• The DGCCRF reminds distributors of their obligation to respect the rules on logistics penalties resulting from the Egalim 2 law and issues injunctions and financial penalties
• French supreme court rules on the implementation of differentiated terms and conditions of sale and reminds of essential principles regarding their communication
• Paris Court of Appeal confirms that the French Competition Authority has jurisdiction to investigate complaints of abusive exploitation of a state of economic dependency
  
   

The DGCCRF reminds distributors of their obligation to respect the rules on logistics penalties resulting from the Egalim 2 law and issues injunctions and financial penalties

Known as the “Egalim 2” law, Law No. 2021-1357 of October 18, 2021, is aimed at protecting farmers’ remuneration and also regulates logistics penalties imposed by a distributor on a supplier.

Under Egalim 2:

1. the contract must mention a sufficient margin of error with respect to the volume of deliveries provided for in the contract,
2. a sufficient time period must be respected to inform the other party in the event of an unforeseen event, and
3. such penalties may only be imposed following an adversarial procedure (Article L.441-17 of the French Commercial Code). In addition, this same article provides that the amount of the penalties may not exceed a certain percentage of the purchase price of the products concerned and must be proportionate to the damage suffered as a result of the contractual non-performance. In practice, the penalties must not be unbalanced.

However, it would seem that this aspect of the Egalim 2 law is unknown to a significant number of actors, as evidenced by the survey conducted over the past few months by the French consumer and competition governmental authority (Direction générale de la concurrence, de la consommation et de la répression des fraudes - DGCCRF).

Indeed, the DGCCRF states that it has identified a series of abusive practices committed by several retailers under investigation, such as the issuance of automatic penalties (i) without any real possibility of contesting them, or (ii) when no contractual breach was committed by the suppliers, or (iii) implementing the automatic deduction of penalties from invoices, as well as (iv) in the absence of any document justifying the alleged breach that triggered the payment of penalties.

The DGCCRF has already issued administrative injunctions with financial penalties of several million euros against two retailers and has announced that it will take similar measures in the coming weeks against two other retailers. A strong signal is being sent ...

French supreme court rules on the implementation of differentiated terms and conditions of sale and reminds of essential principles regarding their communication

In a decision dated September 28, 2022, just a few weeks before the start of the commercial negotiations for 2023, France’s highest court, the Court of Cassation reminded of certain essential principles relating to the communication of terms and conditions of sale (TCS).

In its decision the court reminded of the possibility for a supplier to establish so-called “differentiated” or “categorical” TCS, i.e., several types of TCS applicable to distinct and objectively defined categories of purchasers (e.g. wholesalers or retailers). As a result, any supplier is obliged, under article L.442-6 I 9 of the French Commercial Code, to communicate to any buyer who so requests the TCS applicable to the category of buyers to which it belongs.

In this case, the supplier, Cooper, had (as authorized by Article L.441-1 II of the French Commercial Code) set up three types of TCS applicable to (i) independent pharmacies, (ii) groups of pharmacies and (iii) wholesaler-distributors. Several pharmacies had created a group purchasing organization (GPO) under the name Pyxis Pharma and wished to enter into commercial relations with the supplier on the basis of Cooper’s TCS applicable to independent pharmacies.

Cooper reasoned that Pyxis Pharma could not benefit from the TCS for independent pharmacies, as it considered the GPO a wholesaler-distributor. As a result, it refused to transmit the TCS for independent pharmacies, but to enter into negotiations with it on the basis of the TCS for wholesalers.

Having confirmed the reasoning of the Court of Appeal, the French Court of Cassation held that Pyxis Pharma acted as a purchasing agent and therefore “on behalf of and for the account of” its member pharmacies. The Court considered that the status of the GPO was closer to that of independent pharmacies—among the three categories of purchasers defined by Cooper—since there was a “direct relationship” between Cooper and the member pharmacies of the GPO and that the GPO bore storage costs in the same way as all independent pharmacies. In addition, the absence of a direct contractual relationship between Pyxis Pharma and the final consumer was not such as to call into question this conclusion.

Therefore, Cooper should have communicated to Pyxis Pharma the TCS applicable to independent pharmacies and entered into negotiations with Pyxis Pharma on the basis of these. By refusing to do so and by proposing to the GPO to enter into an agreement on the basis of the TCS applicable to wholesaler-distributors, Cooper failed in its obligations and incurred liability.

Paris Court of Appeal confirms that the French Competition Authority has jurisdiction to investigate complaints of abusive exploitation of a state of economic dependency

In its decision of February 24, 2021, the French Competition Authority rejected the complaint of Cartocad, a computer services company, for lack of evidence to characterize the existence of an abuse of economic dependency on the part of Autodesk, market leader in the publishing of software for digital creation and content.

Cartocad appealed this decision, arguing that the Authority failed to condemn Autodesk’s wrongful conduct that led to the creation of a significant imbalance. On the one hand, the Paris Court of Appeal first recalled its judgment of October 20, 2022, wherein it noted that the Authority cannot rule as such on the characterization of a significant imbalance within the meaning of Article L.442-1 of the French Commercial Code, which is not within its jurisdiction. On the other hand, the Authority is competent to investigate a complaint alleging the abusive exploitation of a state of economic dependency, when the abuse in question takes the form of a restrictive practice, such as a significant imbalance. However, this presupposes that the claimant provides evidence allowing this qualification to be retained and that it demonstrates that the functioning or structure of competition has been affected.

In this case, the Paris Court of Appeal rejected Cartocad’s appeal, considering that the criteria for qualifying Autodesk’s conduct as an abuse of economic dependence were not met (i.e., the existence of a situation of economic dependency of one company with regard to another, an abusive exploitation of this dependence as well as an actual or potential effect on the functioning or structure of competition).