French Competition Law provides a comprehensive review of the French rules relating to competition: restrictive agreements, commercial negotiation, abuses of a dominant position, procedure and merger control.

French Competition Law

The LME Law for the Modernization of the Economy ("loi de modernisation de l'économie") of 4 August 2008  and the Competition Ordinance of 13 November 2008  brought about a new overall reform. The law again attempted to tackle the lack of competition between distributors, and between suppliers and distributors. To achieve this, it facilitated the opening of new retail spaces surfaces by lowering t …

LME Law and competition ordinance

Competition law is in some aspects anticompetitive. The courts have in effect always tried to avoid competitive excesses. The theory of unfair competition thus protects undertakings against competitors seeking, through unfair practices, to poach their customers.

The principle of free competition and the right to create a business, was established by the d'Allarde Decree of 1791, and dominated commerce in the 19th and early 20th centuries. Application of the principle was further reinforced by Article 419 of the Criminal Code, which prohibited agreements between distributors of the same products applying uniform pricing strategies. The first explicit competition regulation only appeared after the Second World War; at the time, competition law was entirely perceived as an instrument of State economic policy. The decree of 24 June 1958 added to the initial post-war measures, which concentrated on prices, prohibitions on “concerted”, i.e. anticompetitive, practices and a number of “individual” practices (refusal to supply, discriminatory practices, tied selling). A 2 July 1963 law prohibited abuse of dominant position, and a 19 July 1977 law first set up merger control. All these texts were replaced by the Ordinance of 1 December 1986, supplemented by the Decree of 29 December 1986, which repealed the earlier legislation but was still strongly influenced by them and did not challenge the theory of unfair competition.

That ordinance was repealed by Ordinance No 2000-912 of 18 September 2000 and integrated into the new Commercial Code , with the exception of a few scattered provisions.  Book IV entitled “Freedom of prices and competition” is devoted to competition law. The codified provisions remain unchanged but are ordered differently. For example, former Article 53 on the scope of application of competition law becomes the first article of Title I (Art. L. 410-1) which lays down general provisions, Title II focuses on anticompetitive practices, Title III deals with economic concentration, Title IV with price transparency and restrictive practices, Title V sets forth investigation powers, Title VI concerns the Competition Authority, Title VII deals with administrative injunctions and sanctions, Title VIII concerns damages actions for anticompetitive practices and finally Title IX contains miscellaneous provisions, including on sentencing legal entities to pay fines and on the application of Articles 101 to 103 TFEU by the Minister of the Economy or the French Competition Authority and also on the rights of professional organizations to bring legal action in the civil or commercial courts. Decree No 2002-689 of 30 April 2002, amended by Decree No 2005-1668 of 27 December 2005, fixed the conditions of application of Book IV of the Commercial Code; Decree No 87-849, on appeals to the Paris Court of Appeal against decision of the Competition Council (now the Competition Authority) as amended by Decree No 2005-1667 of 27 December 2005, remains in force. Those texts are now part of the regulatory section of the Commercial Code devoted to the pricing freedom and competition (Art. R. 420-1 - R. 470-7).

Journal officiel (JO) of 21 September 2000, 14783. Book IV of the Commercial Code along with related EU legislation are included at the end of this volume.

Historical background

Those provisions were modified by the “NRE” Law ("Nouvelles régulations économiques") on new economic regulations of 15 May 2001 . This law, which brought about an overall reform of French competition law, came five years after the Galland Law of 1 July 1996. The NRE Law sought to promote more ethical conduct by fighting against excessive payment deadlines or certain abuses by large retail chains such as fictitious commercial cooperation agreements. As well as trade/industry relations, the law was intended to enhance the fight against anticompetitive practices, in particular by bringing very significant increases to the amounts of fines and the institution of a regime of leniency in favor of “repentant” offenders. It also strengthened merger control, which is now subject to mandatory prior notification with a two-speed procedure depending on the complexity of the case. In light of its title and certain of its provisions, the reform reflected both a renewed confidence in the free play of market forces but also signalled the comeback of State interventionism (e.g. use of a ministerial order to fix notice periods for sudden terminations of established commercial relationships). In short, the State did not yet seem entirely convinced that it needed to remain uninvolved. Competititve dysfunctions, due to both excessive regulation and the concentration of the demand, therefore forces the legislature to make regular “corrections”. 

