- ARTICLE: Restrictive practices: Reform of the regime of the sudden termination of the established commercial relationship
- IN-BRIEF : Illustration of restrictive practices : Amazon’s important condemnation of significant imbalance!
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Reform of the regime of the sudden termination of the established commercial relationship pay:
On April 26, 2019, Order No. 2019-359 of April 24, 2019 came into force, which revised the chapter of the French Commercial Code dealing with restrictive practices.
Among these restrictive practices appears the sudden termination in the established commercial relationship.
This reform is therefore an opportunity to revisit this notion, which is the subject of numerous litigations and evokes a certain legal insecurity.
The need to adapt the regime of the sudden termination of the established commercial relationship
Prior to the Order, Article L.442-6 of the French Commercial Code set out a list of prohibited practices that limit free competition.
The 5° of that section specifically penalized the fact that:
“To suddenly terminate, even partially, an established commercial relationship, without prior written notice taking into account the duration of the commercial relationship and respecting the minimum period of specified notice, with reference to commercial practices, through interprofessional agreements”.
This provision was introduced in the French Commercial Code to combat the abusive dereferencing of suppliers by distributors. However, case law has gradually enriched the framework and extended it to any commercial relationship as long as it was “ongoing, stable and continuous.”
In their report to the President of the Republic, the order’s drafters have identified and denounced several abuses related to this regime that they have tries to prevent through a simplification of the mechanism.
First, they point out that the case law has made it imperative for the parties to respect extremely long notice in order to avoid any risk of conviction, even if “their commercial offers were no longer in line with market conditions”.
Secondly, the effect of this scheme would have been ultimately, particularly in an international context, to restrict competition and thus result in the absolute opposite of its original objective. In fact, taking into account the risk of conviction, involving the observance of a long notice and/or the payment of compensation, would have led the economic operators to less “proceed to” competition. The report indicates that notice allowances were sometimes even reflected in the selling price.
At the end of the day, it was obviously the consumer who was suffering.
Finally, the lack of a clear line on the duration of the minimum notice and the amount of compensation provided an incentive for actors to engage in legal proceedings rather than settle, thus contributing to court overcrowding.
Over time, therefore, this regime has been the subject of a great deal of litigation, which ultimately created the need for reform.
The content of the Reform
In the interests of simplification, the mechanism of the sudden termination of established commercial relationship is the subject of the new article L442-1 II in the French Commercial Code.
The Order came into force on April 26, 2019. However, it does not provide for any transitional provisions concerning the sudden termination of the established commercial relationship. It can therefore be deduced that the latter will be applicable to contracts concluded as from that date. The issue of applicability to the current contract and amendments after April 26, 2019 remains outstanding. In case of doubt, the terminating party should refer to the strictest rule.
In concrete terms, the drafters first clarified that the prohibition of sudden termination applies to any person engaged in a “production, distribution, or service” activity.
This clarification confirms that the scope of the scheme is extremely broad. On the other hand, this wording makes it almost impossible to imagine an activity that does not fall within this field, since there is an established commercial relationship.
No explanation of this desire for clarity is given in the report to the Speaker.
The reform also adds a paragraph to this section that states:
“In the event of a dispute between the parties concerning the duration of the notice, the liability of the author of the termination may not be incurred on account of an insufficient period of time if he has complied with a notice of eighteen months”.
Here, the stated purpose is clear. It is a matter of restoring legal predictability to the mechanism. However, the objective seems only partially achieved. It makes it possible to secure and make foreseeable the consequences of termination of relationships with very long duration. Nevertheless, doubt persists for shorter relationships. Since the duration of the notice will be less than 18 months, the risk of conviction will still have to be assessed as far as possible in the light of the case law.
Economic operators will therefore have a choice to make. They will prefer to prevent any risk of conviction and will respect a minimum notice of 18 months. In this case, the consequence is a return to the perverse effect of restricting competition which the drafters nevertheless wanted to combat. On the other hand, they will feel that the relationship they intend to break does not warrant such long notice and will take the risk of a condemnation. This second hypothesis therefore creates the same legal uncertainty regarding the “established” nature of the commercial relationship and the duration of the notice that will be left to the judge’s discretion.
Finally, the reform removed any reference to the specific cases of contracts relating to the distributor’s trademark or to “call of competition through distance bidding”; for which the notice had to be doubled.
In conclusion, although a progressive minimum notice according to the duration of the relationship would have been preferable, it seems to us, however, that this scheme strikes a reasonable balance between the interests at stake. Case law will continue to define what is an established commercial relationship and will be responsible for restoring legal certainty in cases of rupture, the consequences of which are not clearly regulated by the text.
Illustration of restrictive practices : Amazon’s important condemnation of significant imbalance!
On 2 September 2019, the Paris Commercial Court sentenced the companies AMAZON SERVICES EUROPE and AMAZON FRANCE SERVICES to pay a civil fine of 4 million euros for having created a significant imbalance in their relations contracts with third-party vendors referenced on the platform.
This is in fact on the basis of a report from the General Direction for Competition, Consumer Affairs and the Suppression of Fraud (DGCCRF), and on the basis of the former article L442-6, I, 2° (now L442-1, 2°), that the Minister of Economy and Finance has assigned three AMAZON companies.
The Tribunal allowed, at least in part, the Minister’s request since it qualified a significant imbalance through a body of evidence.
First, the judges noted that the sellers did not negotiate the terms of their SEO, as they are subject to the terms and conditions and options of sale such as “Shipped by Amazon”. Second, the Tribunal considers that Amazon is a market leader and that, above all, its position is much more important than that of its co-contracting parties. Also, since Amazon is an indispensable marketplace for e-commerce, third-party sellers cannot expect to compete through other channels (own e-commerce site for example).
Once this had been described, and in the light of it, the Court of First Instance listed the clauses which created a significant imbalance and those which were in conformity.
For example, the clause according to which AMAZON can modify the contract at any time without notifying the seller, the immediate termination or interruption of services without cause, or the one that allows AMAZON to delay or suspend a sale, are considered unbalanced.
It should be noted that these clauses are not necessarily unlawful by nature but that it is their addition and the contractual context, in particular the position of the parties, that create the imbalance.
Conversely, the court has validated the legality of other clauses such as the one that exempts AMAZON from liability in the event of a website failure or that allows it to use data from transactions with sellers.
In the end, the significant imbalance is the result of a combination of various factors and any economic operator must question this notion at the conclusion or revision of a contract.
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