Judgment of the Paris Court of Appeal of 6 November 2019 on the single agreement and the significant imbalance in the relationship between an car manufacturer and a distributor
The Paris Court of Appeal had to rule on disputes raised by an automobile distributor concerning the single agreement proposed by a car manufacturer (represented by our firm). The disputes were based on Article L. 441-7 (former) of the French Commercial Code (now Article L. 441-3) governing single agreements and on Article L. 442-6, I, 2° (former), now Article L. 442-1, I, 2°, of the same code relating to significant imbalance. Two main lessons can be drawn from the judgment rendered on 6 November last:
there was no subjugation to unbalanced obligations if the distributor was multi-brand and belonged to a large distribution group, which did not reflect an unbalanced balance of power. The single agreement could therefore not be challenged on the basis of Article L. 442-6, I, 2° (former).
the supplier wasfree to set a deadline for its distributors to sign the single agreement even if this date was before March 1 (in this case, the agreement had to be returned on December 1 of year n -1). If it was not returned within the time limit, the distributor was not entitled to the variable discounts stipulated in the agreement.
On 16 October 2019, the daf-mag.fr website published an article written by our firm entitled “Anti-competitive agreement: definition and risks”, which is a reminder that sometimes agreements between companies can distort competition and lead to serious fines.
In its September 2019 issue, the Revue Lamy de la concurrence publishes an article by Xavier Henry entitled “Selective distribution and refusal to contract: the difficulty of reconciling Metro I case law with exemption regulations” (RLC n° 86 9/19 , p. 31).
In three recent decisions, the Paris Court of Appeal and the French Competition Authority had to examine, under competition law, the validity of a refusal to contract from heads of selective distribution networks to candidates for entry into these networks. In particular, they verified that the refusal to contract did not have an anti-competitive object in the light of the case law resulting from the Metro I judgment of the Court of Justice. However, this research does not seem useful because a refusal to contract which does not constitute a hardcore restriction within the meaning of the applicable vertical restraints exemption regulations is not unlawful in itself. The refusal to contract could possibly only constitute a restriction by effect (which was however not the case in the Court of Appeal’s décisions).
The law or companies provide a number of guarantees in favour of buyers of goods. Their multiplicity means that litigants may be lost, especially regarding time limits for asserting their rights. An article from our Law Firm published by the website chefdentreprise.com provides an update on this issue.
Since 2008, “significantly unbalanced” clauses in commercial contracts have been prohibited when imposed by the strong party to the contract. Review of this ban, sometimes unknown, which was reformed last April 24 in an article published by our firm on the website chefdentreprise.com
Few pictures of our presentation for Campus Avocats on July 5, 2019 in the Maison de la Chimie in Paris on the theme “Unbalanced clauses in commercial contracts (Article L. 442-1, I, 2° of the French Commercial Code): inventory of the situation and prospects after the reform of 24 April 2019“.
The French Competition Authority can enter the premises of companies without warning and seize documents on all media for several hours or even days. Knowing its rights in this kind of situation is essential. Review of the rights of companies in an article of our law firm published by the website chefdentreprise.com
In its June issue 2019, the Revue de Jurisprudence de Droit des Affaires (RJDA) publishes a legal article written by Xavier Henry entitled “price control by the judge based on the prohibition of submission to a significant imbalance between the parties: Much ado about nothing ?”
On November 30, 2018, the French Constitutional Council (Conseil constitutionnel) declared that the interpretation of the French Supreme Court (Cour de Cassation) regarding Article L. 442-6, I, 2° (now Article L. 442-1, 2°) of the French Commercial Code that the judge is entitled to control the price agreed by the parties was in accordance with the French Constitution. If this control does not appear so surprising since it is not new under French law, its implementation seems delicate so that the judicial challenge of the price should be exceptional. Moreover, if the Order dated 24 April 2019, which amends ex-article L 442-6, I-2°, will not be of any help on the implementation of the control issue, it could nevertheless broaden the judge’s right to control the price.
As every year, the Paris Bar organizes at the beginning of the summer a week of training for Paris Bar’s lawyers. These trainings are provided by lawyers, law professors, in-house lawyers, …
Our firm was selected to provide on July 5, 2019 at 16:45 at the Maison de la Chimie in Paris a training course entitled “Unbalanced clauses in commercial contracts (Article L. 442-1, I, 2 ° of the Commercial Code): inventory of the situation and prospects after the reform of 24 April 2019 “. The following link allows to register.
Inventory of the administrative fines imposed in 2018 and at the beginning of 2019 in case of payments exceeding legal deadlines through an legal article of our firm published on the websites decision-achats.fr and chefdentreprise.com entitled: “payment exceeding deadlines: fines increase”.
Order n° 2018-359 dated 24 April 2019 amends the provisions of Title IV of Book IV of the French Commercial Code, particularly the provisions concerning transparency in commercial negotiation. Without revolutionizing the subject, the reform brings new provisions that it is important to know. Review of the “new” transparency resulting from the order n° 2018-359 dated 24 April 2019 in a legal article published on 21 May 2019 by our firm on the Village de la Justice website entitled “Reform of the rules of the transparency in the commercial relations: the revolution will wait”.
