Act : Focus on the reform of the supplier/distributor relations
CHATEL’S DRAFT ACT GENERAL COVENANTS.
UNIQUE AGREEMENT AND DECREASE OF BOTTOM RESALE PRICE.
Since the previous reform of August 2, 2005, namely the Dutreil Act, and an explanatory decree on December 2005 for Dutreil Act, many points will be still in effect but major modifications are supposed to occur concerning the bottom resale price and general conditions of sales. Next step is a potential reform on the right to negotiate terms and conditions of sales or services strongly requested by distributors, but practically effective.
Last but not least probably, a reform of the regulation applicable to creation and extension of supermarkets which is examined in a think tank led by Mrs. Hagelsteen, as wished by French Government.
2.1 How can a supplier propose various general T&Cs of sale?
The Chatel Act should not change the long-term principle that suppliers may propose different general T&Cs of sale provided the difference has a consideration and does not result from abusive requirements from the purchaser. T&Cs of sale shall now contain price lists and discount programs.
Difference may arise from delivery or packaging terms and conditions, specific logistics or storage services, payment terms, anticipated payment rate, purchase volume commitments, or the purchaser category. Dutreil Act had contemplated that some decree may give some guidelines in order to distinguish between general T&CS for sale to wholesalers or retailers, but no such decree was actually drafted. Chatel Act maintains the requirement of a coming decree.
General T&Cs had to be communicated to whom required so subject to criminal offence prosecution. Specific conditions might be made. Chatel Act adds that any purchaser can now file an action in order to have the supplier held liable for not communicating such terms.
2.2 Services defined by the law
Three categories of services now exist: services rendered by a distributor or a service provider arising from its commercial policy (logistics), services dedicated to improve the sale of the products (previously as « commercial cooperation » services) and separate services which shall not fall into the commercial cooperation services.
Sale Improvement Services do not relate to the sale and resale operation, are rendered in the meantime of the resale to end-consumers and are made to improve the sale of the products (advertising towards end-consumers, advertising brochures, discount programs for consumers (cards, vouchers, games…), presence on distributors’ website, advertising for the distributor quoting some supplier’s products, internal radio programs, sampling, specific jobracking. No fixed pricelist should exist, as pricing depends on various factors and should be proportional to the services rendered.
The other services are in particular services rendered by the distributor pursuant to international agreements negotiated abroad or services rendered by wholesalers to suppliers not linked to the resale of the products or by distributors, or services such as statistics, analysis of product location in racks, aftersale services, catalogs, promotion towards resellers supplied by the distributor…
Chatel Act does imply no change to this mechanism created or completed in 2005.
Any services agreement had to be described in writing either in a unique agreement or in a master agreement giving rise to specific agreements for each service and shall be annual and entered into by March 1.
Chatel Act requires a unique agreement for any and all terms of the specific T&Cs of sale, sale improvement services and separate services. The unique agreement could be amended from time to time for the concerned year depending on new operations.
Sale Improvement services agreements have to give details upon of the service to be rendered, the products to which they will apply, their term, their remuneration. Sale Improvement services remuneration shall be given as a percentage of the net unit price of the products for the distribution of which it is made. A uniform rate may be given for several products even if the service will be made for one or a part of them: Chatel Act does not modify this.
The percentage is based on the purchase price of the product applicable to the distributor, and not on the latter’s product resale turnover.
Before each January 31, the distributor shall send the aggregate amount for services made (commercial cooperation and other services) to the suppliers. Such amount shall be expressed in a percentage of the product resale turnover.
Chatel Act should not imply any change regarding new promotional instruments (« NIPs ») which consist of promotional offers made by a distributor to end-consumer based on the purchase or purchase volume of some products by the end-consumer (either via an immediate discounts, fidelity program or shop cards…). Some NIPs may enter into the commercial cooperation category, when the discount or the promotional offer is not made through an agreement where the distributor is acting as an agent of the supplier acting in behalf of and for the account of the latter. If such agency agreement is made, the remuneration granted by the supplier to the distributor cannot be deducted to calculate the bottom resale price.
2.3 Enforceability in France and abroad
These requirements apply to any agreement having an effect on the sale of products or services in France even if the contracting party is not located in France.
Frédéric Fournier, Partner