Revision of the provisions of the French Commercial Code relating to tariff transparency and restrictive practices of competition

On Thursday 25 April, the Government published two ordinances in the Official Journal pursuant to the law of 30 October 2018 on the balance of trade relations in the agricultural and food sector and healthy, sustainable and accessible food for all (Egalim law).

Ordinance n° 2019-358 of 24 April 2019 introduces an action for liability for abusively low prices, while ordinance n° 2019-359 of 24 April 2019 redrafts Title IV of Book IV of the French Commercial Code relating to transparency, restrictive practices of competition and other prohibited practices.

The ordinance on liability action for unfairly low prices

The ordinance amends Article 442-9 of the French Commercial Code. The revision strengthens the fight against abusively low prices by extending the possibility for a supplier of agricultural products and foodstuffs to hold his buyer liable for compelling him to practice abusively low sale prices. The judge may take into account production cost indicators as well as any other available indicators in order to characterise the abusively low price. In the case of a first sale, the judge may take into account the indicators contained in the agricultural producer's contract proposal.

This amendment generalises liability claims for abusively low prices, by removing the former conditions arising from the existence of a so-called cyclical crisis and a significant price rise in certain raw materials.

The ordinance will come into force on 1 September 2019 for ongoing contracts.

The ordinance on the reform of Title IV of Book IV of the French Commercial Code

The ordinance clarifies and specifies certain provisions regarding transparency and restrictive practices of competition.

• Commercial relations transparency

The invoicing rules (article L. 441-9 C. Com. new) are lined up with the requirements of tax law. The seller is now required to issue the invoice from the moment of the delivery or provision of services within the meaning of 3 of I of Article 289 of the General Tax Code, as opposed to the date of the sale. In addition, breaches of invoicing rules are now subject to an administrative penalty, and no more a criminal fine, of up to €15,000 for a natural person and up to €75,000 for a legal person.

The rules on payment deadlines (articles L.441-10 to L.441-16 C.Com. new) are organised within several articles and consider distinctly, a general framework, sectoral derogations, export derogations, overseas derogations, auditors, rescript procedure and sanctions. In addition, breaches of the rules on payment deadlines are now also subject to an administrative fine of up to €15,000 for a natural person and up to €75,000 for a legal person.

With regard to the mandatory formalism of commercial negotiations (articles L. 441-3 to L. 441-7, C.Com. new) the ordinance amends the existing regime by providing in particular a more flexible general framework and a stricter framework for agreements relating to mass consumption products.

Regarding the regime applicable to mass consumption products, the agreements will now have to set the estimated annual turnover, in particular for the purposes of ordinance n° 2018-1128 on the regulation of promotions. Similarly, the parties must include in the agreement the "business plan" negotiated between the supplier and the retailer which includes the agreed price and estimated turnover negotiated between the parties. The list of consumer products will be established by decree.

The 1 March deadline for signing the written agreement is maintained.

In addition, any amendment to the agreement must now be in writing, providing for explanations, that is, justifying the existence of the new element.

Concerning the provisions relating to communication of General Terms and Conditions of Sale (“CGV”) (article L.441-1 C.Com. new), the ordinance introduces an administrative penalty of up to €15,000 for a natural person and €75,000 for a legal entity in the event of failure to comply with the obligation to communicate the CGV. In addition, the rule according to which the communication of the CGV must take place three months before the deadline of  1 March (1 December) no longer applies to all single agreement but only to agreements relating to mass consumption products.

The ordinance also provides for an obligation to communicate the terms and conditions for calculating the price of a service when it is not determined in advance in the CGV.

• Restrictive practices of competition

The most important change introduced by the ordinance relates to restrictive practices.

On the one hand, article L. 442-6 of the French Commercial Code (new article L. 442-1 C. Com.), has been radically reformed by removing thirteen practices previously listed. The new Article L.442-1 will now include only three practices: the control of the manifestly disproportionate nature of an advantage granted, the significant imbalance and the sudden termination of commercial relations.

On the other hand, the provisions relating to the significant imbalance and the control of the manifest disproportion of an advantage granted no longer apply to the "trading partner" but to the "other party". This amendment makes it possible to overcome the restrictive definition of the term "commercial partner" provided for in the case law, which excluded any commercial relationship that was not intended to be renewed over time. All situations where the unlawful practice is imposed on a contracting partner in the course of its distribution, production or service activity are now included.

In addition, the definition of the control of the manifest disproportionate nature of an advantage granted is clarified. The words "to any commercial service actually rendered" are replaced by "no counterpart" to avoid limiting the scope of this practice to commercial cooperation agreements only.

As regards to the provisions on the sudden termination of commercial relations, the reform introduces an 18 month cap for the prior notice. In addition, the notice period no longer has to be doubled for private label products.

Concerning the rules of procedure (new article L.442-4 C.Com.), victims can now make the same requests as the Minister, with the exception of the civil fine. Indeed, victims can now apply to the court to order the cessation of the practices, to declare the nullity of the clauses or contracts, and to request the recovery of undue payments.

In addition, the prohibition of off-network resale made to the distributor bound by a selective or exclusive distribution agreement is maintained and moved to article L. 442-2 of the French Commercial Code.

• Entry into force of the provisions