise have given and derives a manifestly excessive advantage — but this requires proof of a state of dependence and is likely to be less welcoming than Article L 442-1 of the Commercial Code, which sanctions a form of economic violence without requiring proof of economic dependence.

Exclusive purchase as a competition-law "single-branding" restraint

On the second level, the exclusive-purchase contract is an agreement (entente) within Article 101(1) TFEU and Article L 420-1 of the Commercial Code — a vertical agreement, defined by Regulation (EU) 2022/720 as an agreement concluded between undertakings each operating at a different level of the production or distribution chain, relating to the conditions under which the parties may purchase, sell or resell certain goods or services (Art. 1(1)(a)). The exclusivity it places on the distributor directly affects competition: competing suppliers see their access to the market restricted, market shares are made more rigid — which, where networks exist, can favour collusion between network promoters little inclined to confront one another — and inter-brand competition, the competition between rival brands, is eliminated at the point of sale (Guidelines, points 18 and 301 and following). The harm is thus a foreclosure harm: it is felt less in the single tie than in the aggregate, where a web of exclusive-purchase ties closes a market to new or smaller suppliers who cannot find outlets. That is why the modern analysis looks past the individual clause to the parties' market power and to any cumulative network effect.

When the tie becomes "single-branding"

The Regulation gives the threshold a precise figure. A non-compete (single-branding) obligation is an obligation on the distributor to acquire from the supplier — or from another undertaking designated by it — more than 80% of its annual purchases of the contract goods and their substitutes, calculated on the previous year's purchases (Art. 1(1)(f)). Below that figure the tie is not, in the block-exemption sense, a single-branding obligation; above it, it is, and the duration rules that follow apply.

Three objections, all overcome

When competition law was first applied to exclusive purchase, three objections were raised and quickly rejected. First, that the tie was a vertical rather than a horizontal arrangement: the authorities held the distinction immaterial so long as competition was affected, even if a vertical agreement is generally less harmful than a horizontal one (Guidelines, point 10). Second, that a single tie between one supplier and one distributor has a negligible effect: true in isolation and absent a dominant supplier, but not where a network or a cumulative effect is present. Third, that the restriction is in fact beneficial — an argument that invited a "competitive balance", weighing the loss of intra-brand competition inside a network of exclusive buyers against the gain in inter-brand competition between networks, under the influence of the American "rule of reason", as in the beer-supply cases. Applied to exclusive purchase, that balance could in principle place outside Article 101(1) altogether the restrictions existing within a network of exclusive buyers, where they increase competition between networks, so that the agreement, considered globally as not anti-competitive, would not be caught at all. In practice the analysis is now channelled through the block exemption and, failing it, an individual assessment, rather than a free-standing rule of reason.

The benefits that justify exemption

Exclusive-purchase agreements generally satisfy the conditions for exemption, because — in the Commission's assessment — they improve distribution, let the supplier plan its sales more precisely and further ahead, assure the reseller a regular supply, limit market risks, reduce distribution costs, facilitate sales promotion, stimulate competition, and reserve to users a fair share of the resulting benefit through a regular and readier supply. The block exemption exists precisely to spare such agreements an individual analysis where they stay within its limits — the subject of the next section.

How competition law came to assess the tie: the block exemption

The promoters of exclusive-purchase contracts, from the first application of what is now Article 101(1) TFEU, massively sought exemption under Article 101(3) by notifying their agreements to the Commission. Faced with the flood of notifications, the Commission obtained authorisation from the Council to draw up "block" exemption regulations, exempting whole sets of similar agreements. Each such regulation, taken for a limited period (in principle ten years), specified the condemned stipulations ("black clauses"), those admitted under conditions ("grey clauses") and those admitted or even required ("white clauses"). The result was a rigid, prescriptive uniformity, as exclusive-purchase contracts scrupulously — and often merely formally — reproduced the regulatory requirements.

To end that rigidity, the Commission adopted in 1999 Regulation No 2790/1999, which targeted only the specific restrictions of competition at issue rather than types of agreement or clause, and looked more realistically at the parties in terms of their market share. It was followed by Regulation No 330/2010 of 20 April 2010, which faithfully reproduced the 1999 scheme, and in turn by Regulation (EU) 2022/720 of 10 May 2022, the regulation in force.

