This book provides a wide-ranging review of the European rules relating to distribution: exclusive purchase and exclusive supply, exclusive and selective distribution, motor vehicle distribution, franchises, commercial agents.

French Distribution Law

The abusive exploitation by an undertaking or a group of undertakings of a dominant position on the internal market or a substantial part thereof is prohibited by Article L. 420-2(1) of the Commercial Code. The franchisor in a dominant position which, without objective necessity, reserves itself an ancillary activity that could be exercised by a third party undertaking as part of its activities on …

Abuse of a dominant position or economic dependence.

The abusive exploitation by an undertaking or a group of undertakings of a dominant position on the internal market or a substantial part thereof is prohibited by Article L. 420-2(1) of the Commercial Code. The franchisor in a dominant position which, without objective necessity, reserves itself an ancillary activity that could be exercised by a third party undertaking as part of its activities on a neighboring market, is guilty of abuse. This is the case where the franchisor restricts the franchisees' freedom in the computerized management of stores . According to the Competition Authority, it is possible that contractual provisions defining the franchisor's stake in the franchisee's business and those defining the franchisor and franchisee's obligations, i.e. a lengthy period of commitment, a right of entry by deferred payment, a post-contract non-affiliation and non-compete clause or a pre-emption right, may dissuade the franchisee from leaving the network and strengthen the franchisor's dominant position . Nevertheless, where there is no post-contract non-affiliation or non-compete obligation or any stake by the franchisor in the capital of its network members, a right of preemption of a duration of one year and a penalty clause provided for in the contract are not contrary to Article L. 420-2 of the Commercial Code as the member is able to run his store under another trade name once the contract is terminated as long as no assignment of a majority shareholding is involved . By contrast, the setting-up of a franchise network specialized in the display and enhancement of luxury items justifies the exemption of the sale refusal from a franchisor in a dominant position on the basis of Article L. 420-4 of the Commercial Code .

Paragraph 2 of Article L. 420-2 further prohibits the abusive exploitation of the state of economic dependence in which a customer undertaking or a supplier finds itself. However, a franchisee cannot claim to be in a state of economic dependence with regard to the franchisor on the grounds of the very high/exclusive proportion of its supply being sourced from the latter, where it neither provides details on the relevant market and the position of its co-contractor on that market, nor demonstrates the absence of an alternative source of supply . The franchisor's interference in its franchisee's business is an abuse of economic dependence where the franchisee does not have alternatives . The demonstration of the franchisee’s situation of economic dependence on the franchisor can result from the interaction of a set of contractual terms imposed by the latter, the purpose of which is to limit the possibility of franchisees to leave the network and to restrict their contractual freedom to an extent that goes beyond the objectives inherent in a franchise system, and the fact that those terms were willingly accepted cannot be used against them. Thus, a clause which in practice makes it virtually impossible for the franchisee to source from other suppliers, combined with the one-year contractual and post-contractual non-compete clauses, creates a state of economic dependence on the franchisor . By contrast, economic dependence is rejected where the franchisee has an equivalent solution enabling it to operate its activity independently . Moreover, the dependence of a group of franchisees with respect to the same franchisor is excluded where they do not form a sufficiently homogeneous group by reason of the large variety of legal and economic links binding them to the franchisor . 

Finally, only abuses are prohibited. This is not the case for the practice of selling goods at prices higher than the recommended retail prices or for the granting of different pricing terms to franchisees located in different areas . Likewise, franchisees cannot claim that by exploiting their economic dependence, the franchisor and the assignee of its network has imposed on them a change of brand under less favorable terms, when it is established that some of them were able to refuse that option and retain the benefit of their previous contract until its expiry . To be prohibited, the abusive exploitation of the state of economic dependence must be likely to affect the functioning or structure of competition. Failing any evidence of such an effect, the misappropriation by the new franchisor of the customers of part of its franchisees or practices leading to their exclusion form the market  are contractual disputes and not abuses of economic dependence .

CA Douai, 11 October 1990, LawLex200200006370JBJ.

Competition Authority decision No 13-D-19 of 29 October 2013, LawLex201300001565JBJ

Competition Authority decision No 18-D-22 of 17 October 2018, LawLex201800001604JBJ, cited above.

Competition Authority decision No 18-D-25 of 6 December 2018, LawLex201900002050JBJ.

Competition Council decision No 94-D-24 of 6 April 1994, LawLex200200002514JBJ.

Competition Authority decision No 13-D-19, cited above.

Cass. com., 4 May 1999, LawLex200200002830JBJ.

CA Paris, 31 May 2017, LawLex201700000958JBJ.

Cass. com., 16 December 1997, LawLex200200002617JBJ.

CA Paris, 3 October 2018, LawLex201800001482JBJ.

CA Paris, 2 December 1994, LawLex200200002584JBJ. Cf. CA Rennes, 13 May 1992, LawLex200200002519JBJ: the franchisor abuses of the economic dependence of the franchisee when it unilaterally amends the contractual terms, where the franchisee does not have an equivalent solution for its supply due to the franchisor's commercial policy and the need to have a sufficient stock to answer to the customers' needs; CA Lyon, 2 July 1999, LawLex200200002520JBJ: a franchise contract places the franchisee in a state of economic dependence where it only leaves it a very low margin of autonomy in the management of its business and deprives it of a solution of substitution by reason of the existence of a clause of non-re-establishment.

Competition Authority decision No 10-D-08 of 3 March 2010, LawLex201000000262JBJ; No 18-D-22 of 17 October 2018, LawLex201800001604JBJ.

CA Paris, 3 October 2018, LawLex201800001482JBJ, cited above.

French Distribution Law

349. Abuse of a dominant position or economic dependence.

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349. Abuse of a dominant position or economic dependence.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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