ALI-ABA Course of Study Product Distribution and Marketing March 18-20, 2009 Charleston, South Carolina

Transcription

1 751 ALI-ABA Course of Study Product Distribution and Marketing March 18-20, 2009 Charleston, South Carolina A Comparative Study of Distribution and Agency Selected in Selected Latin American Jurisdictions By Hernan Pacheco Pacheco Coto San Jose, Costa Rica

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3 753 Introduction. It is undeniable that the growth of trade and investment in a globalized economy forces the business sector to develop more efficient and more aggressive models to sell products and services in a foreign country. By the same token, given the evolution and dynamics of trade and investments, governments have been also forced to adopt or adapt legislation and other legal instruments to cope with challenges of cross-border transactions, such as the sale of products and services. There are a wide variety of models used for the distribution of products and services in a foreign country, inter alia, franchising, distribution, agency, licensing and a diverse menu of challenges which include legal, economic, political and cultural aspects. During the late 60 s and early 70 s many Latin American countries adopted special legislation to regulate the relationship between foreign suppliers and domestic distributors, agents or sales representatives. Most of these legal bodies were characterized for containing provisions that overprotect the interest of the local distributor or agent in detriment of the interest of the foreign supplier. The proponents of said bodies of rules substantiated the need for adoption of special legislation on the fact that many foreign companies came to the region, hired a sales representative or appointed a distributor who, after investing significant resources in opening the market for the foreign product or service and once the market matured, was terminated without cause. In many cases the relationship between the foreign company and the local agent or distributor was not properly documented, leaving the terminated party without recourse. Termination under those circumstances triggered, as a consequence, an indemnification mechanism the characteristics and particularities of which varied from one country to the other. With the liberalization of markets and the global economic trends, much pressure has been exerted to abolish and amend these protectionist legislations. This paper is intended to analyse the legal situation of distribution and agency or sales representation, in selected Latin American countries, with one common denominator: all of them have signed a Free Trade Agreement with the United States. The selected jurisdictions are Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and Panamá. I would like to express my gratitude and recognition to colleagues and friends who contributed with information about their own jurisdictions to enable this comparative study. They are: Jaime and Guillermo Carey of Carey & Cia in Chile; Ernesto Cavelier of Parra, Rodriguez y Cavelier in Colombia; Norman de Casto of Pellerano & Herrera in the Dominican Republic; Piero Rusconi of Rusconi, Valdez & Medina in El Salvador and Ernesto Arias of Sucre, Arias & Reyes in Panama.

4 754 I. Chile International distribution agreements in Chile are not regulated by any particular statute. Freedom of contract is a basic principle of Chilean law, so that two contracting parties are free to enter into any type of contract, provided it does not infringe Chilean public policy. On the other hand a sales representative is normally viewed in Chile as an agent, although sometimes it takes the form of a broker. A sales representative usually is viewed as someone who represents the manufacturer in the country and who is therefore empowered to carry on sales on behalf of the principal or as an independent contractor or broker that does not have the right to act on behalf of the principal. 1 A. Distribution Agreements. In general terms, distribution agreements under Chilean law shall be subject to the specific terms and conditions agreed upon by the parties and several rules such as: (a) general Chilean statutory provisions applicable to commercial and civil agencies; (b) laws governing civil and commercial sale and purchase agreements; (c) Chilean antitrust legislation; (d) Chilean Consumer s Protection Act; (e) United Nations Convention on Contracts for the International Sale of Goods; and, (f) Chilean jurisprudence, business practices, and domestic and foreign doctrine. According to Chilean law and doctrine, distributorship agreements are defined as those under which the producer or manufacturer agrees to deliver certain products to the distributor who agrees, in turn, to sell them directly or through other sellers. A distributorship agreement has the following general characteristics under Chilean law: (i) The distributor is not linked through employment to the manufacturer. (ii) The distributor is not a partner to the manufacturer or producer, as his profits accrue exclusively to himself. (iii) The distributor is generally autonomous in the marketing of the products received from manufacturer. (iv) The distributor's earnings are usually the difference between the purchase price and the resale price, even though the parties may agree on bonuses should the distributor reach certain sales targets. (v) The distributor sells on his own name and for his own account and invoices the client directly. 1 Chilean Code of Commerce of Titles III and IV, Book I regulating brokerage and commercial mandate 2

5 755 B. Sales Representation or Agency. While under Chilean law the principle of freedom to contract prevails in most commercial relationships, international sales representative agreements are subject to the general statutory provisions applicable to commercial and civil agencies, and to civil and commercial sale and purchase agreements; antitrust legislation; United Nations Convention on Contracts for the International Sale of Goods; jurisprudence; business practices; and to some degree to both domestic and foreign doctrines. Accordingly, the contracting parties are free to determine the terms and conditions of the representation provided they are not against the law or Chilean public policy. C. Antitrust legislation, a potential issue. a. Distribution Agreements. According to the traditional doctrine of the Resolutory Commission on Anti- Trust law, a distribution contract may not: (i) Fix distribution territories within which only one distributor may sell, (ii) Prohibit the marketing of other brands of products, (iii) Fix prices for the distributor's sales to third parties, (iv) Set minimum sales targets for sales to third parties, (v) Provide for an exclusive distributor, particularly in cases of a single distributor for similar articles manufactured by different producers, (vi) Establish quotas regarding the market for the product, (vii) In general, provide for any arrangement whose purpose is to eliminate, restrict or interfere with free competition in a given market. All these provisions have been traditionally construed as infringement to Antitrust law regardless of the market participation of the product or parties involved. b. Representation or Agency Agreements. Sales representative agreements are less sensitive to antitrust problems than distribution agreements. However, there are potential antitrust problems if the contract: (i) Provides for an exclusive representative particularly in cases of a single representative for the same merchandise of different producers; (ii) Fix territories within the country where only one exclusive representative may sell; (iii) Establish quotas regarding the market for the product; or (iv) In general, provide for any arrangement the purpose of which is to eliminate, restrict or interfere free competition in a given market. 3