Paris Antitrust & Distribution Newsletter – June 2023

SUMMARY

The following short articles provide a short summary of subjects of interest particular to French law which use to French and foreign business in the food, drink and farming sector, when items are marketed in France

These short articles supply a broad introduction of a few of the essential problems that might occur and do not make up legal suggestions. The points dealt with in these short articles might go through additional analysis by BCLP groups.

ANOTHER NEW FRENCH LAW BRINGS CONSIDERABLE MODIFICATIONS TO INDUSTRIAL RELATIONS IN BETWEEN SUPPLIERS AND PROVIDERS

On March 22, 2023, the French National Assembly embraced a law called “Egalim 3” which intends to reinforce the balance in industrial relations in between providers and suppliers. Given the intricate nature of this policy and the reality that the next set of trade settlements begin in a couple of months, French and foreign financial operators in the food, drink and farming sector that market their items in France will rapidly require to get to grips with what will be needed.

This brand-new law finishes 3 previous guidelines (“Egalim 1” law of October 30, 2018, the “ASAP” law of December, 7 2020 and the “Egalim 2” law of October 18, 2021) looking for to bring back a balance in between providers and suppliers by:

1. making sure that farming manufacturers receive a proper level of reimbursement;
2. combating cost deflation; and
3. streamlining, clarifying and enhancing the legal structure to enhance industrial relationships.

These guidelines concentrated on:

• Contractual relations in between providers and suppliers, specifically through arrangements on food and family pet food, customer items (i.e. those specified as non-durable items with high frequency and reoccurrence of intake such as food, household, health and charm items offered in supermarket) and “merchant’s brand name” items;
• Pricing practices (an increase in the limit of sales loss to 10% and execution of a structure for promos).

The existing legal structure has actually nevertheless needed even more adjustment to reduce the effect of Covid-19 and the war in Ukraine “intensifying a basic increase in the rates of lots of basic materials”, however likewise to reinforce and to attend to some unpredictabilities of previous laws.

THE “EGALIM 3” LAW AS A RESULT BRINGS CONSIDERABLE MODIFICATIONS AND EXPLANATIONS TO THE ALREADY DENSE LEGAL STRUCTURE APPLICABLE TO COMMERCIAL RELATIONS, INCLUDING THE FOLLOWING:

1. The arrangements of the title 4 of the French Commercial Code governing industrial openness and restricted practices in between specialists are now public law guidelines

The arrangements given public law status by the “Egalim” 3 law are:

1. The preparing of the basic conditions of sale;
2. The settlement and formalization of industrial relationships;
3. The logistic charges;
4. The specific guidelines on farming items and foods items;
5. The restricted practices in between specialists, consisting of those called “restrictive practices” and the “other prohibited practices.”

Consequently, French and foreign providers and suppliers will not have the ability to derogate from the jurisdiction of the French courts and the application of French law once the legal items are marketed in the French area.

2. The program of logistic charges is enhanced

Logistic charges are punitive damages enforced in case of non-compliance with logistic arrangements of the agreement in between the provider and the purchaser (shipment time, and so on.).

Following regular abuses by suppliers, the “ASAP” law of 2020 restricted the imposition of logistic charges, followed by the “Egalim 2” law of 2021 under which failure to abide by the requirements of these charges makes up a “restrictive practice” most likely to engage the obligation of its author prior to the French civil or industrial court.

The “Egalim 3” law strengthens this appropriate structure by offering that:

1. The mutual logistics commitments to which the celebrations concur are set out in a different written contract;
2. Penalties troubled the provider by the supplier are topped at 2% of the worth of the items of the worried item classification;
3. No charges can be enforced after one year from the event of the breach of agreement;
4. Distributors and sellers have a responsibility to interact, on a yearly basis, the quantity of charges enforced and paid to the Directorate-General for Competition, Consumer Affairs and Prevention of Fraud (DGCCRF). Any breach undergoes an administrative fine of approximately €75,000 for a specific and €500,000 for a legal individual – which can be doubled in case of repeating.

3. The structure for promos and the limit of sales loss is extended and modified

To secure providers from value-destroying practices of big sellers and to secure the reimbursement of farmers and others who form part of the circulation chain such as wholesalers, the “Egalim 1” law of 2018 presented a structure which uses to food and family pet food as part of a two-year experiment, extended in 2020 by the “ASAP” law up until April 15, 2023. This consists of:

1. The limit of sales loss that consists to offer the items by using a 10% boost to the reliable purchase cost of the items (i.e. this cost represents the net cost of the item – monetary benefits (discount rates, refunds) and barrel and other particular taxes and transportation cost);
2. The structure for promos that forbids promos (a) with a worth surpassing 34% of the asking price to the customer or a boost in the comparable amount and (b) in surpassing 25% of the volume or turnover figured out ahead of time by the celebrations to the agreement.

The “Egalim 3” law brings 2 modifications: 

1. The limit of sales loss structure stops to use to vegetables and fruits and is extended up until April 15, 2025;
2. The structure of promos will use to all customer items, consisting of household, health and charm items (and not just to food) from March 1, 2024. The structure is extended up until April 15, 2026.

