The new French Protection Consumer Law (i.e. “Loi Hamon”) was adopted by the French National Assembly on February 13, 2014 and was promulgated on March 17, 2014. This new law has many implications for businesses, notably concerning distribution agreements.
According to Article L. 441-7 of the French Commercial Code, suppliers and distributors engaged in a long-term business relationships must sign each year an annual distribution agreement setting out the specific terms and conditions for the supply of products in the relevant year and, if any, the services mutually rendered by the parties in connection with the distribution of the products.
The annual agreement may be either a single contract or a framework agreement completed by several individual sales contracts. It must be concluded before March 1st of each year or within two months from the starting point of the period of commercialization of the goods or services.
The new consumer protection law amends the rules concerning the contents of the annual agreement and fixes strict rules for its negotiation.
Under the new provisions of Article L. 441-7, paragraph 7 of the French Commercial Code, the supplier must communicate its general terms and conditions of sale to the distributor at the latest three months before the deadline of March 1st (i.e. November 30th) or two months before the starting point of the commercialization period for goods or services subject to a particular cycle of marketing. In addition, the price agreed between the parties apply at the latest on March 1st, and all the clauses in the agreement can enter into force no earlier or subsequent to the effective date of the agreement. The mandatory schedule aims to put an end to a practice where certain clauses of the contract are applied retroactively to January 1st, regarding the commercial terms negotiated for as discounts for example, while the new distributor price was taken into account as of the date of signature of the agreement.
Under the new Article L. 441-7 1° of the French Commercial Code, price reductions on the supplier’s standard prices must be explicitly stated in the annual agreement. The aim is to put an end to practices by some distributors to lighten the content of the agreement or to include such discounts granted by the supplier in the unit price of products, whereas they should appear explicitly in the agreement.
The new Article L. 441-7 1° also sets out the conditions under which the supplier undertakes to grant promotional benefits on its products or services during the year to consumers. These conditions are now required to be set out in mandatory agreements with the distributor or service provider. The amount and the nature of promotional advantages as well as the period during which the advantages are granted and their conditions of implementation must be defined in specific agreements with the distributor.
A new Article L. 441-8 of the French Commercial Code now specifies that sales agreements concerning agricultural and food products of a duration exceeding three months must include a clause on terms of renegotiation for the price to take fluctuations into consideration. This new clause must specify the conditions that trigger the renegotiation and must refer to one or more public price indices of agricultural and food products. This negotiation must be conducted in good faith and in accordance with the obligation of confidentiality in industrial and commercial matters and trade secrets, and the negotiation period may not exceed two months.
The infringement of Articles L. 441-7 and L. 441-8 of the French Commercial Code is subject to an administrative fine which may not exceed € 75,000 for a natural person and € 375,000 for a legal person, doubled in case of a repeat offence within two years from the date at which the first sanction became final.
