Q&A: manufacturing and distribution of fashion items in Spain

Manufacturing and distribution

Manufacturing and supply chain

What legal framework governs the development, manufacturing and supply chain of fashion items? What are the usual contractual terms of these relationships?

Spanish professionals and companies are involved in every stage of the creation and supply of luxury fashion products, from design, development and manufacturing, through sourcing and logistics or fulfillment, to wholesale (business-to-business) and retail distribution (business-to-business). -consumer), offline and online. Insofar as they carry out their activity in Spanish territory, European and Spanish legislation applies to their activities. However, there is no overarching legal framework that applies to all aspects of the supply chain or that applies exclusively to the fashion industry in Spain.

On the retail side, Spain was relatively late in the world of e-commerce, but quickly caught up after most of the world’s leading online retailers launched their local sites in Spain, especially from of 2010.

The Spanish contract law system is comparable to that of most jurisdictions in continental Europe and offers a strong product liability regime and warranty protection against defects. Furthermore, on the regulatory side, consumer protection and retail regulations are well developed and directly influenced by applicable EU directives, as are e-commerce rules and data protection requirements. . Among the most recent changes to consumer law in Spain is the extension of the legal warranty from two to three years for goods and products sold to consumers after January 1, 2022.

The only peculiarity of the Spanish legal system is that while contract law and civil law more generally fall under national (state-wide) law, consumer protection and, to some extent, trade regulation , are delegated to the Spanish Law Regions. This implies that a retailer who, for example, wants to launch a product or a promotion on the Spanish market, must take into account not only the national rules but also the specificities of the regional legislation of the territory where the products are offered.

On the manufacturing, supply and distribution side, various contractual arrangements apply. We often see Spanish companies acting as:

  • suppliers of goods and raw materials to other manufacturers;
  • suppliers of manufacturing and processing services to other brands;
  • brand distributors or agents, in all or part of the Spanish market;
  • franchisees or master franchisees of brands in all or part of Spanish territory;
  • franchisors of Spanish brands wishing to develop internationally, via third-party franchisees abroad;
  • logistics, fulfillment and warehousing service providers in Spain; and
  • providers of auxiliary support services in Spain (call centers, regional purchasing or sales platforms, after-sales services, etc.).

To the extent that the principle of “freedom to contract” applies in Spanish contract law, each of these contractual arrangements can be tailored and tailored to the particular business need in each case. The only particularities which, in general, deserve to be underlined in this context are:

  • the application of a specific law on commercial agency (Law 12/1992) in the case of agents – this law offers protection to commercial agents in Spain, in accordance with EU rules on commercial agency;
  • the absence of a specific law on distribution in Spain (the general rules of contract law apply and, to a certain extent, the law on commercial agency is applied by analogy in the event of termination of the distributor);
  • the application of the rules on franchise contracts under Spanish law (Royal Decree 201/2010); these are however very basic and not as sophisticated as those found in other jurisdictions;
  • specific legal and regulatory requirements that may apply to certain products (eg, cosmetics, jewelry, product labeling); and
  • the need for specific regulatory authorizations and authorizations in the industrial context (for example, for transport and logistics, for most manufacturing processes, etc.).

In the specific context of the supply of goods, the parties generally contractually opt for Spanish law in the choice of law clause and expressly exclude international rules or conventions on trade and supply. That said, nothing in principle prevents the parties from choosing the law of a country other than Spain under the rules of European and Spanish private international law.

Distribution and agency contracts

What legal framework governs distribution and agency contracts for fashion items?

Spain is a country where agents and distributors have traditionally played an important role, especially in the fashion industry. International brands, including luxury fashion brands, have relied heavily on sales agents and wholesale distributors in Spain to cover the vast market that Spain represents.

That said, it is expected that the role of commercial agents will diminish over time. After all, in a world where direct-to-store and direct-to-consumer is made much easier through efficient online systems and low-cost logistics networks, many brands (and their backers) are beginning to reconsider the use of agents, as their sales commissions are a significant cost that, at present, cannot always be justified.

We can therefore expect an increase in terminations of agency contracts across Spain in the future, with the resulting discussions around termination benefits and related claims. A similar trend may appear with regard to distributors in Spain, especially now that logistics across Europe have become so fluid.

There is a specific law on agencies in Spain (Law 12/1992) which largely mirrors EU law on the protection of agencies. However, there is no specific law on distribution relationships (unlike other EU countries like Belgium) and the contract with distributors is therefore governed by general contract law.

What are the most commonly used distribution and agency structures for fashion items, and what terms and contract terms typically apply?

The Spanish fashion industry offers a variety of contractual arrangements.

As the parties are free to negotiate the terms of their collaboration, in some cases there may be variations from typical contractual structures (such as agency, distribution or franchise) and sometimes “hybrid” contracts may be found, depending on the product or retail. model at hand. But this is no different from what can be seen in other European jurisdictions – Spain offers no particularity in this regard.

While for the most common fashion products, there are no specificities from a legal technical point of view in Spain (other than the fact that these products often rely on franchise structures to allow expansion stores), it is precisely the luxury brands – in particular high-end jewellery, fashion, cosmetics and perfumery – where the contractual environment is generally much more sophisticated and restricted. Selective distribution systems are often used in these cases. As in other EU jurisdictions, this system allows a supplier to have more control over the resale of their products, protecting their brand reputation and preserving quality and customer experience.

Import and export

Do special import and export rules and restrictions apply to fashion items?

No special rules apply in Spain for luxury and fashion products in particular. As with other products, goods from outside the EU are subject to customs and import and export regulations. Goods moving within the EU enjoy greater flexibility, which has led to the emergence of EU-wide distribution centers from which different countries are served at the same time, instead of to have a local distribution structure in each country.

It should be mentioned that Spain has historically faced significant counterfeiting problems. Customs and intellectual property lawyers, alongside law enforcement authorities, are often involved in freezing or seizing “pirated” or counterfeit goods at Spanish ports and airports, in a constant battle against “the copy industry”, which causes significant losses for brands and manufacturers in Spain and Europe.

Corporate social responsibility and sustainability

What are the corporate social responsibility and sustainability disclosure requirements and obligations for fashion and luxury brands in your jurisdiction? What due diligence in this regard is advised or required?

International standards and EU requirements apply in Spain. Operators in the Spanish fashion and luxury sector are subject to obligations similar to those in other countries, and large Spanish distribution companies (especially those listed on the stock exchange such as Inditex or Cortefiel) have implemented sophisticated policies on sustainable sourcing and corporate social responsibility more generally, in line with international expectations. Spain’s leading luxury and fashion companies are immersed, like most multinationals in other industrial sectors, in a global push for increased environmental, social and corporate governance (ESG) standards and compliance.

What occupational health and safety laws should fashion companies be aware of in their supply chains?

Depending on the fashion and luxury segment in which a company operates, health and safety issues may be significant or not significant at all. Obviously, it is the manufacturing companies that face the greatest challenges in complying with the high health and safety standards set out in Spanish legislation, but this is not specific to the fashion industry and is not specific to the fashion industry. applies to all manufacturing sites in all industries in Spain. So we don’t see any special requirements for the fashion and luxury industry in particular.

Date declared by law

Correct the

Indicate the date the above information is accurate.

February 1, 2022.