4. The existing structure is reinforced in the lack of an arrangement in between providers and suppliers by March 1

Under French law, the agreements in between providers and suppliers need to be concluded no behind March 1 of each year. Failure to abide by this requirement is punishable by a fine of approximately €75,000 for a specific and €375,000 for a legal individual, doubled in case of repeating.

The “Egalim 3” law supplies information and support where the celebrations have actually not concluded their agreement by March 1:

1. Firstly, to fix the problem where celebrations continue their industrial relationships under damaging prices conditions for the provider, the law presented a speculative step for a duration of 3 years, under which the provider might; 
   1. Terminate, without notification, any business relationship with the supplier in the lack of a freshly formed agreement. In this occasion, the supplier cannot hold the provider accountable on the basis of the restriction of unexpected termination of the business relationship; or
   2. Request the supplier the application of a notification duration.
2. Secondly, for customer items just, the law strengthens the sanction sustained for non-compliance with the March 1 due date by: 
   1. Increasing the quantity of the fine approximately €200,000 for a specific and €1,000,000 for a legal individual, doubled in case of repeating;
   2. Creating a brand-new “restrictive practice” enabling to engage the liability of the celebration who breaches the responsibility of “good faith” that caused the non-conclusion of the agreement on  March 1.

5. Prohibition of prejudiced practices is reached customer items

Discriminatory practices include using or getting, with concerns to the other celebration, prejudiced rates, payment durations, sales conditions or sales or purchase terms which are not validated by genuine factors to consider.

The restriction of prejudiced practices, which was gotten rid of from French law in 2008, was reiterated with the “Egalim 2” law of 2021 for legal relations worrying food and pet food. The “Egalim 3” law for that reason extends its scope of application.

THE FRENCH COMPETITORS AUTHORITY WHEN ONCE AGAIN SANCTIONS A PROVIDER AND ITS WHOLESALER-IMPORTERS FOR CARRYING OUT ANTI-COMPETITIVE EXCLUSIVE IMPORT RIGHTS IN FRENCH GUYANA AND GUADELOUPE

On March 8, 2023, a Champagne provider and its 2 wholesaler-importers were fined €283,000 by the French Competition Authority (The Authority) for keeping special import rights in French abroad areas. This is the tenth choice rendered by The Authority on these practices considering that the “Lurel” law of 2012 produced this French-particular anti-competitive practice.

CONSIDERING THAT THE LUREL LAW, EXCLUSIVE IMPORT AGREEMENTS IN OVERSEES COLLECTIVES ARE FORBIDDEN UNDER COMPETITORS LAW

The Lurel law of December 22, 2012, in force from March 2013, produced a brand-new anti-competitive practice particular to France to restrict the “high cost of living” scenario in the abroad areas.

The law forbids arrangements or collective practices with the things or result of giving special import rights in the abroad areas on customer items, consisting of food and alcoholic and non-alcoholic drinks. This restriction uses to the areas of Guadeloupe, Reunion, French Guyana, Martinique, Mayotte, Saint-Barthélemy, Saint-Martin, Saint-Pierre-et-Miquelon and Wallis and Futuna.

This structure was finished by a law of December 3, 2020, that forbids wholesaler-importers and sellers from using prejudiced conditions to business in which they do not hold a share of the capital, worrying service or products for which there is a de facto import exclusivity scenario.

Companies that do not abide by these requirements go through a charge of approximately 10% of around the world turnover.

THE UNIQUE IMPORT RIGHTS APPROVED WERE THE OUTCOME OF CIRCULATION CONTRACTS AND A BODY OF PROOF

In this case, a Champagne manufacturer solely counted on an importer-wholesaler in Guyana (the business Sodis Chrismay) and on another importer-wholesaler in Guadeloupe (the business Sodipa) for the circulation of its drinks.

The Authority discovered that, in both of these areas, the provider had actually executed restricted exclusivities: 

• For the very first duration of the violation, the exclusivity was clear considering that it was stated in a special circulation agreement.
• For the staying duration of the violation, The Authority thought about, in the lack of specific legal arrangements, that the exclusivity was the outcome of a body of severe, accurate and concordant proof confirming the typical will of the celebrations to continue to use the exclusivity.
• The proof included: 
  1. declarations and internal files;
  2. prices files, exchanges and declarations mentioning that a “Distributor and Exclusive discount rate” had actually been given;
  3. rejections to offer by the provider to prospective clients; and
  4. a system executed by the provider to motivate regional purchasers to go through the special importer by restricting the funding of marketing deals of suppliers in the French city, to promote sales through this circulation channel.

DISTRIBUTORS AND SUPPLIERS MUST GUARANTEE THAT THEIR COMMERCIAL PRACTICES IN THE ABROAD AREAS ARE NOT FORBIDDEN

This brand-new sanction highlights the requirement for providers and suppliers active in the circulation sector to be watchful concerning their activities in the abroad areas. In specific, it needs foreign business marketing their items in these areas to be especially mindful, as this restriction is a French uniqueness.