French Law 2015-990 for economic growth and activity, known as the “Macron Law”, entered into force on 6 August 2015.
The Macron Law introduces some major innovations to French commercial and distribution law. The main legal changes include amendments designed to make it easier to change distribution networks, the development of a specific single commercial agreement for wholesale distribution, stricter rules in relation to maximum payment terms, increased penalties for restrictive commercial practices, and measures to encourage e-invoicing.
For our previous article on the changes introduced by the Macron Law to French Competition and Merger Control Law, please see here.
- Termination of distribution contracts
There has been growing concern around the manner in which members of a given distribution network (e.g. distributors, retail stores etc.) can, in practice, find themselves “locked” into a relationship with their supplier.
When joining a distribution network, retailers generally have to sign a significant number of contracts including an exclusive purchase commitment and post-contract non-compete clauses. These contracts do not always have the same term or termination conditions. As the French Competition Authority noted, this contractual misalignment may create an obstacle to independent retailers joining competing retail chains.
The Macron Law introduces a number of new standard contractual provisions to be inserted into distribution contracts when these contracts provide for the right for the distributor to use trademarks (“enseigne”) belonging to the supplier for retail purposes in conjunction with an exclusive purchase commitment. The new law shall apply to such types of contracts for product distribution (including franchises and selective distribution networks) and will also apply to contracts with a central purchase/negotiation entity.
- Contractual term
As amended by the Macron Law, article L. 341-1 of the French Commercial Code (“FCC”) states that the same end date must be prescribed for all contracts entered into between the distribution network head and a given member of the distribution network where they include clauses that may potentially limit that member’s freedom to carry on the commercial activity concerned. Subject to further confirmation as to the interpretation of the Macron law, the same end date could be provided either as a fixed term or as a result of the lapse of the contract.
In addition, under the new changes the termination of one contract will automatically terminate the others.
- Post contractual restrictions
Furthermore, as amended by the Macron Law, article L. 341-2 of the FCC provides that post-contractual non-compete clauses that restrict the commercial freedom of the former member are prohibited.
However, post-contractual non-compete clauses may nonetheless be valid provided they abide by a certain number of conditions. These conditions mirror those provided by EU Regulation 330/2010 on vertical restraints, as also applicable under French law, namely:
- the obligation relates to goods or services which compete with those of the contract;
- the obligation is limited to the premises and land from which the entity has operated during the contractual period;
- the obligation is essential to protect know-how transferred during the contract;
- the duration of the obligation is limited to a period of one year after termination of the agreement.
Nevertheless, it is not clear how tacit renewal clauses will be perceived under the Macron Law, and whether they might be considered contrary to these provisions.
These new provisions should enter into force on 6 August 2016 and they are not limited to contracts in the retail food sector. It is not clear whether they should apply to international distribution contacts but we expect that the Direction générale de la concurrence, de la consommation et de la répression des fraudes (“DGCCRF”) will take the view that the Macron Law applies as long as distributors operate on the French market. Any current distribution contracts should therefore be reviewed and amended, if need be, by August 2016.
- Single commercial agreement
As a reminder, suppliers and distributors have to enter into a single annual agreement by 1 March of each year providing for (i) the applicable terms and conditions including the reference price list with the individual agreed prices further to negotiations (ii) the conditions pertaining to commercial cooperation services and (iii) the conditions covering any other services provided to enhance the relationship. This is known as the single commercial agreement (the “convention unique”) which can cannot be further amended during the year.
These provisions were made applicable to wholesale distribution, i.e. distributor deals with professional clients or retailers under previous statutory law. The Macron Law creates a specific regime for wholesale activities. A single annual contract must still be executed by 1st March each year, but it does not have to provide for the general price list for the products. Suppliers and wholesalers can now agree on an upfront specific price without reference to any general price list and/or they can agree on a price revision mechanism applicable throughout the year.
- Payment terms in commercial contracts
The new article L. 441-6 of the FCC establishes the principle that payment terms in B-to-B contracts may not exceed 60 days as from the date on which the invoice is issued.
Nonetheless, it remains possible to contractually agree upon payment terms of 45 days “end of the month” as from the issuance of the invoice (i.e. invoice is payable 45 days after the end of the month in which it was issued). However, this option constitutes an exception which can only be provided when this term is specifically mentioned in contracts and is not “grossly unfair to the creditor”. The latter suggests that the 45 day option might be challenged by the debtor on a case-by-case basis.
- Penalties for restrictive commercial practices
Established French law prohibits so-called restrictive commercial practices in all commercial contracts. These include infringements such as terminating a contract with insufficient prior notice, introducing “significant imbalances” between the respective rights and obligations of parties and obtaining payment for services that in fact have no substance.
The party that imposes such practices is liable to pay damages but also a fine of up to 2 million euros or three times the amount of undue payments received in connection with the illegal practices. The Macron Law introduces an additional cap, equal to 5% of the total turnover generated in France by the infringing party, which is potentially greater than the current fine cap of 2 million euros or three times the amount of the undue payments received.
Within 8 months, the French Government is expected to enact an Ordinance to oblige companies to accept invoices issued in dematerialised (electronic) form. This will apply to ongoing contracts but the new regime will include interim measures by reference to the size of companies concerned.
- Online hotel reservation platforms
Finally, the Macron Law also represents the latest stage in an ongoing saga revolving around the relationship between hotels and online hotel reservation platforms, by prohibiting so-called price-parity clauses. According to such clauses, hotels were obliged to grant equivalent price conditions across all platforms including their own websites. The Macron Law provides that hotels must enter into a “mandate” contract and that they can control their own pricing and discounts, notwithstanding any contractual clauses they may have entered into. Hotels can therefore offer the prices they want, through any channel including their own website, notwithstanding the prices offered by online hotel reservation platforms.