Business Contracts

The ban on abusively low prices was enacted following the adoption of the Galland Law No 96-588 of 1 July 1996 on fairness and balance in commercial relations. Article L. 420-5 of the Commercial Code stipulates that “price offers or sales price practices to consumers which are unreasonably low in relation to production, processing and marketing costs and which have the object or effect of eliminat …

Abusively low pricing

The ban on abusively low prices was enacted following the adoption of the Galland Law No 96-588 of 1 July 1996 on fairness and balance in commercial relations. Article L. 420-5 of the Commercial Code stipulates that “price offers or sales price practices to consumers which are unreasonably low in relation to production, processing and marketing costs and which have the object or effect of eliminating an undertaking or one of its products from a market or preventing access to a market”  are prohibited.

The scope of Article L. 420-5 has given rise to certain problems of interpretation. Although the letter of the text refers to “sales prices to consumers”, according to the Competition Authority , the law nonetheless applies to the provision of services. The prohibition of abusively low offers or prices applies only to offers made to consumers, and excludes relations between businesses . The consumer in question is “the natural or legal person who, without any particular experience in the field in which he or she contracts, acts to satisfy his or her personal needs and uses the product or service acquired for this purpose alone” . Furthermore, the last paragraph of Article L. 420-5 excludes from its scope resale as is , with the exception of sound recordings reproduced on physical media and videograms intended for the private use of the public. The prohibition therefore applies to direct sales by producers to consumers, as well as to sales of processed products by resellers to consumers.

In order for an infringement to be characterized as such, three conditions must be met: a fault,  harm and causation. The fault lies in the offer or practice of abusively low prices in relation to production, processing or marketing costs. A price that is lower than the undertaking's variable costs, or a price that is higher than those costs but lower than its total costs, is unfairly low if it reflects a desire to drive customers out of business . Thus, according to the Competition Authority , “only a low pricing practice that is sufficiently persistant and widespread to be considered abusive can be inferred from it as part of a strategy to divert a competitor's customers and drive him out of the market”. Consequently, it was not established that the commercial operation launched by a large-scale retail chain, which froze the price of the standard white baguette at EUR 0.29 for a period of 4 to 6 months, constitutes a practice of abusively low pricing that could have had an impact on the complainant undertaking’s business likely, ultimately, to affect its continued presence on the market, where the referral does not allow the conclusion that the two undertakings operate in the same market, where the complainant has not established that the sale of baguettes represents a significant part of its business, and therefore that a drop in turnover linked to this activity could lead to its exclusion from the market, especially since the disputed operation did not involve a price reduction compared to the price previously applied and was of a temporary nature .

The harm lies in the risk of eliminating a competing undertaking or one of its products or services from the market, or creating barriers to entry to that market. The Competition Authority  has thus ruled that an operator is entitled to refer the matter before it, if, in the context of a given market, it is forced or presents a serious risk of being forced to cease all or part of his activities as a result of abusively low prices charged by a competitor.

Finally, in order to be subject to sanctions, sales at abusively low prices must have an anticompetitive object or effect. The complainant must therefore establish a causal link between its elimination, or potential elimination, and a competitor's use of abnormally low prices. On the other hand, it is not necessary to demonstrate that the undertaking engaging in abusively low prices holds a dominant position on the market in question .

Law No 2017-256 of 28 February 2017 on real equality in overseas France amended Article L. 420-5 and supplemented the provision by adding a second paragraph in order to take into consideration local particularities concerning food distribution in overseas departments or regions: “In Guadeloupe, French Guiana, Martinique, Reunion and the Department of Mayotte, when foodstuffs identical or similar to those produced and marketed locally are offered to consumers at prices clearly lower than those charged in metropolitan France, the conclusion of an agreement between those involved in import and distribution, on the one hand, and those involved in local production and processing, on the other, may be made compulsory by the State representative in the territory. The latter takes into account the quantities of products concerned, the economic situation of local producers and the interests of consumers on very low incomes. The agreement, which is negotiated under the supervision of the State and local authorities responsible for economic development, must specify the ongoing transactions undertaken by retailers to offer consumers locally-produced food, as well as the policy pursued by local producers to best meet consumer needs. The agreement is made public by prefectoral order. If no agreement is reached within ten working days from the start of negotiations, the representative of the State in the territory will issue an order taking all measures within his or her jurisdiction to achieve the aforementioned objectives”.

Competition Council Opinion No 96-A-05, 2 May 1996, LawLex200200000040JBA.

CA Paris, 4 June 2002, LawLex200200002130JBJ.

CA Paris, 3 July 1998, LawLex200200002597JBJ.

Competition Council Decision No 98-PB-01 of 13 January 1998, LawLex200002396JBJ.

Competition Council Opinion No 97-A-18 of 8 July 1997, LawLex200002393JBJ.

Competition Authority Decision No 22-D-23 of 1 December 2022, LawLex202200010584JBJ.

Competition Council Decision No 00-D-70 of 31 January 2001, LawLex200002429JBJ.

Business Contracts

31. Abusively low pricing

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31. Abusively low pricing

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise