Following its decision to investigate the mass retail food
distribution sector (see
issue 461 and
issue 464 of Community Week), the French Competition Authority
(the 'Authority') has, on 7 December 2010, issued two
The first opinion relates to entry barriers and obstacles to the
movement of independent stores in the mass retail food distribution
sector. Such obstacles consist of (i) regulatory burdens, (ii) the
risks associated with planning permissions being challenged, (iii)
the lack of suitable real estate for large store instalments, and
(iv) the non-competitive behaviour of incumbent retail
Incumbent retail groups introduce non-compete clauses in their
contracts for the sale of land which prohibit estate buyers from
starting a competing activity. The contracts also provide for
priority rights which allow retail groups to buy back their
commercial real estate. Such clauses may last up to 50 years. As a
consequence, the level of concentration in various customer
catchment areas is high as a retail group will often have very few
The Authority thus recommends removing the contractual obstacles
to the movement of independent stores across retail groups.
Contractual terms which impede such movement include:
the excessive duration of contracts;
the existence of overlapping terms in the various agreements
entered into by affiliate stores with their retail group, which
have the effect of binding that store to that specific retail
the requirement for affiliate stores to pay deferred entry
rights amounting to a percentage of the store's turnover and
which are payable upon termination of the contract. This
effectively dissuades the store from leaving the retail group at
the end of the contract; and
post-agreement non-compete and non re-affiliation clauses,
which have the effect of preventing an affiliate store that decides
to leave the retail group from setting up an activity in
competition with its former group or from joining a competing
In practice, the Authority recommends (i) that non-compete
clauses and priority rights in contracts for the sale of land be
suppressed, (ii) that the duration of affiliation contracts be
limited to five years, (iii) that post-agreement non re-affiliation
and non-compete clauses be limited and (iv) that priority rights be
If these recommendations are not followed, the Authority will
encourage legislative intervention.
In its second opinion the Authority examines "category
management" agreements between suppliers and retailers, under
which the supplier (the "category captain") provides
commercial advice to one or more of its distributors regarding a
specific category of product.
The Authority considers that category management agreements may
reduce competition in the sector. The category captain
sometimes participates in the introduction and positioning of
products in stores and may take advantage of this privileged
relationship with the retailer to influence the assortment and the
merchandising of its products to the detriment of its competitors,
especially the smaller ones. In addition, the category
captain could be tempted to denigrate its competitors' products
when introducing them to the retailer. These agreements also
allow the parties to exchange commercially sensitive information on
their respective commercial strategies.
Finally, the Authority identified a risk of collusion between
retailers when the same supplier is a category captain for several
retailers as he could serve as a central actor in a cartel by
facilitating the exchange of information between retailers.
The Authority thus recommends that a best practice code be
adopted under the supervision of the French commercial practices
review panel ("Commission d'examen des pratiques
commerciales"). In the meantime, anticompetitive
practices should be assessed and prevented under the existing
prohibition of abuse of dominant position and collusion
In order to improve transparency, the Authority recommends that
the appointment of a category captain be made public, for example,
through a tender for applications. In addition, the Authority
recommends that category management agreements clearly set out each
party's specific responsibilities.
To view Community Week, Issue 501; 10th December 2010
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
By 27 December 2016, the Croatian Parliament needs to implement the Directive 2014/104/EU on antitrust damages actions, which is expected to streamline the procedure for private individuals and businesses to sue for damages...
The European Commission recently published its preliminary report on the E-commerce Sector Inquiry, identifying potential competition concerns in cross-border e-commerce of digital content and consumer goods.
The German government has recently published a bill that would significantly amend the criteria for determining whether an M&A transaction is subject to German merger control.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).