Towards a comprehensive reform of the law on abusive practices under Article L. 442-6 of the French Commercial Code

The 27 February 2019

The French law on abusive practices set out in Article L. 442-6 of the Commercial Code has come under considerable criticism over the years. Additions of provisions have led to deep layers of disparate rules many of which have fallen into disuse. On the other hand, those which remain relevant, such as point I, 5° which prohibits the termination of established commercial relations without sufficient notice, have proved to be an endless source of inefficiency and perverse effects. At long last, the time for the long-awaited reform appears to have come. In the framework of the ordinances authorized under the EGalim Law, the DGCCRF has issued a draft for consultation for a complete overhaul of Article L. 442-6 of the Commercial Code.

I. Substantive reforms
1. Radical simplification by way of repeal.

Instead of the twenty or so practices currently referred to in parts I and II of the Article L. 442-6 of the Commercial Code, the Administration has proposed to refocus this text around three practices: two “umbrella” practices: “obtaining a benefit without consideration or which is manifestly disproportionate” (new Article L. 442-1, I, 1°) and significant imbalance (new Article L. 442-1, I, 2°), and the more specific practice of sudden termination of established commercial relationship (new Article L. 442-1, II). A relaxation of the conditions for recourse to the first two practices is also to be noted: the condition relating to the existence of a trading partnership is no longer mentioned. While the courts interpreted this notion restrictively and excluded from subjection to a significant imbalance the initial entry into commercial relations (see CA Paris, 20 May 2018, LawLex18820, 6 July 2018, LawLex181046, contra, CA Paris, 11 Jan 2019, LawLex194) or certain contracts not reflecting a real commercial partnership (Court of Cassation, 3rd civil chamber, 15 Feb. 2018, LawLex18287, commercial lease, CA Paris, 16 March 2018, LawLex18523, financial lease), those provisions could now be relied upon without having to show the existence of that condition.

2. Capping of the required notice period to one year in the event of termination of established commercial relations.

In addition to the two umbrella practices intended to bring together all the practices previously referred to in Articles L. 442-6, I and II, the termination of established commercial relations is the only individual practice that has not been simplified. The DGCCRF proposes to set a one-year notice period “in the event of a dispute between the parties regarding the notice period” (new Article L. 442-6, II). As there has been a great deal of uncertainty as to notice periods and the risk involved, there would now be an absolute limit, with the introduction of a one-year limit applicable regardless of the duration of the relationship. This proposal provides greater legal certainty and should help to avoid lengthy notice periods, which can be of up to three years (CA Paris, 7 Jan. 2015, LawLex1522, CA Limoges, 18 Feb. 2015, LawLex15227). It allows more adaptability and greater efficiency in commercial relations and gives French law a more competitive edge. Indeed, as it stands, the law makes it impossible to terminate a contract without notice with partners that are no longer competitive and leads to a loss of efficiency of the economy in general. Long notice periods under French law also mean that large companies prefer to make their contracts with foreign distributors subject to Swiss law with jurisdiction conferred on Swiss courts or arbitrators to the detriment of the influence of French law and the French courts.

A possibility might be to limit the scope of the provision to the sale of products or services in France to avoid any adverse effect on the incentive for companies to choose French law and the jurisdiction of the French courts for the resolution of disputes.

II. Procedural reforms
3. Broader options for victims.

New Article L. 442-2 of the Commercial Code focuses on the procedures for the implementation of legal action and the sanctions for restrictive practices. The new wording would allow victims to formulate the same demands as those of the Minister of the Economy and the Public Prosecutor’s Office, with the exception of the imposing of a civil fine. Victims would now be able to ask the court for an injunction for the cessation of the practices, the voiding of unlawful terms or contracts and the restitution of undue benefits (new Article L 442-2, II, para. 2). Giving victims more options is to be welcomed.
4. Strengthening of sanctions. The Administration proposes to amend the ceiling of the civil fine. It would now be “the highest” of the following three amounts (and no longer either one or the other of those amounts at the court’s discretion): EUR 5 million, three times the amount of unduly received /obtained benefits/services, or 5% of pre-tax turnover achieved in France. The maximum amounts of the sanction seem very high. Many of the respondents to the DGCCRF’s market test called for moderation, and particularly that account be taken of companies’ ability to pay, as is the case for anticompetitive practices.

III. Issues to be clarified or supplemented
5. The need to maintain provisions for off-network resales.

Current Article L. 442-6, I, 6° effectively protects selective distribution networks against non-network resellers (see especially Court of Cassation, commercial chamber 16 Feb. 2016, LawLex 16387, CA Paris, 23 Jan. 2019, LawLex19108). This provision is not covered under the two umbrella practices and ought to be preserved.

6. Obtaining of an advantage, prerequisite for receiving orders without proportionate written commitment.

This practice could be covered under benefits without consideration or which are manifestly disproportionate per new Article L. 442-1, I, 1°. However, some suppliers think that it would be worthwhile keeping it as is, notably due to its highly dissuasive nature and to the likelihood of circumvention that could result from it only being subject to review through the benefit without consideration or manifestly disproportionate route. It is in effect likely that in the event of the suppression of current Article L. 442-6, I, 3°, undertakings wishing to obtain large advance payments before entering into a commercial relationship without providing a volume commitment will rely on consideration that is difficult to quantify and therefore more difficult to challenge than under the current provision.

Commentaires (0)

Leave a Reply