ania - relaciones comerciales en la cadena alimentaria en francia

Madrid, 8 March 2012

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Commercial relations

French case

Seminar

« Trade relations in the food chain :

looking for solutions in Spain and the

European Union »

French food industry and French retailers’ market

Long process to develop our specific law to ensure fair commercial relations

The specific French law

Legal tools to enforce the specific law

Assessment of the law’s application

Outline of the presentation

2 Madrid, 8 March 2012

1st French industry with a turnover of € 143.6 billion in 2010

More than 10,000 companies of which 90% are SMEs

Second national employer with 477,000 jobs

1st partner of French farmers using 70% of French agricultural resources (raw

materials)

4th world exporter after the U.S., Germany and the Netherlands

80 % of food products consumed in France are produced locally (the only industry in

this case at the national level)

French food industry


French retailers’ market

Food trade is dominated by retailers (hypermarkets and supermarkets) which represent

around 70% of the market. Source : panorama des IAA du MAAP

In 2010, French families bought 66.6 % of their food products in hypermarkets (more than

2500 m²) and in supermarkets (more than 400 m²) [compared to 67.2 % in 2009]. Source INSEE



Groupe Carrefour 21,8 %

Galec / Leclerc 17,6 %

Groupe Intermarché 13,3 %

Groupe Casino 12,9 %

Groupe Auchan 11,1 %

Système U 9,3 %

Lidl 4,7 %

Cora / Provera 3,1 %

Aldi 2,4 %

Dia 2,2 %

Retailers market shares for food products

Source : Kantar Worldpanel (consolidation Linéraires) Cumul annuel mobile au

27/11/11 PGC + frais LS – En valeur – Hypers + supers + supérettes + hard

discount


The French retailer’s market is organized around integrated and independent

retailers. The consequences are very important in terms of liability and agreements

Integrated retailers such as Carrefour, Auchan, Cora, Casino negotiate at the

national level and have the same range of products in each supermarket.

Independent retailers such as Leclerc, Système U and Intermarché : the

producers have to negotiate at national level and at regional level before

negotiating with each supermarket. Each supermarket’s manager can choose

his range of products.

The French food market’s characteristic is an imbalance of economic relations

between 7 retailers and 10 000 producers. This imbalance creates difficulties for

producers and farmers and facilitates the occurrence of unfair practices.



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5 laws in 20 years to progressively develop and adapt our legislation to

stakeholders’ practices : Loi Galland in 1996 : beginning of specific legislation for commercial

negotiations to take into account the unbalanced relations between retailers

and producers

Loi NRE in 2001 : identification of several unfair practices with penalties

(fines)

Loi Dutreil in 2005 : disconnecting the loss leading threshold from the invoice

price, taking into account the payment of services such as end of aisle display,

catalogue …

Loi Chatel in January 2008 : finalizing this evolution initiated by the Dutreil

law

Loi LME in August 2008 : to facilitating negotiation and competition among

retailers by eliminating the discrimination ban.

Long process for a specific law


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A

A negotiation based on the producer’s offer

An annual written agreement before 1st March

A list of prohibited unfair commercial practices

Specific French law


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General sales conditions must be communicated to all retailers

General sales conditions remain the base of negotiation with the compulsory minimum content: sales conditions (delivery conditions, transfer of risk, retention clause), price list, discounts and payment terms. Suppliers can develop their General Sales Conditions in particular for logistic issues….

General sales conditions must be organized by category and communicated to all retailers in the same category

Differentiating General sales conditions for each category of clients (retail, cash and carry, distance selling, export…) is possible. Each producer can organize his own general sales conditions by category of clients if he can justify them. A retailer as Carrefour or Leclerc cannot be considered as a category of client.

Special conditions of sales negotiated and communicated only to the retailer concerned

Possibility to negotiate special conditions of sales, which must be justified by true counterparts. It is the only way to differentiate between clients.

Specific French law A negotiation based on the producer’s offer


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This annual written agreement has to formalize the results of the negotiation to ensure real controls of its balance. Each commitment must be clearly exposed in this agreement : price reductions granted by the producers and counterparts given by the retailers.

