Paris Court of Appeal, 11 September 2013, Eurauchan Case No.: 11/17941; Paris Court of Appeal, 18 September 2013, Galec Case No.: 12/03177

"Eurauchan" decision of 11 September 2013

Convicted by the court of first instance (Commercial Court of Lille on 7 September 2011), the Paris Court of Appeal upheld the fine of one million euros imposed on Eurauchan, Auchan's central purchasing office, for abusive practices and "major imbalance in the rights and obligations of the parties".

In this judgement of 11 September 2013, the Court sanctioned two clauses in the annual cooperation agreement signed between the distributor (Eurauchan) and its suppliers on the grounds that they created an imbalance of power.

The first clause had to do with revising the supplier's prices in the middle of executing the annual agreement and stipulated that any proposed price increase requested by the supplier had to be justified by objective facts.

The second clause on "service level" provided for a system of penalties in case the suppliers do not meet a non-negotiable minimum service level of 98.5%; whereas, moreover, no clause allowed for a readjustment of the contract

As in the first instance, the Court considers that this clause creates a major imbalance in the relationship between Eurauchan and its suppliers, but unlike the Commercial Court of Lille, the Court focuses more on the formal aspect of the clause rather than on its implementation or its economic aspect. The Courts note that there is no precise definition of service levels and their method of calculation, as well as the lack of negotiation which falls within the uniform nature of the service level, in particular, regardless of the nature of the suppliers' activities and the relationship that exists.

"Galec" decision of 18 September 2013

In 2009, the Versailles Court of Appeal ordered the Leclerc central purchasing office (Galec) to return to its suppliers, victims of abusive contract terms, monies that the former had unduly collected from them (€ 23.3 million). Galec thus had to pay that amount to the Public Treasury, which was then in charge of distributing the money to the suppliers. But if the suppliers did not claim the money, the Economic Division government would have to return it to Leclerc. Galec thus put pressure on its suppliers so that they would renounce collecting this money, even going so far as to send them a pre-written letter of waiver.

Ordered in 2011 by the Commercial Court of Paris to pay a civil fine of one million euros for subjecting its partners to a significant imbalance, Galec had its sentence doubled on appeal and increased to a fine of two million euros.

The Paris Court of Appeal, in its decision of 18 September 2013, held that the practice of telling its suppliers to renounce their claims, resulting from the amounts to be returned to them under a court decision, was an attempt by the central purchasing office to subject the suppliers to a major imbalance. In addition, the Court held that "Galec did not demonstrate that this imbalance was offset by a bond or a financial consideration that it would support financially or that it would do its part to retain its relationships with the suppliers."

One of the lessons learned from this judgement by the Paris Court of Appeal is that it is not necessary to demonstrate that the clause creating a major imbalance was actually applied to the extent that article L 442-6--2° of the Commercial Code states that "attempting to subject the trading partner to such an imbalance engages the liability of the offending party just as if it had indeed implemented such imbalance."