Commercial agents and authorized dealers are not entitled to information concerning the gross profit of the principal for the purposes of calculating their claim for compensatory adjustment. That was the verdict of Germany’s Federal Court of Justice (BGH) in a ruling from September 24, 2020 (case ref.: VII ZR 69/19).
Claims for compensatory adjustment are a common point of contention between commercial agents, or authorized dealers, and their clients (a.k.a., the “principal”). Section 89(b)(1) of the German Commercial Code (HGB) stipulates that the commercial agent is entitled to demand a reasonable indemnity from the principal for business relations that the former established and from which the latter continues to derive a benefit. We at the commercial law firm MTR Rechtsanwälte note that this provision can also be applied to authorized dealers when they have to transfer their client base to the manufacturer.
The value of this customer base to the manufacturer can usually be deduced from the purchasing discounts that were granted to the authorized dealer prior to the termination of the contractual relationship. In the case in question that came before the BGH, a car dealer acting as an authorized dealer took the view that the benefits they had been providing to the manufacturer were not limited to purchasing discounts. Consequently, they demanded information regarding the manufacturer’s gross profit generated from the vehicles.
Instead of enforcing this demand, the Federal Court of Justice put a spoke in the dealer’s wheel, finding that gross profit is not a suitable basis for calculating the benefits derived by the manufacturer; nor is it, therefore, a suitable basis for calculating the authorized dealer’s claim for compensatory adjustment. As such, the Karlsruhe judges concluded that the dealer was not entitled to information concerning the gross profit.
The BGH went on to state that the benefits derived by the manufacturer lie in the business ties established by the commercial agent or authorized dealer, which the former can continue to capitalize on even after the contract has ended. It is therefore a matter of evaluating the customer base created by the distributor. This is to be distinguished from the profit margin that the manufacturer can achieve overall for its products. The Court also noted that there is no empirical principle according to which an objectively determined percentage of the total gross profit can be assigned to the customer base established by the authorized dealer.
The calculation of claims for compensatory adjustment will remain a contentious issue despite the BGH’s ruling. Lawyers with experience in the fields of commercial law and distribution law can provide counsel.