Draft Sapin 2 Act: Effects on distribution agreements and on restrictive practices: increased contractual flexibility but strengthened sanctions.
On November 3, 2016, draft Sapin 2 Act (name of French Minister of the Economy) was enacted by the Senate. New step is a vote by the National Assembly. This draft act contains strong indications of what could be the final law.
Retail distribution agreements for maximum three years but yearly pricing negotiation:
The requirement of an annual distribution agreement would disappear with an opportunity to make distribution agreement with retailers up to three years. Practically, small suppliers’ and retailers’ professional organizations FEEF and FCD have anticipated this since September 2013 in an agreement (http. // www.feef.org/Engagements-et-r%C3%A9ussites/Accords-sign%C3%A9s-avec-la-FCD/Plate-forme-diff%C3%A9renci%C3%A9e-PME) and number of suppliers and distributors now plan to stick at contractual terms for a certain period over one year to avoid to reinitiating negotiations of these terms each year.
The draft act provides pursuant to Article 31b that 5th paragraph of Article L. 441-7 of French Commercial Code is amended as follows: « The written agreement [between suppliers and retailers] is made for a period of one year, two years or three years, no later than March 1 of the year when is come to effect, or within two months after the starting point of the sale of the products or services subject to specific marketing cycles. When concluded for two or three years, it provides the conditions of revision of agreed price. These conditions may refer to public index related to production factor evolution. ».
Strengthened sanctions:
Article 31 bis D of the draft act adds a new case of liability in the always inflating Article L. 442-6 of French Commercial Code, which is supplemented by a new paragraph 13°: a party is liable when providing or attempting to provide the other party penalties for late delivery in case of force majeure.
Article 36 of the draft act skyrockets the administrative fine due for non-compliance with the legal requirements related to existence and content of terms and conditions of sales, billing obligations and maximum payment terms (see Articles L. 443-1 and L. 441-6) from €375,000 to € 2 million.
Article 31 D of the draft law aims at increasing the civil penalty provided in Article L. 442-6 of the Commercial Code, applicable in case of restrictive practices (e.g. disproportionate consideration, significant imbalance, sudden termination of commercial relations) from Euro 2 million to Euro 5 million when the Minister of Economy brings the claim.
Frédéric Fournier
Partner