Government Reveals Consultation Outcome on The Commercial Agents Regulations

Principal-agent relationships: the CARs remain in force and unchanged

Commercial agents do not always have the bargaining power or knowledge to negotiate unfavourable terms imposed on them by larger firms they contract with. The Commercial Agents (Council Directive) Regulations 1993 (the ‘CARs’) provide some protection to such businesses who act as agents selling or purchasing goods on behalf of their principal.

The CARs are a piece of assimilated EU law, based on the French and German legal systems and do not sit easily with English contract law, which is predicated on the principle of businesses having the freedom to agree contracts without statutory protections.

Last year, within the context of the review of EU legislation post-Brexit, the Conservative government consulted on disapplying the CARs to new agency contracts in Great Britain.

Part of the driver for the consultation was whether deregulation would ‘make it simpler for businesses to contract with each other’ and bring the contracts in scope of the CARs under the same rules as all other commercial contracts, simplifying the UK’s legislative framework. Although the consultation findings showed, ‘…a polarisation of views – particularly between commercial agents and principals’, the general picture is that the advantages of deregulation do not outweigh the disadvantages of doing so.

The consultation process

The consultation was launched on 16 May 2024, extended when the Labour party came to power, and ran until 1 August 2024. 86 responses were received, out of which only seven responses were from principals.

On 13 February 2025, the Department for Business and Trade (DBT) announced that the CARs will remain in force without amendment. Read the full consultation response here.

On balance, the consultation showed that the CARs work well for commercial agents, providing protections to them when negotiating contracts with principals who are, in many cases, larger businesses. Although the CARs did not allow for contracts to be negotiated freely, there was not a sufficiently large body of evidence to suggest that this is a major issue and that there is a strong case for change.

A recap on the CARs

Sale of goods, not services

Where the CARs apply, they provide certain protections to ‘self-employed intermediaries’ (i.e., the agent, which might be an individual, partnership or company). This is where the agent sells or purchases goods on behalf of another, their principal. The protection does not extend to an arrangement for the sale / purchase of services. There are some nuances here to be mindful of, for example in the supply of software.

Minimum protection rights for agents

Where there is a commercial agency arrangement in place, many of the protections for agents under the CARs cannot be excluded. These include the right to a written contract and an agent’s right to compensation on termination in certain circumstances.

Key takeaway from the consultation

Commercial agency contracts for the sale or purchase of goods will remain subject to the CARs, which continue as they are without amendment.

Businesses who engage agents, and agents alike, should be aware of and understand the CARs and their consequences fully at the beginning of their engagement.

How we can help

Our experienced team of commercial solicitors can support you if you would like to learn more about the consequences of the CARs applying, if you are planning to enter or to exit a commercial agency arrangement, or are considering the pros and cons of agency versus another model for your business, such as a distributorship.