Controversial Reform of the Motor Vehicle Distribution Sector

9 March 2011

On February 15, 2011 the approval of a radical reform of the framework regulations for motor and commercial vehicle distribution caused major controversy between the car manufacturers and dealerships.

The amendment introduces various relevant changes. Firstly, it establishes the imperative application of the Agency Contract Act to motor vehicle distribution agreements. The reform likewise states, in those agreements where the supplier had contractually established minimum stock purchases, that the distributor is entitled to return products that have not been purchased by their clientele within the 60 days following delivery. The new regulations acknowledge compensation for loss of clientele in the event of contract termination due to expiry of the period or any other cause, in which case the distributor will be entitled to receive compensation which in no case can be less than the average annual sales amount for the supplier. The controversial rule also includes the distributor’s right to be reimbursed for investments made by indication of the supplier which have not been paid off at the time when the contract is terminated, as well as receive compensation for personnel which they have had to dismiss as a result of the contract termination. In the last stage of its passage through Parliament, a provision which declared that the rule applied to those contracts entered into prior to the entrance into effect of the Act was eliminated.

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