Business Contracts

Restrictive agreements and abuses of dominance are at the heart of competition law. Article L. 420-1 of the Commercial Code prohibits concerted actions, restrictive agreements, express or tacit understandings or coalitions, which “have as their object or may have as their effect the prevention, restriction or distortion of competition on a market [...]”. For a restrictive agreement to exist, three …

Restrictive agreements

Restrictive agreements and abuses of dominance are at the heart of competition law. Article L. 420-1 of the Commercial Code prohibits concerted actions, restrictive agreements, express or tacit understandings or coalitions, which “have as their object or may have as their effect the prevention, restriction or distortion of competition on a market [...]”. For a restrictive agreement to exist, three constituent elements are therefore required: (i) a restriction of competition observed on the market must be attributable to (ii) collusion implemented by (iii) several undertakings. The general principle of prohibition - which is not absolute  - is illustrated by a non-exhaustive list of examples. In particular, a restrictive agreement is prohibited when it seeks to “prevent prices from being set freely on the market, by artificially encouraging them to rise or fall” (Art. L. 420-1, 2°, Commercial Code).

As a general rule, price-fixing agreements between competitors are considered particularly serious by the supervisory authorities, since the freedom to set prices is an essential component of free competition. They are assessed more severely than vertical agreements, which are not considered anticompetitive in principle . A restrictive agreement may relate directly to the price itself or to one of its components (product cost, margin, etc.). For example, a concerted practice whereby a trade association sets common minimum sales prices for the products concerned at the start of marketing is contrary to Article L. 420-1 of the Commercial Code . The systematic alignment of an undertaking with the prices of competitors it knows to be in concert, which is justified neither by the characteristics of the market nor by the structure of operating costs, is also evidence of involvement in an unlawful anticompetitive agreement . Similarly, competing undertakings cannot agree to predatory pricing in order to drive a new entrant out of the market in violation of Article L. 420-1 of the Commercial Code . On the other hand, the concerted setting of a cost price for the same product by competing undertakings, which does not have the effect of imposing an identical price on these undertakings, is not contrary to that provision, provided that their conditions of supply and operation, although similar, are nevertheless specific to each of them and do not prevent them from independently determining their selling price .

Vertical agreements may also fall within the scope of Article L. 420-1 where they contain discriminatory conditions  or relate to the fixing of resale prices. Retail price maintenance (RPM) may have its origin in the agreement, in particular when the supplier imposes on its wholesalers, in its general terms and conditions of sale, under threat of financial penalties, a selling price corresponding to that set in a price list it has issued to them, as well as an obligation to enforce or monitor the prices charged by retailers . RPM can also be inferred from the behavior of undertakings : a manufacturer is deemed to have carried out resale price maintenance when it instructs its distributors not to publicly disclose prices other than recommended retail prices, and to ensure that reseller-installers comply with the same obligation to display minimum prices, under the guise of harmonizing the resale prices of its products on the retail market and limiting the incentive for resellers to compete on the resale price of its products .

Under Article L. 420-3, any undertaking, agreement or contractual clause relating to a practice prohibited by Article L. 420-1 is null and void. In addition, Article L. 420-6 of the Commercial Code provides that any natural person fraudulently taking a personal and decisive part in the conception, organization or implementation of the practices referred to in Articles L. 420 may be punished by a prison sentence of four years and a fine of EUR 75,000

This prohibition is waived when the outcome of the restrictive agreement is positive, either as a result of an assessment carried out under Article L. 420-1, under the rule of reason, or by virtue of an exemption granted on the basis of Article L. 420-4.

Competition Authority decision No 11-D-01 of 11 January 2011, LawLex201100000048JBJ: while concertation on a maximum price may be permitted in the context of a vertical agreement, such a practice is, on the other hand, likely to be prohibited in the context of a horizontal agreement insofar as a price higher than the maximum imposed would enable the undertaking to offer a better service to the consumer, or provide it with resources enabling it to offer another product at a lower price or of better quality.

Competition Council Decision No 05-D-55 of 12 October 2005, LawLex200600000089JBJ; see also Cass. com., 21 March 2000, LPA, 15 November 2000, noting that a fee scale distributed by a professional association is likely to encourage its members to set their fees regardless of their own management objectives, insofar as it emanates from the body vested with regulatory and disciplinary authority, whose representative has the power to rule on complaints lodged against the fees charged.

Cass. com., 8 October 1991, LawLex200200002802JBJ.

CA Paris, 16 January 2016, LawLex201700000030JBJ.

Competition Council Decision No 99-D-17 of 24 February 1999, LawLex200002959JBJ.

Competition Council Decision No 02-D-59 of 17 September 2002, LawLex200002133JBJ, ruling that preferential prices granted to a software distributor are not discriminatory when they are the consideration for services rendered, such as the setting up and management of a call center and a toll-free number, mass mailings and the management of updates.

CA Paris, 16 January 2020, LawLex202000000058JBJ.

Competition Authority Decision No 18-D-26 of 18 December 2018, LawLex201800001987JBJ: when a vertical price-fixing practice is established by direct documentary evidence such as email exchanges, the distribution of price lists, general terms and conditions of sale providing for an obligation to comply with the tariffs communicated under threat of fines, it is not necessary to supplement these elements with a body of substantial, precise and corroborating evidence establishing the significant observance of the instructions by distributors.

Competition Authority decision no. 21-D-26 of November 8, 2021, LawLex202100005760JBJ, characterizing the practices in question as anticompetitive by their very object, insofar as they were intended to achieve uniformity in communications relating to the prices of its products throughout the value chain and across the whole of France, by reducing intra-brand competition between wholesalers and between resellers-installers.

Business Contracts

29. Restrictive agreements

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

29. Restrictive agreements

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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