France: The "Macron" Bill Was Adopted: What Changes In The Suppliers/Distributors Relationships?

Last Updated: 23 October 2015
Article by Alexandra Berg-Moussa, Renaud Christol and Elsa Pinon

The bill for economic growth and activity ("Macron bill") was adopted on July 10, 2015, after article 49-3 of the French Constitution was used on three occasions. This bill modifies substantially the relationships between the players in the distribution sector.

Indeed, the Macron bill regulates the way distribution networks are organized, and modifies the relationships between suppliers and distributors.

Regulation of distribution networks

The bill sets out a framework for every "contracts concluded between, on the one hand, an individual or a corporate entity composed of retailers (...), and on the other hand, any person operating, on its own behalf or on behalf of another party, at least one retail store, having as common purpose the operation of one of these stores and containing clauses likely to limit the freedom to exercise by the operator of its commercial activity" [1], in other words, agreements relating to commercial real estate, purchases and affiliations between large retailers and store managers.

The French competition Authority ("the FCA") recommended, in two opinions in 2010[2] and 2012[3], an alignment of these contracts' durations and a limitation of their duration to five years. The FCA also called for a harmonization of the termination methods of the different contracts constituting the relationship between the head-end and a member of the network.

The FCA was partially heeded as the Macron bill creates a principle of common termination and expiration date for every contracts constituting the relationship: if a contract is terminated, then the other contracts are also automatically terminated. However, in accordance with the wishes of some retailers, no limitation of the duration of these contracts is set forth by the bill.

The bill also establishes a principle of interdiction of post-contractual non-re-affiliation and non-compete clauses[4]. It will however be possible to derogate from this principle if four cumulative conditions are met: (i) the clause must concern goods and services competing with the ones object of the contract, (ii) it is limited to sites and premises from which the retailer operates during the contract, (iii) it is essential for the protection of secret, specific and substantial knowledge transmitted in the framework of the contract, and (iv) it does not last more than one year after the expiration or termination of one of the contracts constitutive of the relationship.

All these provisions will apply within one year pursuant the enactment of the bill.

Suppliers/distributors relationships

Payment terms. The Macron bill amends the provisions of Article L. 441-6 of the French Commercial Code, confirming that « as of principle », the payment terms agreed upon between the parties to pay the sums due may not exceed 60 days as of the invoice date. The maximum of "45 days end of the month from invoice date" becomes a derogatory maximum, applicable "as long as such payment terms are expressly agreed in the contract and provided they are not grossly unfair to the creditor".

In addition, "for the sale of products or the provision of services falling under sectors presenting a particularly notable seasonable nature" (which list of sectors shall be subject to a further decree), the parties may agree on payment terms "that should not be more than the maximum payment terms applicable in 2013 as set forth in an agreement concluded under section III of article 121 of bill n° 2012-387 of March 22, 2012 regarding simplification of the law and administrative processes" (the derogatory sector agreements), provided that such payment terms are expressly agreed in a contract and provided they are not grossly unfair to the creditor.

An annual single agreement specific in the B2B sector. The content of the bill was amended in the course of the discussions between the National Assembly and the Senate. Whereas it was initially contemplated to purely exclude the relationships between suppliers and wholesalers and more generally with all types of B2B distributors from the scope of the annual single agreement of article L. 441-7 of the French Commercial Code, the creation of a specific annual single agreement was finally preferred.

In this respect[5], an annual single agreement still needs to be concluded between a supplier and a "wholesaler", understood as being "any individual or entity which, for professional purposes, buys products to one or several suppliers and resells such products, as its main activities, to other dealers, wholesalers or retailers, processors or any other professionals which supply themselves for the purposes of their activities" as well as "the purchasing or referencing bodies of such wholesalers".

The deadline (March 1 of each year) and format of this annual single agreement remain the same. The annual single agreement shall also include the sales conditions (including the price reductions), commercial cooperation services and "ex other services". However, and this is the specificity, the "wholesaler" annual single agreement shall not necessarily include the supplier's price list/scheme or the way such price list/scheme may be consulted, and the parties are free to indicate in the agreement, the types of situations and conditions under which the sale may be applied different conditions. The Macron bill introduces room for manoeuver inter alia on the possibility and manner to modify prices during the year, which was a major request of the players in this sector. Non-compliance with the requirement to conclude a compliant « wholesaler » annual single agreement within the timeframe may trigger the same sanction as the one set forth for the annual single agreement of article L. 441-7 of the French Commercial Code, i.e. an administrative fine of up to 75,000 € for an individual, and up to 375,000 € for a legal entity (which amount can be doubled in case there is a new non-compliance within 2 years from the date the first administrative sanction decision became final).

Noteworthy, the notion of « wholesaler » excludes « companies or group of individuals or companies which directly or indirectly exploit one or more retail stores or which act as purchasing or referencing bodies for retail store companies ».

Private labels are confirmed as entering into the scope of the « review clause » of article L. 441-8 of the French Commercial Code, which now imposes that a price renegotiation clause be inserted in the event of a fluctuation of the price of raw materials and agricultural materials in the contracts "whose performance term exceeds three months and which concern the design and production of the products mentioned in the first paragraph, according to the terms and conditions meeting the purchaser's special needs".

The Macron bill increases the existing sanction of the restrictive practices of Article L. 442-6 of the French Commercial Code. In this respect, the civil fine of 2 million euros may, as it was before, be brought to 3 times the amounts that were unduly paid or (and this is new), in a manner proportionate to the advantages arising from the sanctioned practices, to 5% of the turnover realized in France by the author of such practices, during the last financial year preceding the one during which the relevant sanctioned practices were implemented./.

Footnotes

[1] New Article L. 341-1 of the French commercial code.

[2] Opinion n° 10-A-26 of 7 December 2010 on affiliation agreements of independent retailers and the terms for acquiring commercial land in the food retail sector.

[3] Opinion n° 12-A-01 of 11 January 2012 concerning the competitive environment in the food retail sector in Paris.

[4] New Article L. 341-2 of the French commercial code.

[5] New article L. 441-7-1 of the French Commercial Code.

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.

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