NRE Law

The law on restrictive practices, which was characterized by a large number of automatic or “per se” offenses was reformed in 2005 by the Dutreil Law . Although based on excellent intentions, the text still remained too interventionist. The measures adopted did not sufficiently address the lack of competition and over-regulation prevalent in the relationships between suppliers and distributors. The Dutreil Law was only one more step in the reform of trade/industry relations.

Law No 2005-882 of 2 August 2005 in favor of small enterprises, JO 3 August 2005, 12639.

Dutreil Law

Since the Dutreil Law of 2 August 2005, the French government has attempted to switch from an interventionist to a free market system but this has proved to be a tricky process. The Chatel Law of 3 January 2008  attempted to reverse State interventionism. However, the law contradicts its primary objective by making commercial negotiations subject to excessive formality. A single written agreement, concluded before 1 March, must, since its entry into force, fix the terms of the sales transaction and the services designed to promote commercialization which do not fall under buying and selling operations. 

Law No 2008-3 of 3 January 2008 for the development of competition to benefit consumers, JO 4 Jan. 2008, 258.

Chatel Law

The LME Law for the Modernization of the Economy ("loi de modernisation de l'économie") of 4 August 2008  and the Competition Ordinance of 13 November 2008  brought about a new overall reform. The law again attempted to tackle the lack of competition between distributors, and between suppliers and distributors. To achieve this, it facilitated the opening of new retail spaces surfaces by lowering the authorization threshold, which was raised from 300 m² to 1000 m². 

Undertakings now have more freedom in their commercial negotiations: the law repeals the per se prohibition of discriminatory practices. Specific terms of sale can be applied without having to be justified by specific services. Payment deadlines have been reduced. Under this law the former Competition Council ("Conseil de la concurrence") became the Competition Authority ("Autorité de la concurrence") and saw its powers increase: the Authority now has its own investigation services and is vested with the authority to carry out merger control. The reform in respect of merger control is somewhat ambiguous insofar as the Minister of the Economy retains a residual authority to overrule decisions of the Competition Authority on general interest grounds. The ordinance empowers the Minister to prosecute for “anticompetitive micro-practices” affecting a local market , which are not automatically covered by European law and are carried out by companies with an individual turnover of less than EUR 50 million in France and - since the Hamon Law of 17 March 2014 -  a cumulated turnover not in excess of EUR 200 million. Article L. 464-9 of the Commercial Code gives the Minister the power to propose that the parties reach a settlement. Beyond that, the matter is referred to the Competition Authority: the Minister has sole jurisdiction for the enforcement of settlements. 

Law No 2008-776 of 4 August 2008, JO 5 August 2008, 1247 s.

This condition was removed by the DDADUE Law of 3 December 2020, which retains only the turnover criteria and the non-applicability of EU law.

The Hamon Law of 17 March 2014 on consumer protection ("loi relative à la consommation")   does not bring about any major reform to the competition law as the LME Law did. 

The Hamon Law has brought significant changes to the areas of restrictive practices and price transparency which clearly reflect a shift in policy. Where earlier reforms were concerned with the liberalization of relations between suppliers and distributors, the Hamon law has tightened up the rules on commercial negotiation by subjecting undertakings to stricter formal requirements. More importantly it has given the authorities back the enforcement powers that they had lost under the Ordinance of 1986. 

Further, the Law extends the jurisdiction of the Minister of the Economy by raising the threshold for anticompetitive micro-practices to EUR 2 million of combined turnover (from EUR 100 million previously). At the same time, the maximum amount of any settlement ("transaction") that the minister may propose in the event of practices affecting local markets has been increased from EUR 75,000 to EUR 150,000.

