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

In order to combat certain unfair practices in mass distribution, former Article L. 442-6, I, 8º, repealed by the Ordinance of 24 April 2019, forbade the “refusal or return of goods or the automatic deduction from the amount of the invoice issued by the supplier of the penalties or discounts corresponding to the failure to respect a delivery date or the non-conformity of the goods, when the debt i …

Rules governing logistics penalties

In order to combat certain unfair practices in mass distribution, former Article L. 442-6, I, 8º, repealed by the Ordinance of 24 April 2019, forbade the “refusal or return of goods or the automatic deduction from the amount of the invoice issued by the supplier of the penalties or discounts corresponding to the failure to respect a delivery date or the non-conformity of the goods, when the debt is not certain, of a fixed amount and due, without the supplier having been able to ascertain the reality of the corresponding claim”. 

 The ASAP Law  of 7 December 2020 has reintroduced, in the same terms, the prohibition of logistics penalties, to respond to the growing development of this practice since its repeal.

The same law created a new restrictive practice, consisting of “imposing penalties which are disproportionate to the non-performance of contractual obligations”. Because of its broad phrasing, this prohibition was not reserved for the logistics field, even though the amendment that introduced it was intended to sanction the imposition of excessively high logistics penalties. The EGalim 2 Law  merges the two offenses under new Article L. 441-17, non-compliance with which is sanctioned by Article L. 442-1, I, 3°. New Article L. 441-18 addresses the sanctioning of possible contractual breaches by the distributor. The EGalim 3 Law , supplemented by updated DGCCRF guidelines , has added further precision to the rules.

Under Article L. 441-17, a contract may provide for the setting of penalties to sanction a supplier in the event of non-performance of its contractual commitments. However, the supplier must be afforded a sufficient margin of error with respect to the volume of deliveries provided for in the contract, as well as a sufficient time-limit to inform the other party in the event of unforeseen circumstances. The Constitutional Council was asked to rule on a priority question of constitutionality based on the vagueness of the concept of a ‘sufficient margin of error’, and declared that the text complied with the principle of the legality of offenses and penalties. In effect, according to the Council, it follows from the very terms of the provisions of Article L. 441-17 that the sufficiency of the margin of error left to the supplier must be assessed on a case-by-case basis in the light of the volume of deliveries provided for in the contract . Prior to the EGalim 3 Law, the agreed penalties could not exceed an amount corresponding to a percentage of the purchase price of the products concerned and had to be proportionate to the damage suffered as a result of the non-performance of contractual obligations. The EGalim 3 law retains the proportionality requirement, but now specifies that fines are to be imposed up to a ceiling equivalent to 2% of the value of products ordered in the product category in which the breach of contractual undertakings was found to have occurred. In its guidelines, the DGCCRF specifies that compliance with the upper limit will be observed on the basis of the penalty calculated per order, and not on an annual basis, in order to comply with the principle of proportionality of penalties.It also stresses that the maximum is based on the value of all products ordered in the product category for which the infringement is established . The EGalim 3 Law also stipulates that no logistics penalties may be imposed for failure to meet contractual obligations that occurred more than one year previously. According to the guidelines, the starting point of this time-limit is the date of the logistics penalty invoice, not the date of the notification of the fine.

Article L. 441-17 specifies that only situations that have resulted in shortages may justify the application of logistics penalties unless the distributor demonstrates and documents in writing the existence of another type of loss. When considering the imposition of logistics penalties, the distributor must take into account circumstances beyond the control of the parties in adjusting the amount of the penalty. In the event of force majeure, no logistics penalty may be imposed. In addition, the distributor may not require the supplier to pay the logistics penalties within a time-limit that is shorter than the period  it applies on receipt of the goods. Furthermore, the text prohibits the distributor from rejecting or returning goods, except in the case of non-conformity or failure to meet the delivery date. The proof of the breach must be provided by the distributor and the supplier must have a reasonable time-limit to verify and, if necessary, contest the validity of the corresponding grievance. The automatic deduction from the amount of the invoice issued by the supplier of penalties or rebates corresponding to the failure to comply with a contractual commitment is also prohibited. Only situations that have led to stock shortages may justify the application of logistics penalties. By way of derogation, the distributor may impose logistics penalties in other cases, provided that it demonstrates and documents in writing the existence of a harm . When the distributor fails to fulfill a contractual undertaking, new Article L. 441-18 authorizes the supplier to impose penalties on it. As for penalties incurred by suppliers, the EGalim 3 Law has introduced a ceiling of 2% of the value, within the order, of the category of products ordered concerned by the non-fulfillment of commitments. The penalties must also be proportionate to the harm suffered as a result of the non-performance of contractual obligations. Proof of the breach must be provided by the supplier and the distributor must be given a reasonable period of time to verify and, if necessary, contest the reality of the corresponding grievance.

Lastly, the EGalim 3 Law supplements Article L. 441-9 of the Commercial Code and imposes a number of obligations on distributors, including the obligation to declare  the amount of logistics penalties imposed on their suppliers to the DGCCRF by 31 December each year, subject to an administrative fine of up to EUR 500,000 for legal entities. Article L. 441-3 of the Commercial Code, relating to the single commercial agreement under ordinary civil law has also been supplemented by a new section II bis, under which mutual logistical obligations, including penalties, must be set out in a separate document.

The case law rendered in application of former Article L. 442-6, I, 8° will help shed light on the system under the new Article L. 441-17. Thus, a service provider who does not contest the facts on receiving correspondence complaining of late deliveries may not subsequently object to the automatic implementation of penalties provided for in the contract, which the client has applied on the invoice . Similarly, a purchaser cannot be accused of having abusively and unilaterally deducted penalties for non-compliance from invoices issued by its supplier when a joint expert appraisal has revealed problems with the quality of the goods delivered . On the other hand, a distributor may not automatically deduct penalties on its suppliers' invoices for failure to meet delivery deadlines when it is at the origin of this situation by its own delay in taking orders and when the calculations do not comply with contractual stipulations  or when it does not put its supplier in a position to verify the reality of its complaints .

Law No 2020-1525 of 7 December 2020 on accelerating and simplifying public action (ASAP Law).

Law No 2021-1357 of 18 October 2021 for the protection of farmers' remuneration, OJ 19 Oct. 2021.

CA Paris, 19 April 2017, LawLex201700000726JBJ.

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

DGCCRF guidelines on logistics penalties, published on 3 November 2023.

Cons. constit., 30 April 2024, No 2024-1087 QPC, LawLex202400003516JBJ.

By way of example, if part of an order placed with a supplier by a distributor is absent, compliance with the maximum limit will be calculated according to the value of all products in the same category in the order, whether or not they have been delivered, and not just according to the value of the missing products.

For an illustration from before the legislation came into force, see CA Paris, 10 May 2023, LawLex202300007759JBJ, emphasizing that the automatic deduction of logistics penalties, the nature and cause of which were brought to the wholesaler's attention both before and after invoicing, and which the wholesaler is free to contest, is not contrary to the applicable legal provisions.

CA Paris, 19 January 2011, LawLex201100000116JBJ.

CA Rennes, 24 April 2012, LawLex201200000706JBJ.See also, for deductions justified by price differences or delivery errors, Cass. com, March 16, 2022, LawLex202200001721JBJ, upholding CA Paris, June 24, 2020, LawLex202000001651JBJ.

CA Amiens, 3 December 2015, LawLex201500001703JBJ.

French Competition Law

194. Rules governing logistics penalties

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194. Rules governing logistics penalties

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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