Publication of a legal article by Xavier Henry co-written with his Colleague Emmanuel Dieny in the Revue Lamy de la concurrence entitled “Refusal of approval of a selective distributor: the Court of Appeal of Paris in front of the limits of the antitrust law”(RLC 3572, No. 83 May 2019, p.13).
In a few months, the Court of Appeal of Paris has rendered several decisions about the refusal of approval by car manufacturers to candidates who wanted to become or remain authorized repairers (selective distribution). Under this astonishing concentration of decisions, the Court of Appeal had to rule on a question which had not been submitted to it for a long time, i.e. whether a refusal to contract was an agreement in the sense of Article 101 (1), TFEU and 420-1 of the French Commercial Code (antitrust law) or if it was an unilateral act. The Court replied that it was an agreement that could be an anti-competitive agreement in the event of an anti-competitive object or effect. This position, which applies to all selective distribution and not only to automobile distribution, is questionable regarding the principles.
Order No. 2018-359 dated 24 April 2019 amends the provisions of Title IV of Book IV of the French Commercial Code, and in particular the provisions concerning restrictive practices. These are largely rewritten. Presentation of these important changes in an article published on May 15, 2019 by our law firm on the website of the Village de la Justice entitled “A real reform of restrictive practices of competition”.
The Franchise Magazine website publishes an legal article of our law firm: “Breach of a franchise agreement by the franchisee with the complicity of a franchisor’s competitor: damages due by everybody” (17 April 2019)
Our law firm is once again listed in 2019 in Best Law Firm ranking established by Décideurs Magazine in Antitrust and Anti-Competitive Practices as well as Distribution Law and Restrictive Practices.It is also this year in the commercial litigationranking.
Publication of an article written by Xavier Henry in the legal journal Les Petites Affiches of March 12, 2019 about a judgment rendered by the Court of Appeal of Paris on October 3, 2018 entitled “Franchise Agreement: analysis by the court of Paris of several behaviors and clauses” (LPA 12 March 2019, n ° 51, article n ° 142n8, p.5).
According to a judgment dated 3 October 2018, the Court of Appeal of Paris had to settle a dispute between a franchisor and a franchisee in the field of mass distribution which leads the court to examine several aspects of the franchisor / franchisee relationship such as the franchisee’s economic dependence vis-à-vis its franchisor, the practice of prices between the parties or the post-contractual non-competition clause. The answers given by the court on these various questions make it possible to broaden the legal analysis of relations between franchisors and franchisees and more generally between suppliers and distributors.
Autoactu.com comments the decision of the Paris Court of Appeal dated 23 January 2019 which confirms the car manufacturer’s right to refuse to contract opposed to a authorized repairer candidate. The car manufacturer was represented by our firm.
Selective distribution: validity of a refusal to contract opposed by a car manufacturer to a former repairer (Paris Court of Appeal, January 23, 2019, n ° 16/16856).
By a judgment of 23 January 2019, the Paris Court of Appeal ruled that a car manufacturer represented by our firm was entitled to refuse to contract with a former repairer whose contract had been terminated with a two years’ notice since the refusal to contract did not have an anti-competitive object or effect.
The former repairer argued that because he fulfilled the qualitative standards of selection, he had to be approved again. This argument is rejected. The car manufacturer does not infringe the competition rules by not contracting with him. The manufacturer simply did not want to renew a partnership which did not satisfy him. The Court adds that, regarding competition on the car aftermarket, refusing to contract with a repairer candidate cannot have an effect on the market.
The car manufacturer has therefore not committed any anti-competitive practice.
It must therefore be understood from this judgment that a manufacturer may not have to contract again with a former repairer whose contract was terminated with a two years’ notice even if he fulfills the qualitative standards of selection (Arrêt Mazda CA Paris 19.01.23).
January 16, 2019. Publication on the Justice Village website of a legal article written by Xavier Henry entitled “Franchise contract: pre-contractual information is still in the case law events”.
Although the provisions relating to the pre-contractual information that must be provided before signing a franchise contract in particular are not recent since they derive from the Act n° 89-1008 dated 31 December 1989 known as ” Doubin Act “and decree n° 91-337 dated 4 April 1991, they continue to generate plentiful case law.
January 7, 2019. The DGCCRF (French Directorate General for Competition, Consumer Affairs and Prevention of Fraud) submits to professionals for opinion the proposed changes of the Commercial Code regarding in particular invoicing and single agreement (“convention unique”).
These amendments will then be subject to legal provisions in accordance with the EGALIM Act of October 30, 2018.
The DGCCRF has prepared a document showing the modified provisions with its comments. Essentially:
With regard to invoicing: the invoice must be issued as soon as the delivery and no longer upon the completion of the sale.
as regards the single agreement, different cases are envisaged depending on whether or not the agreement concerns consumer products (“produits de grande consommation”) which are defined by the DGCCRF in its comments. When it does not cover such products, the conditions are less restrictive. There is no longer a deadline for concluding it because it is up to the parties to determine this date (the date of March 1, however, is maintained for single agreements concerning wholesalers). In the case of consumer products, the proposed amendments are more rigid ( forecast turnover, imperative date of conclusion which is no longer however necessarily that of March 1, no possibility for derogations, …).
