New regulation applicable to distribution
French National Assembly voted yesterday the draft Act (« Chatel Act ») related to the relations between suppliers and distributor, which aims at clarifying the rules and reduce the bottom resale price. French Government which claimed for this reform wishes a decrease of prices to end-consumers with granting the possibility to distributors to reduce their resale price (which cannot be inferior to the bottom resale price as calculated under French law).
Next step is the review of the draft Act by Senators (the Act is supposed to be voted by January 1, 2008) and in the coming months debates before Parliament related to potential negotiations of the suppliers’ general terms and conditions of sales.
1. The T&Cs of sale and supplier’s civil tort liability.
T&Cs for sales or services remain to date the terms of reference for any sale or service. They have to be communicated to any who requests for receiving them. Criminal offence remains for non communication of T&Cs, but draft Chatel Act now provides that any purchaser may file a claim for (i) having the supplier held liable for non sending its T&Cs but also (ii) claim for damages.
Specific conditions derogating to general T&Cs, services rendered by the distributor to the supplier in order to favor the commercialization of the products with no link with an obligation directly arising from the sale or purchase (namely « service de coopération commerciale »), e.g. statistics made by distributors, and any other services (namely « services distincts ») benefiting to the consumers, shall be provided in a unique agreement.
Unique agreement may be either one annual contract, or an annual master agreement giving rise to specific agreement.
The unique agreement shall be entered into by March 1, each year, except for new relations made for the year for which the unique agreement is to be signed within 2 months from the first purchase order.
2. Bottom resale price.
A distributor cannot resell products at a price under the bottom sale price, except for periods of sales or old fashioned products…
Chatel Act should allow the distributor to calculate bottom resale price by deducting all discounts granted by supplier or remuneration received from supplier for the services of commercial cooperation or other services. These deducted amounts are called « financial benefits ». For wholesalers selling products to independent and non affiliated distributors or non franchisees, the bottom resale price is as provided by law less 10%.
Financial benefits shall be expressed in the unique agreement, in percentage of the unit price of the product or service.
3. Abusively low prices for agricultural raw materials.
French law prohibits abusively low prices proposed by a manufacturer (roughly meaning prices under the costs incurred) as an anticompetition practice. However for some agricultural raw materials, purchasers shall have the possibility to file a claim for damages against the seller of such products, if the seller is the initial seller.