Market power, measured by market share

The pivot of the modern approach is market power — the capacity, over a significant period, to charge prices above the competitive level or to hold output, quality, product diversity or innovation below it, in short the capacity to abstract oneself from competition. Market power is assessed, somewhat roughly, through market share: the ratio of an undertaking's turnover on the market to the turnover of all undertakings active on it. In an exclusive-purchase agreement the share to consider is that of the supplier and that of the distributor (Reg., Arts. 3 and 8); where a wholesaler is involved, both the upstream market with its suppliers and the downstream market with retailers must be assessed.

EU or national law?

Which body of competition law applies turns on whether the agreement is capable of appreciably affecting trade between Member States: European law applies where it is, national law where it is not. The Commission's guidance treats trade as not appreciably affected — so that Article 101(1) does not apply on that ground — where the parties' aggregate market share does not exceed 5% and turnover stays below a defined ceiling. That de-minimis logic runs alongside the older principle that an agreement escapes Article 101(1) where its effect on competition is insignificant given the weak position of the parties on the market (CJEC, 9 July 1969, Volk).

When is an exclusive-purchase tie valid — and when is it void?

Applying the block exemption, the validity of a single-branding tie turns on market power and duration.

Market share

The block exemption applies where each party's share — supplier and distributor — does not exceed 30%. Below a 15% share for each party the agreement is, in principle, of minor importance and does not fall under Article 101(1) at all — save a restriction by object, to which the Commission generally assimilates the hardcore restrictions of an exemption regulation, or a cumulative network effect (CJEC, 9 July 1969, Volk). But even below the market-share thresholds, the effect is treated as appreciable where the contract carries a "flagrant" or hardcore restriction — in particular where it fixes the distributor's resale prices — or where the practice has an anti-competitive object.

Duration — the five-year rule

Even within the market-share ceiling, a single-branding obligation is excluded from the block exemption where it is agreed for an indefinite duration or for a duration exceeding five years (Reg., Art. 5(1)(a)). For the Commission, five years is enough to let the distributor amortise the investments required to market the products. Two accommodations exist: where the supplier lets the distributor use premises or land it owns or leases, the tie may exceed five years but not beyond the period of occupation (Art. 5(2)); and where the supplier acquires equipment to place at the distributor's disposal, the tie may be extended, beyond five years, by the time needed to amortise that investment (Guidelines, points 249 and 315). Also excluded are a post-contractual non-compete (Art. 5(1)(b)) and the "wide" parity obligation between online intermediation platforms (Art. 5(1)(d)).

Where the block exemption is unavailable

Losing the block exemption is not the end of the analysis. A tie that falls outside the exemption — because a market share exceeds 30%, or the duration exceeds five years — may still be validated by an individual exemption under Article 101(3) TFEU, whose conditions must be cumulatively satisfied and are, in the Commission's assessment, generally met by exclusive-purchase agreements given the improvements in distribution, planning and supply they bring and the fair share of the benefit they pass to users. The consequence is practical: exceeding the block exemption's limits raises the analytical burden — the parties must justify the tie on its own merits — rather than automatically condemning it.

The two levels do not merge. Where competition law is not in issue, an exclusive-purchase contract whose duration exceeds five years keeps its validity under contract law — subject, of course, to the ten-year cap discussed above. A tie can therefore be good under one body of rules and bad under the other, which is why it must be checked against both.

Is your exclusive-purchase tie on solid ground?

This orientation aid flags the contract-law and competition-law points that decide a tie's validity, on the rules above. It weighs the duration of the exclusivity in years; whether both parties hold 30% or less of the market; whether the tie requires more than 80% of annual purchases from the supplier (single-branding); whether the supplier provides the distributor's premises or key equipment; and whether the distributor is left free to set its resale prices (or subject only to a maximum or recommended price).

Two independent tests apply: contract law (the ten-year cap of Article L 330-1) and competition law (30% shares, and — for single-branding — a five-year limit under Reg. 2022/720, Art. 5). A minimum resale price is separately prohibited. Indicative only; not legal advice.