Electronic Commerce and Closed Distribution Networks: Proposals for Solving Legal Problems

Developments of the World Wide Web and electronic commerce upset the traditional marketing schemes. This disruption is moderatly appreciated by the producers who have built " closed distribution " structures, such as exclusive concession or selective distribution networks ( ie within car industry sector (Peugeot, Rover...) and within the perfume sector (Chanel, Yves St Laurent...). These networks consist of authorized dealers selected on specific qualitative criteria and " disguised " quantitative criteria. The producers are particularly attentive to potential " free riders " offences. In other terms, they do not wish their products be resold outside the network. This legally framed marketing model is underpinned with contracts that define the terms and conditions of sale. 15th BILETA Conference: “ELECTRONIC DATASETS AND ACCESS TO LEGAL INFORMATION”. Friday 14th April 2000. University of Warwick, Coventry, England. Page 1 of 21 Electronic Ccommerce and Closed Distribution Networks: 01/04/2005 http://www.bileta.ac.uk/00papers/collard.html Producers have the opportunity to take legal action against the authorized dealer who does not respect these conditions (especially the condition prohibiting the resale of products outside the network). They can also undertake proceeding against the free riders, arguing that their behaviour provoke unfair competition. This development perturbes the legal organisation of the networks and generates new questions: * Does the authorized dealer commit a fault by selling or simply promoting the products on the WWW? Does this behaviour constitute a breach of contract? * Does the free rider commit an act of unfair competition by selling or simply promoting the products on the WWW? * Do the existing contracts offer sufficient security, in relation to electronic commerce? * In an international environment by nature, what are the legal rules to be applied to possible litigation? This question is important, knowing that closed distribution networks are well protected by French Law. It is not necessarily the case in other countries within the EU. * Could a web site be considered as a point of sale, integrated to an exclusive or selective network? If this is the case, how will the contract take the specific nature of this point of sale into account? In this paper we analyse the global problem caused by the confrontation between closed distribution networks and electronic commerce. We show how producers could respond with legal tools, knowing that it is a strategic issue for them. We try to propose legally secured and efficient operational solutions.