The practices of large supermarket retailers are at the centre of an investigation launched by the DGCCRF (the General Directorate for Competition Policy, Consumer Affairs and Fraud Control) relating to their annual negotiations with suppliers. Pursuant to the provisions of article L.441-7 of the French Commercial Code, the requisite annual contract resulting from negotiations between suppliers and retailers must be finalized before the end of February.
The DGCCRF investigation into ongoing commercial negotiations follows complaints filed by suppliers accusing the large supermarket retailers, under the pretext of higher operational costs, of imposing the payment of a significant amount prior to entering into 2016 negotiations. Through the imposition of this payment, the retailers implied that those who did not pay would be disqualified from the negotiations. Furthermore, details of how the payment was calculated were allegedly not given to suppliers.
All but one of the group of large supermarket retailers tried to institute this specific practice, which may be yet another consequence of the ongoing price war exacerbated by the oligopolistic nature of the large retailer market in France, particularly in the food and beverage sector, as well as the creation of the supermarket groups’ centralized purchasing bodies. For more than a decade, the commercial referencing practices, unjustified “commercial cooperation” and contractual imbalances imposed by the large retailer chains upon their suppliers have come under fire (and resulted in significant fines) by the administration, the courts and the legislature. In 2015 alone, the Trade Negotiations Observatory established by the national association of food industries (ANIA), received more than 260 complaints from suppliers of all sizes related to illegal demands from large supermarket retailers.
Pursuant to article L.442-6 II (b) of the French Commercial Code, all practices consisting of imposing conditions prior to negotiations are considered abusive. The mandatory payment prior to starting negotiations with suppliers seems therefore to be unlawful and could be prosecuted by the French Ministry of Economy. The retailers concerned may be playing with fire since they could be liable to pay a fine of up to 5% of their turnover under the new provisions of the “Macron law” of 6 August 2015.
In its press release from 12 February 2016, the French Government warned large supermarket retailers that it may consider tightening the law governing commercial negotiations if the consequences thereof for 2016 were to result in reduced prices received by suppliers in struggling industries, particularly those of agricultural and dairy products.