The compulsory content of the annual agreement is :

- Sale conditions negotiated on the base of the general sale conditions

- Special sale conditions such as rebates, discounts or year-end

bonuses

- Sales cooperation or trade services which are provided by the retailer

and paid by the supplier such as end of aisle display, product

highlighting...The object, the date and the conditions of the agreement as

well as the price and the list of products concerned.

- Other obligations to develop the commercial relation such as

statistics, trade shows…

Penalties

Joint obligation to sign this annual agreement before 1st March : € 75,000

and € 375,000 for legal entities

Specific French law An annual written agreement before 1st March


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The French legislation prohibits several unfair commercial practices, for example:

- Submitting (Imposing) or trying to submit (impose) a commercial partner to obligations which create a significant imbalance between contractual rights and obligations.

- Obtaining or trying to obtain an advantage, prerequisite or condition in order to place an order, without written commitment about a proportional volume of products.

- Obtaining or trying to obtain under threat the total or partial delisting of products, unfair conditions concerning prices, payment deadlines or services.

- Submitting or trying to submit a partner to abusive payment conditions.

- Refusing to indicate the supplier’s name and address on private label products if the supplier requires it.

- Asking for an alignment of the contract terms with the best commercial conditions obtained by the competitors.

- Stopping commercial relations without observing a notice period which is the double for private labels etc ….

Specific French law List of prohibited unfair commercial practices


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Penalties

₋ Refund of unduly paid sums

- Civil fine (limited to € 2 millions) can represent three times the amount of sums unduly paid.

- Publication, distribution or display of the Court’s decision.

Specific French law List of prohibited unfair commercial practices


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Investigations and legal actions by public authorities

A commission in charge of analysing commercial practices



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The French Ministry of Economy :

₋ has investigation powers and organizes each year, 2 investigations of

both suppliers and retailers to check commercial practices (content of

annual written agreement, invoices, documentary evidences ….)

₋ In case of unfair practices, the French Ministry of Economy can file

claims on behalf of the producers who fear being delisted.

₋ Case laws increase each year and the most dissuasive tool for

retailers is the publication of Court’s decisions.

A few examples of case laws

₋ 9/02/2010: Condemnation of Carrefour for an imprecise written agreement

concerning services invoiced to suppliers.

₋ 22/11/2011: Condemnation of Leclerc to refund € 23 millions unduly paid to

28 suppliers.

₋ 24/01/2012: Condemnation of Casino for abusive contractual commitments

(return of unsold products to suppliers) to a fine of € 400,000.

Investigations and legal actions by public authorities



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This public authority was created in 2001 to give recommendations about

unfair or fair practices between suppliers and retailers.

The president of this Commission is a member of Parliament.

Members of this Commission represent equally retailers, suppliers, the

Minister of Economy, experts, members of Courts.

All stakeholders or members of government can report a matter to this

Commission which writes and publishes positions. The Commission can

also investigate a matter on its own initiative.

Judges can refer to this doctrine for their judgment

Stakeholders can also refer to it in their relationships

The difficulty is to obtain a consensus for important issues and, sometimes,

some topics cannot be resolved.

Legal tools to enforce the specific law A commission in charge of analysing commercial practices


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We are fortunate and proud to have a specific and useful legislation justified by our national context.

Unfortunately, commercial relations are always difficult and become more and more strained particularly since the entry into force of the last law in 2008 and the beginning of the increase of raw materials prices in 2007: retailers continue to refuse price conditions, to negotiate advantages without real counterparts, to impose abusive contracts and transfer costs and liabilities to suppliers.

Anyway, each condemnation is very useful to remind retailers about their obligations even if, often, they find solutions to get round legal obligations.

For French suppliers, our law has 3 weaknesses :

₋ Contradictory interpretations by retailers and suppliers

₋ Slowness of Court’s decisions

₋ Increase of settlements made outside courts with the assistance of public authorities but which are not made public (no Name and shame disincentive)

We hope that our government will be very attentive and reaffirm its will to apply our legislation.

Assessment of our specific law


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