In fact, that principle allows the head of the network to accept or reject as a member of the network — with some limitations at the case of “open networks” as cooperatives or selective distribution systems — the other members or potential members.
At least the application of the company rules to business network involves the impossibility of giving adequate solutions to specific network problems.
Other organizational structures such as cooperatives, consortiums or EIG are more adequate. All of them are designed as coordination structures but they imply the existence of a common interest of the parties and, as discussed in the next section, in networks there is a dialectic relationship between a parallel interest of the parties and a divergent interest of them without a common interest.
b. The question of the network interest
The exchange bilateral contracts are characterized by the confrontation of the legitimate interests of the parties — not only in cases win/loss but also in cases win/win —. In these cases each party defends its own legitimate private interest and shall not pay attention to the other party interests —with some increasing exceptions in the case of long term, intuitu personae, trust or fiduciary contracts —. Only in the case of collaboration agreements — typical network contracts — we recognize the existence of a parallel interest shared by the parties and the existence of a shared interest with consequences both in the interpretation and integration of the contract and in the parties’ rights and duties. In the case of companies and associations there are always a common interest and private divergent interests of the members or stakeholders which are external, irrelevant in relation with the definition of common interest. In case of confrontation between common interest and shareholder divergent interest the board of directors of the company shall always follow the first.
In EIG, consortiums, and horizontal groups there are a crescent weakening of common interest and a progressive recognition of the legitimacy of parties’ private interest. In these cases the confrontation between the common interest and the members' divergent interest do not always imply that the second shall submit to the first.
Networks find themselves between contracts and companies — also when they are expressed in a contractual or organizational form — and we recognize in them the existence of a dialectical relationship between two types of interests held by their members. The interest to create value as shared interest is individual for each member or contractual party — each member or party has the same interest in parallel with the others — as individual is the divergent interest to the allocation or sharing of created value.
Both interests are expressed in the business activity of the organization and in the business activity of the members of the organization — network expressed in an organization — or in the business activity of contractual parties — contractual network— and both are legitimate in networks10. If it is easy to recognize the shared interest as a network interest we must also recognize that the divergent interest is also a network interest — just as our prior logic rejects the possibility of a particle being at the same time in two places following the quantum physics theory —.
As in networks the amount of value obtained for each member depends of the exercise of its own business activity — and is not fixed in relative terms as in companies — the marginal oscillation between the minimal and the maximum gain possible for each member is limited without the acquisition of new quotes of the market through the efficiency and competition or in the case through an arbitrary decision of network head.
That makes that nor company regulation nor exchange contracts regulation may be recognized as an adequate framework to deal with the relationship between the two kinds of network interest. In the case of company or organization regulation this is so because these regulations impose the prevalence of common interest in opposition to private divergent interest of parties. In the case of exchange contracts regulation because this imposes the prevalence of the parties' private interests.
The harmonization of interests is in consequence an important goal for a network regulation.
An efficient network regulation requires a legal framework that legitimizes both interests — the shared interest as well as the divergent — and shall explain with detail the parties’ or members’ relationships and the cases of prevalence of the first or the second interests when both are in conflict.
c. Hierarchy and market from the legal point of view
Only some words about this central question. Business networks imply cooperation, coordination and competition between members. There is no hierarchy but limited central direction — with different degrees of extension — and the position of the members in face of the direction may vary from the complete independent coordination to the dependence.
There is an inverse proportional relationship between market relationships between members or parties on the one hand, and the extension of central direction and the dependence of the members on the other hand.
A legal business network regulation must take account of this typical network miscegenation and of the dialectic relationship between dependence versus independence and coordination versus market.
d. Characteristics of business networks
Another key issue in the field of networks is the feature whose attendance allows us to recognize the existence of a business network.
Legal scholarship has identified the interdependence and stability — of the network, not the special relationship linking the members with her — as the characteristic of business networks. Complementary activities of the members or parties may be seen also as an essential element.
In the most of the cases these networks imply a division of the functions of production and distribution or others included in the value production chain such as research and development.
It is also characteristic that its members may sustain relations of cooperation and competition between them11. This statement has important consequences in relation with regarding the question of networks and public interest and in particular in relation with competition issues.
Other relevant feature is the existence of a connection with the market shared by the members or parties — brand, technology, products —.
III. DIRECTION - MEMBERS' PROBLEMS AND HORIZONTAL MEMBERS PROBLEMS
In every network there is a direction centre — network directory — that may reside in the network’s head company, may be a manufacturer — outsourcing — or a provider of services — franchising or credit cards —.
The network’s direction also may reside in the entity that structure the network — Joint ventures, cooperatives, consortium or EIG —, or in a stable committee, personified or not, representative of all or some members of the network.
a. Direction power, control and authorisation
Network’s directory has the power to issue instructions and set the general framework for the development of the activity, to monitoring the implementation of these and in general the activity of the members and to allow the members' business decisions in the cases fixed by contract or by statute.
The foundation of directive power in contractual networks lies in bilateral contracts. These contracts generally parallel, adhesive and with a wide homogeneity, limit the commercial autonomy of the member.
On the one hand they involve the setting — usually via contractual appendices — of essential elements of the member company’s business policy such as the suppliers identity, composition and level of minimum stocks, methods of business organization, tradedress, distinctive signs that identify the products or services and even the store of the member — franchising —, marketing formulas and commercial know-how, among others.
In this way the freedom of network members is limited to the framework specified by the contract, and this transfers the decisions on such questions to the network