Businesses wishing to market their products in Puerto Rico must be aware of two important laws that regulate the commercial relationship between a principal and a distributor. These are the Puerto Rico Dealers Act 75 and the Sales Rep Law 21. These statutes were enacted to protect Puerto Rico distributors, dealers and sales representatives from a manufacturer’s arbitrary termination or impairment of their commercial relationship. Both laws are liberally interpreted in favor of those who carry out distribution activities; affording locals injunctive relief and carry stiff penalties for principals that do not comply. Whether a business is considering establishing or terminating a distributorship, sales relationship or even a franchise, it must take into consideration these statutes.
Dealers Act 75 protects local distributors from a manufacturer’s arbitrary termination or ending their commercial relationship with the Puerto Rican distributors who had prior thereto developed a market for their products. Accordingly, a manufacturer cannot terminate its agreement with a dealer except for “just cause.”
Law 21’s motive is to protect sales representatives who fall short of compliance with dealership status under Law 75. It protects Puerto Rico sales representatives from arbitrary terminations after they create a market for their principals. A sales representative under Law 21 is as “an independent entrepreneur who establishes a sales representation contract of an exclusive nature, with a principal or grantor, and who is assigned a specific territory or market, within the Commonwealth of Puerto Rico.”