It is not necessary for a distribution agreement to include provisions on margins and bonuses. These aspects can be determined unilaterally by the manufacturer. That was the verdict of Frankfurt’s higher regional court – the Oberlandesgericht (OLG) Frankfurt – in a judgment from February 14, 2023 (case ref.: 11 U 9/22).
A great many commercial legal disputes between manufacturers and authorized dealers can be traced back to the arrangements put in place for margins and bonus payments. According to a recent ruling of the OLG Frankfurt, these do not need to be set in stone in a contractual agreement; they can be set by the manufacturer without the approval of the authorized dealer, reports commercial law firm MTR Legal Rechtsanwälte.
The case at hand involved a dispute between a car manufacturer and its authorized dealers about the fixing of margins and bonuses. The parties concluded a new agreement in early 2020. Whereas the “old” agreement guaranteed fixed remuneration in the form of a basic margin in addition to providing for a variable remuneration component, applicable rebates and margins were not carried over to the new distribution agreement. The car manufacturer informed the authorized dealers about the new arrangements that would see margins and bonuses reported in the fourth quarter of each year for the following year, but these arrangements were opposed by the dealer association.
Notwithstanding this opposition, the association’s legal action did not find favor with the OLG Frankfurt. While the Court acknowledged that setting the basic margins and bonuses on an annual basis unilaterally did constitute an impediment within the meaning of Section 19 of the German Act Against Restraints of Competition (GWB), the impediment was deemed not to be unreasonable or unfair in this case.
The Court noted that the manufacturer’s interest in having a degree of flexibility to adjust the basic rebate conflicted with the authorized dealer’s interest in being able to reliably calculate basic rebates and bonuses by concluding contracts with as long a term as possible, as well as in being able to ensure the ongoing economic viability of its business. However, the determination of the basic margin, which does not represent an attainable trade margin and which is passed on at least in part to the end customer, is in any case of only limited significance to the dealers’ continued economic viability. This is because the earnings potential depends on many other factors, such as customer behavior and competition, which the manufacturer is not in a position to influence. The Court also pointed out that selling other brands was allowed under the terms of the distribution agreements. As for the bonus payments, these were clearly voluntary payments on the part of the manufacturer. All this informed the OLG Frankfurt’s ultimate finding that no unfair impediment was present in this case.
The team of commercial lawyers at MTR Legal can provide counsel.