Lastly, the Hamon Law introduces class actions into French law, and this is the key measure of the new legislation. It now authorizes damages actions to be brought by approved consumer associations in claims to compensate for “individual loss suffered by consumers placed in a similar or identical situation” caused by breach by a trader of the competition rules provided that said breach has been the object of “a decision handed down against the trader by the relevant national authorities or courts, or those of the European Union, which has established the breaches and which is no longer subject to appeal for the party in respect of the establishment of the breaches”. 

Law No 2014-344 of 17 March 2014 on consumer protection, JO 18 March 2014, 5400.

Hamon Law

The Macron Law for growth, activity and equality of economic opportunities ("loi pour la croissance, l'activité et l'égalité des chances économiques") , which was presented as intending to loosen the regulatory burdens placed on businesses, on the contrary adds another layer of regulation to the Commercial Code. The Constitutional Council ("Conseil constitutionnel") has, fortunately, ruled that the extension of the structural injunctions mechanism, in force in the French overseas territories, to metropolitan France, one of the flagship measures of the new law (Art. 39), was a manifestly disproportionate infringement of both the freedom to do business and property rights . The Constitutional Council also declared as contrary to the right to respect for private life the possibility for officials to access the data stored and processed by electronic communications operators, i.e. itemized bills (Art. 216 of the draft bill). Nevertheless, a whole series of constraints were included in the final draft: regulation of fees of regulated professions (L. 444-1 et seq. Commercial Code), obligation of prior notification of joint purchasing arrangement between central purchasing/referencing bodies (Art. L. 462-10), regulation of affiliation agreements (L. 341-1 and L. 341-2), extension of the scope of renegotiation clauses to distributors’ own brands (L. 441-8), introduction of a “stop-the clock” mechanism in  phase I of merger control extending the duration of the procedure (L. 430-5), strengthening of the Minister's power in respect of merger control (L. 430-7-1), introduction of a method of calculation of civil fines for restrictive practices providing for a penalty of up to 5% of an undertaking's turnover (former Art. L. 442-6). The text nevertheless contains a number of improvements: relaxation of the formal requirements of single commercial agreements between producers and wholesalers (former Art. L. 441-7-1), replacement of the non-contestation of objections procedure by a settlement procedure - which is more predictable for undertakings - and the simplification of the procedure for companies participating in the leniency program (L. 464-2). Finally, the text aims to reduce the payment terms making the period of 45 days from the end of the month a derogation from the maximum 60-day period (L. 441-6) and formally prohibits parity clauses between hotel establishments and online booking platforms (Art. L. 311-5-1 et seq. Tourism Code).

Law 2015-990 of 6 August 2015, OJ of 7 August 2015, 13537 and corrigendum of 8 August 2015.

Cons. const., decision No 2015-715 DC of 5 August 2015.

Macron Law

Law 2016-1691 of 9 December 2016 , known as the Sapin II Law, has a threefold aim: transparency, the fight against corruption and the modernization of the economy. In order to address the issue of excessively long payment terms, the Law increases the level of fines bringing the maximum for legal entities to EUR 2 million. It also provides for the systematic publication of sanctions imposed ("name and shame"), previously subject to the discretion of the authorities. The cap in the case of cumulations of administrative sanctions has now been removed. Article L. 470-2, VII of the Commercial Code provides that “when, in the same or separate procedures, several administrative sanctions have been imposed against the same party for concurrent breaches, those sanctions shall be executed cumulatively”. 

On the other hand, the Sapin II Law relaxes the rules pertaining to the Single Commercial Agreement ("convention unique") which seals trade negotiations between suppliers and distributors (former Art. L. 441-7 Commercial Code) and between suppliers and wholesalers (former Art. L. 441-7-1 Commercial Code). For the sake of price visibility in the longer term, it is possible to conclude single commercial agreements for periods of one, two or three years. The provision states: “When concluded for a period of two or three years, [the agreement] must fix the terms under which the agreed price is revised. These arrangements may provide for the taking into account of one or several public indexes reflecting the evolution of factors of production”.

The proposal to advance the date of the conclusion of single commercial agreements to 1 February was ultimately disregarded and remains unchanged: the cut-off date therefore continues to be 1 March. Although initially the amendments were to apply only to agreements concluded from 1 January 2018, the legislation as adopted actually provided for their entry into force from 1 January 2017.