Article L. 442-6 of the Commercial Code (significant imbalance, sudden termination of commercial relations, etc.) is not concerned and will be subject to subsequent proposals.
Comments must be sent by 21 January 2019 at the latest. The bill will be submitted to the Conseil d’Etat (State Council) at the end of February 2019.
Publication in October 2018 of a legal article written by André Bricogne on the Village de la Justice website about the Court of Appeal of Paris’ decision dated 4 July 2018, n° 16/05518, and entitled : “Distribution Contract: sudden OR unfair termination or sudden AND unfair termination ?”
Publication in September 2018 of an article written by André Bricogne on the Village de la Justice website about the Court of Appeal of Paris’ decision dated 12 September 2018, n° n°15/15234 and entitled “Termination of a distribution contract: The injury assessment according to the legal basis of the claim” (village-justice.com, 20 September 2018).
The economic reconversion of the business partner victim of a contractual termination will be, or will not be, taken into account to assess the reparable damage according to whether the claim for damages is brought on a contractual or tortious basis.
Publication in September 2018 of an article written by Xavier Henry in the legal Journal Dalloz Actualité Juridique Contrat entitled “Abusive clauses in commercial contracts: inventory of the situation ten years later” (Dalloz AJ Contrat – August-September 2018 – n° 8-9, p. 370).
The modernization of the economy law dated 4 August 2008 added in Article L. 442-6, I, 2 ° of the French Commercial Code a new case of responsibility prohibiting the fact of “submit or attempt to submit a trading partner obligations creating a significant imbalance in the rights and obligations of the parties “. The legislator thus wanted to extend to commercial contracts the prohibition of unfair clauses previously reserved for contracts between consumers and professionals. If Article L. 442-6, I, 2 ° does not constitute the revolution expected by some and dreaded by others, it nonetheless poses a general principle that simplifies the challenge of clauses not only by the weak party of the relationship but also by the Minister of the Economy. Ten years after its adoption, an inventory of case law is needed, the text having obviously raised questions that have not all received a clear answer.
Publication in September 2018 of an article written by our law firm on the Village de la Justice website about recent case law in economic law (Chronique sélective de la Jurisprudence rendue en droit économique, village-justice.com, 12 September 2018).
In particular, with regard to competition law, the European Commission has highly fined a search engine for abuse of dominant position and the Paris Court of Appeal has in general upheld the fines imposed by the French Competition Authority in the courier and parcels cartel . The Court of Appeal of Paris handed down various interesting decisions on the unfair (imbalanced) commercial clauses, on the disproportion of an advantage granted with regard to its value (subject rarely dealt with in case law), on the sudden termination of established relations, on unfair competition and parasitism. Regarding distribution law, Courts have been led to decide the validity of the pre-contractual information document imposed by Article L. 330-3 of the French Commercial Code, on certain contractual clauses such as purchase commitments or on the principles of calculation of the compensation due to the commercial agent in case of termination of his contract. Finally, regarding consumer law, the French Supreme Court (Cour de cassation) ruled on the legal guarantee of conformity.
Publication in July 2018 of an article by Xavier Henry in the Quarterly Review of Commercial Law and Economic Law (RTDCom), Editions Dalloz, entitled “The ill-established case-law principles of Article L. 442-6, I, 5 ° of the commercial code ” (RTDCom, April-June 2018, p. 523).
If the merits of Article L. 442-6, I, 5 ° of the French Commercial Code which requires, before terminating an established commercial relationship, to give written notice to the co-contracting party, are not disputed, its application makes debate. The Commercial Chamber of the French Supreme Court (Cour de cassation) has made this text a special category of civil liability, asserting in particular its tort nature although the parties were bound by one or more contracts (written or not). Above all, it created a new principle in French law: compensation without proof of harm. The case law is often disconcerting, which increases the legal uncertainty for companies which have to deal with new rules that it was hardly possible to anticipate such as the questioning of the resolutive clauses. However, an application of well-known legal principles would not diminish the effectiveness of the text and would provide greater legal certainty.
Legal article written by Xavier Henry published in the legal journal Les Petites Affiches dated April 6, 2018 entitled “Business relationships : to be established or not to be” (LPA 6 April 2018, n° 70, article n° 134h3, p. 9).
It presents thoughts about what are or should be “established” business relationships under Article L. 442-6, I, 5° of the French Commercial Code which prohibits abrupt termination of established business relationships.
Legal article written by our law firm published in the legal journal Dalloz Actualité Juridique Contrat of February 2018: “Motor vehicles and motorcycles contract: review of jurisprudence of the year 2017” (Dallloz AJ Contrat, February 2018, n° 2, p. 70).
Automotive distribution, given its economic dimension in France and uses or habits resulting from successive specific exemption regulations, generates numerous and sometimes specific cases. 2017 did not depart from this rule. Whether it is the selection of distributors, the performance of contracts or their termination, 2017 knew very interesting judgments. Motorcycles distribution, even if litigation is lower, completes this panorama of case law.