UK: The French Macron Law And The Framework Of Commercial Relations

Last Updated: 1 October 2015
Article by Emmanuelle van den Broucke and Sara Pomar

Promulgated on August 6, 2015, the law to promote growth, activity and equal economic opportunity, known as the "Macron law", provides for a series of provisions aimed at redressing the balance in commercial relations, notably in the distribution and hotel industry sectors.

Distribution networks

With a view to ensure a better balance in the contractual relation between a retail store operator and the distribution network to which he is affiliated, the Macron law introduces two new Articles L.341-1 and L.341-2 in the French Commercial Code. Under the first Article, all the agreements entered into between a distribution network and a retail store operator having as common purpose the operation of the store must provide for a common termination date. It is also stipulated that the termination of one of these agreements results in the termination of all the agreements.

According to the Constitution Council, this new system is intended to "put an end to the contractual practices of commercial distribution networks which conclude various agreements with retail store operators affiliated to them which do not have the same duration, the same termination date or the same termination conditions, so that this results in an artificial extension of the agreement which can be seen as a restriction to the retail store operators' entrepreneurial freedom".

It remains to be seen what kind of distribution networks are covered: Article L.341-1 specifies in this respect that the common termination date and termination conditions apply to the agreements concluded either by a legal entity regrouping certain types of traders, or by a person making available a trade name, brand or sign.

Therefore, the scope of the new Article is relatively broad and covers agreements such as the affiliation agreements between retail stores and group purchasing organization, or franchise or brand agreements. However, for the new system to apply, the contractual whole has to include clauses likely to limit the operator's commercial freedom, such as for example exclusivity obligations. This would thus exclude from the new system the selective distribution networks which do not impose such clauses on their approved retailers.

Furthermore, Article L.341-2 limits the duration of the post-contractual non-competition or non-affiliation clauses to one year after the end of the agreement, under certain conditions.

Finally, it should be noted that the new system applies after the expiry of a period of one year as from the promulgation of the law, which brings us to August 6, 2016. During this period, it is necessary to make the existing agreements compliant therewith.

Restrictive practices.

The civil fine currently capped at €2 million to sanction the restrictive practices referred to in Article L. 442-6 of the Commercial Code, such as submitting the commercial partner to significant imbalance, can now reach 5% of the turnover excluding taxes realized in France by the offender. This significant modification is intended to sanction more severely the group purchasing organizations or major brand distribution companies for which the 2 million cap may have had an insufficient deterrent effect.

Mass distribution supply.

The obligation to include in supply agreements a price renegotiation clause to take into account the price fluctuations of agricultural and food commodities has been extended to the supply of distributor brand products (Article L. 441-8 com. c.).

Hotel-Online travel agency relations.

In order to prevent certain practices imposed by online travel agencies, such as rate parity clauses, the Macron law provides, on penalty of a fine, that agreements with hotels can only be concluded in the form of a written mandate as referred to in the Civil Code. This will reinforce the hotel's position as principal and allow it to maintain the freedom to grant customers any rebate or tariff advantage of any kind whatsoever.

The innovations of the French Macron law in competition law

The new law makes certain substantial adaptations to the procedures before the French Competition Authority. However, the Constitutional Council quashed the structural injunction procedure in the retail sector in metropolitan France, which, according to the bill, could have been set up by the Competition Authority independently from any abuse of a dominant position.

Settlement in procedures relating to anti-competitive practices.

The "no challenge" procedure is replaced by a settlement procedure which offers greater predictability to companies with regard to the level of the reduction which may be granted to them. It is now stipulated that when an organization or company does not challenge the objections of anti-competitive practices notified to it by the Competition Authority, the general case handler may submit to it a settlement proposal stating the minimum and maximum amount of the contemplated financial penalty. If, within a period fixed by the general case handler, the organization or company agrees to the settlement proposal, the general case handler proposes to the Competition Authority to order the financial penalty within the limits fixed by the settlement. However, the improved predictability of the penalty will only be effective if the range proposed by the company is relatively limited.

Merger review periods by the Competition Authority.

The Macron law allows the Competition Authority to suspend the review period of a merger when (i) the parties to the notification have failed to inform it of a new fact upon the occurrence thereof, or (ii) have failed to communicate to it all or part of the information requested during the formal review procedure within the given deadline, or (iii) when third parties have failed to communicate to it the requested information for reasons attributable to the parties having made the notification. The expiry of this suspension remains vague insofar as the new law merely indicates in this respect that these periods will resume "upon the disappearance of the cause justifying the suspension". It is to be hoped that this will not deprive of all efficiency the pre-notification procedure which today allows the parties to ensure in advance that their file is complete and to organize the closing date of their operation as from the formal notification date.

Anti-competitive practice with a local dimension.

The Competition Authority can now reject a referral when the facts involved can be treated by the DGCCRF (administrative body of the Ministry of Economy) and therefore have a local dimension. It should be recalled that the DGCCRF is competent to rule on practices which affect a local market (without of course affecting trade between Member States) and provided the turnover realized in France for each of the authors of the anti-competitive practice does not exceed €50 million.

Client sharing between competitors always has an anti-competitive object, regardless of the number of clients shared

In Romania, the implementation of a private pension insurance system made it compulsory for certain people to join one of the private pension funds approved by the State. In the event a person joined several funds, a procedure to allocate the "duplicates" was provided: clients were to be allocated "randomly" and proportionally to each approved fund reflecting the competition "landscape". Thereafter, some funds took concerted action to allocate the duplicates (who represented less than 1.5% of the market) so as to circumvent the legal allocation system.

The Romanian competition authority sanctioned this anti-competitive concerted action. It is in the context of an appeal against this decision that the Appeal Court decided to stay proceedings and ask the ECJ whether, in the case of a client allocation practice, the number of clients allocated could have an impact on the characterization of the practice.

In a decision of July 16, 2015, the ECJ answered that agreements to share clients are one of the most serious restrictions to competition and constitute a concerted practice with an anti-competitive object, the number of clients affected by the agreement being irrelevant to avoid this characterization.

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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