Moreover, the legislator has extended the scope of the practice of obtaining from a commercial partner an advantage which does not correspond to any commercial service actually provided or which is manifestly disproportionate to the service provided (former Art. L. 442-6, I, 1° Commercial Code) to commercial promotion activities and any “remuneration for services rendered by an international central purchasing body of distributors”. The Law has introduced two new restrictive practices: (i) the imposition of a price revision clause (for single commercial agreements under former Articles L. 441-7 and L. 441-7-1) or price renegotiation clause (for contracts falling under former Art. L. 441-8), which make reference to one or several public indexes with no direct connection with the products or services concerned by the single agreement or the contract (point 7° of former Art. L. 442-6); and ii) the imposition of a clause subjecting or attempting to subject a commercial partner to late delivery penalties in the case of force majeure (point 13° of former Art. L. 442-6). 

Finally, the Sapin II Law has adopted new provisions in favor of the agricultural sector, such as: i) the obligation to indicate in the general terms of sale for certain food products composed of non-processed agricultural products, the “average provisional price” proposed by the seller to the producer of those agricultural products; ii) the limitation of the amount of NIPs (nouveaux instruments promotionnels – new promotional instruments) to 30% of the value of the unit price scale, including administration costs for the agricultural products referred to in former Article L. 441-2-1, as well as for milk and dairy products; iii) the obligation to include in certain contracts for the sale of agricultural products, within the criteria and procedures for determining price, a reference to one or several indicators or public indices designated by the Law; iv) prohibition on transferring obligations arising from contracts between producers and buyers on the purchase of cow's milk for a period of seven years from the date of publication of the Law; and v) the obligation to state, in contracts of a duration of less than one year between suppliers and distributors, the price or the criteria and procedures for determining the purchase price of non-processed agricultural products incorporated into food products.

Sapin II Law

Law No 2018-938 of 30 October 2018, known as the EGalim Law  has five main components:

- a reinforced contractual framework in agricultural matters;

- the raising of the resale below cost threshold and the regulation of promotions for food products ;

- reinforced monitoring of central referencing or purchasing agreements by the Competition Authority ;

- greater emphasis on combating abusively low prices;

- and the green light for the government to proceed with the general recast of Title IV, Book IV of the Commercial Code.

On 24 April 2019, the French government adopted Ordinance No 2019-359 recasting Title IV of Book IV of the Commercial Code relating to transparency, restrictive practices and other prohibited practices. Its aim was to clarify the provisions applicable to commercial negotiations, in particular by eliminating those having become redundant, and to organize Title IV into a chronological and thematic structure reflecting business relationships. 

It abolished the single “ wholesaler ” agreement leaving room for only two types of single commercial agreement: a relatively flexible single ordinary civil law agreement which is also applicable to wholesalers, and a special agreement covering consumer goods. By contrast, the ordinance did not bring any significant changes to the rules on billing and payment terms. More importantly, instead of the twenty plus specific types of conduct covered in parts I and II of former Article L. 442-6 of the Commercial Code, the government refocused the rules around two umbrella practices: obtaining an advantage without consideration or which is manifestly disproportionate (new Art. L. 442-1, I, 1°) and imposing a significant imbalance (new Art. L. 442-1, I, 2°), and more specific practices: sudden termination of the established commercial relationship (new Art. L. 442-1, II) and third-party complicity in the breach of contractual obligations (Art. L. 442-2).

In the context of both commercial negotiations and restrictive and abusive practices, the reform has brought flexibility and a welcome simplification of the French commercial negotiation rules, although further improvements could be useful. However, this effort was very quickly dashed by the need to bring French law into alignment with EU law.

