Legal Requirements for Non-Competition Clauses
The non-competition clause plays a central role in distribution law. For manufacturers and suppliers, the non-competition clause is an important instrument to protect their economic interests against their distribution partners, such as commercial agents, authorized dealers, or franchisees. Especially when ending distribution relationships, legal disputes may arise regarding the permissibility of non-competition clauses.
In addition to the statutory non-competition clause, one can also contractually agree on a non-competition clause under distribution law. Legal regulations and restrictions must also be considered here, as the non-competition clause may be impermissible if violated, according to the business law firm MTR Legal Rechtsanwälte, which also advises in commercial and distribution law.
Statutory Non-Competition Clause for Commercial Agents
The statutory non-competition clause for commercial agents is derived from Section 86 (1) of the German Commercial Code (HGB). According to this, they must, by law, represent the interests of the company. This also means that during the contractual relationship, they may not engage in competing transactions without the entrepreneur’s consent. A crucial factor is whether there is an actual competitive situation between the companies.
A contractually agreed non-competition clause may also apply to other distribution partners, such as authorized dealers or franchisees. However, it requires an individual contractual arrangement. In particular, statutory restrictions must be observed for post-contractual non-competition clauses.
Authorized Dealers and Franchisees
The provisions for commercial agents do not directly apply to authorized dealers. However, from the trust relationship, so-called “dealership-related ancillary obligations” can arise. The Federal Court of Justice (BGH) has consistently recognized that authorized dealers are also obligated to a certain competitive loyalty during the contractual relationship.
The same applies to franchisees, as the franchisor has a legitimate interest in protecting their concept, know-how, and brand presence from competition by their own distribution partner. Non-competition clauses are therefore a common and regularly accepted means in the franchise system. However, they are subject to strict antitrust control.
Post-Contractual Non-Competition Clause
When agreeing on post-contractual non-competition clauses, particular caution is required. For commercial agents, the conditions for a post-contractual non-competition clause are regulated in Section 90a of the HGB. Accordingly, the clause must be agreed in writing and relate to the affected area or customer base of the commercial agent. Furthermore, it must specify which goods or services the non-competition clause applies to. It must also not last longer than two years. In return, the contract must also stipulate compensation for the commercial agent.
For authorized dealers and franchisees, the regulations of Section 90a HGB do not apply directly, but they can be analogously applied if a comparable economic dependency exists.
Judgments on Non-Competition Clauses
Non-competition clauses in distribution law regularly occupy the courts. On October 6, 1999, the BGH ruled on a claim by an authorized dealer for compensation (Case no. VIII ZR 34/99). The Karlsruhe judges made it clear that an authorized dealer subjected to a post-contractual non-competition clause can be entitled to compensation under certain circumstances, analogous to the rule for commercial agents. A prerequisite for the claim, however, is that the authorized dealer is integrated into the distribution system like a commercial agent and is obliged to transmit customer data.
In another judgment on February 5, 1992, the BGH ruled that a non-competition clause may also be permissible for franchisees, as long as it serves to protect the franchisor’s know-how (Case no. KZR 23/90). However, the clause must not exceed the necessary measure. Typically, compensation is also required if the clause is economically burdensome.
The Higher Regional Court of Munich clarified with its judgment on February 13, 2014, that a competing activity by the dealer during the ongoing distribution contract can already constitute an important reason for immediate termination (Case no. 23 U 2404/13). An implied non-competition clause can be derived from the overall picture of the contractual relationship.
Legally Securely Agreeing on Non-Competition Clauses
Non-competition clauses are an effective but sensitive instrument in distribution law. They protect legitimate interests but must not be excessive. Correspondingly, they should be agreed individually in the contract with care. Additionally, these agreements should be regularly reviewed and possibly adapted concerning new legal developments.
MTR Legal Rechtsanwälte has extensive experience in commercial law and advises on non-competition clauses and other topics of distribution law.
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