In effect, Directive No 2019/633 of 17 April 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain introduced a system of lists of practices that are prohibited per se or authorized under conditions in relations between buyers and suppliers. Among the many practices that are prohibited, are:

- payment periods later than 30 days for perishable agricultural and food products, or 60 days for non-perishables ; while these payment periods appeared to be consistent with those already provided for in Articles L. 441-10 and L. 441-11 of the Commercial Code, their starting points differed; the Ordinance of 30 June 2021, which transposes the directive , brings French law into line with European law in order to make the time-limit run from the date of delivery;

- cancellations of orders for perishable agricultural and food products at short notice, for which the transposition ordinance of 30 June 2021 had to make a new offense ;

- the buyer refusing to confirm in writing the terms of a supply agreement between the buyer and  the supplier, the penalty for which it laid down in new Article L. 443-7;

- the buyer unlawfully acquiring, using or disclosing the trade secrets of the supplier,which the transposition ordinance sanctions in new Article L. 443-6.

The DDADUE Law  of 3 December 2020 further amended Article L. 442-1 of the Commercial Code to include a new restrictive practice, which sanctions the failure of online platforms to comply with the provisions of Regulation No 2019/1150 of 20 June 2019 promoting fairness and transparency for business users of online intermediation services.

And the ASAP Law  of 7 December 2020 reintroduced the ban on logistics penalties and added a new restrictive practice to the list in Article L. 442-1.

The EGalim 2 Law, in recognition of the relative failure of the first EGalim law, strengthened the legal arsenal aimed at protecting farmers' income . which the transposition ordinance sanctions with a new Article L. 443-6. Upstream of the chain, the text reinforces the contractual relationship between producers and first buyers of agricultural products. Downstream, it accentuates the formal aspects of commercial negotiations between food manufacturers and distributors. The law clearly defines the content of general terms of sale for food products and products intended for pet food and requires, for those same products, the drafting of a specific written agreement. The text also makes changes to Article L. 441-8 of the Commercial Code relating to the renegotiation clause and to Article L. 441-7 concerning private label products, and radically overhauls the prohibition on logistics penalties, regardless of the sector considered. For food products and pet food only, the EGalim 2 Law reintroduces the ban on discriminatory practices, which the LME Law had repealed in 2008.

Lastly, the EGalim 3 Law  sets out to promote a better balance in commercial relations between distributors and suppliers, against a backdrop of inflation which all market players have to contend with, and which is causing tension in both commercial relations and negotiations. To this end, the law adopts a set of rules designed to regulate and penalize non-compliance with the March 1 deadline or failure to reach an agreement, extends and prolongs the framework for promotions and the resale-below-loss threshold, and introduces new provisions to prevent two abuses: legal evasion, which consists in certain chains relocating contractual negotiations abroad in order to make them subject to more favorable provisions, and the size of the penalties imposed in the event of non-fulfillment of contractual commitments. The new law also extends the offense of discriminatory practices to all consumer products.

Law No 2018-938 of 30 October 2018 for balance in trade relations in the agricultural and food sector and healthy and sustainable food which is accessible to all, OJ 1 November 2018.

The EGalim law authorized the government to increase by 10% the resale below cost threshold for foodstuffs and products intended for pet food. Ordinance 2018-1128 of 12 December 2018, on the raising of the threshold for resale at a loss and the framing of promotions for foodstuffs and certain food products, OJ 13 December 2018 implemented this increase.

The EGalim Law allows the Competition Authority to take precautionary measures of its own motion in respect of any agreement entered into by a central listing or purchasing agency if the latter is likely to significantly impede competition to a sufficient degree of seriousness (Article L. 462-10 Commercial Code).

Commercial Code, Art. L. 443-5 (new) the conditions of application of which have are specified in two new articles D. 443-3 and D. 443-4.

Law No 2020-1508 of 3 December 2020 on various provisions for adapting to European Union law in economic and financial matters (DDADUE Law).

Law No 2020-1525 of 7 December 2020 on the acceleration and simplification of public actions  (ASAP).

Law No 2021-1357 of 18 October 2021 aiming to protect the income of of farmers, OJ 19 Oct. 2021.

Law No 2023-221 of 30 March 2023 aimed at strengthening the balance in commercial relations between suppliers and distributors, OJ 31 March 2023.

French Competition Law

5. LME Law and competition ordinance

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5. LME Law and competition ordinance

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Les notions juridiques connexes

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