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CANIVET REPORT

1

REPORT

OF THE GROUP OF EXPERTS ESTABLISHED

ON REPORTS

BETWEEN INDUSTRY AND TRADE

2

SUMMARY

INTRODUCTION 4

  1. THE CURRENT BALANCE, ARISING IN PART OF EXISTING LEGISLATION, MUST

BE CHALLENGED TO REBUILD PRICE COMPETITION AT

THE CONSUMER ADVANTAGE 6

1.1. The legislative mechanism created in 1996 has achieved its objectives …………………………………. … 7

1.1.1. The law applicable to relations between suppliers and distributors has experienced a

significant development in 1996 ………………………………………. ……………………………………….. 7

1.1.2. But the law of 1 st July 1996 led to a significant change in the

commercial negotiating ………………………………………… ………………………………………….. 16

1.2. The distribution sector in France is oligopolistic ……………………………….. 22

1.2.1. Hypermarkets are still dominant in France but are contested by the

hard discount …………………………………………. ………………………………………….. …………… 22

1.2.2. A strong distinction between independent trade and integrated trade exists25

1.2.3. French distribution groups are powerful ……………………………………. ….. 26

1.2.4. There is a phenomenon of regrouping in the form of central purchasing bodies ………… 28

1.3. Supermarkets’ suppliers have heterogeneous characteristics 29

1.3.1. Groups are concentrated and have strong brands ………………………….. 30

1.3.2. SMEs are more fragile ……………………………………… …………………………………. 32

1.4. The current balance is not satisfactory ………………………………….. ………………………. 33

1.4.1. A balance that has been established to the detriment of the consumer …………………………. 33

1.4.2. The rise in the prices of consumer goods can be explained by the

combination of industry concentration and legislation ………………………………… 36

1.4.3. The measures taken in 1996 did not produce the expected effects with regard to

safeguarding “small business” …………………………………… …………………………… 41

1.4.4. France is characterized by a more restrictive regulatory environment

than other European countries ……………………………………… ………………………………………. 44

1.4.5. The progression of hard discount is constant …………………………………….. ……… 48

CONCLUSION OF PART ONE 52

  1. THE PROPOSED REFORMS 54

2.1. Strengthen the administrative and judicial system for implementing the

regulations …………………………………………. ………………………………………….. …………….. 55

2.1.1. Making recourse to the judge more effective, both in civil and criminal matters ……………… 56

2.1.2. Strengthening the role of the Trade Practices Review Board ……………… 63

2.2. Clean up commercial relations ………………………………………. ………………………… 65

2.2.1. Supervise commercial cooperation ………………………………………. ………………….. 65

2.2.2. Sanction abusive range reductions …………………………………….. ………….. 68

2.2.3. Insert in Title IV of Book IV preliminary provisions relating to the

unfair competition ………………………………………… ………………………………………….. …… 69

3

2.3. Lower prices by returning to the laws of the market. ………………………………………… 70

2.3.1. The prohibition of resale at a loss and more generally the law of practices

restrictive policies are hardly compatible with the free play of the market …………………………………. .. 71

2.3.2. The elimination of resale at a loss could only be done gradually and

under the aegis of a regulatory authority …………………………………. …………………………….. 73

2.4. Lower prices by adjusting the SRP …………………………………… ………….. 74

2.4.1. The new threshold for resale at a loss envisaged …………………………………… …………… 79

2.4.2. Such a reform would be simple and effective to achieve a fall in prices at

consumer benefit ……………………………………….. ………………………………………… 79

2.4.3. A transition period could be considered ……………………………………. …….. 80

2.4.4. This reform should be accompanied by corrective measures specific to

meet other public policy objectives ………………………………….. ………. 780

2.4.5. The other avenues considered ………………………………………. ……………………………….. 79

2.5. Act on the concentration level of distribution ………………………………….. …. 81

2.5.1. Redesigning the merger control regime ……………………………………. 82

2.5.2. Reviewing Commercial Equipment Legislation ………………………… 82

CONCLUSION OF PART II 85

  1. THE SPECIFIC DIFFICULTIES ENCOUNTERED BY THE SECTORS

AGRICULTURAL, IN PARTICULAR BY THE FRUIT AND VEGETABLE SECTOR,

CALL FOR A RENEWED FUNCTIONING OF THE INTERPROFESSION

STATE SUPPORTED 88

3.1. The economic sector studied operates according to economic mechanisms

unique by being subject to a specific legislative and regulatory framework. ……………. 89

3.1.1. The unique mechanisms of this economic sector ……………………………………. 89

3.1.2. The sector is subject to a specific regulatory environment ………………… 91

3.2. The group’s analyzes and proposals ……………………………………. ………………… 92

3.2.1. The contractual route seems to be the only one likely to be taken

with regard to minimum prices. ………………………………………….. ………………………………….. 93

3.2.2. The application of concerted prices supposes a regrouping of the offer ………………… 94

3.2.3. The device aimed at cracking down on practices of ” excessively low prices ” by

period of crisis seems doomed, as it stands, to ineffectiveness …………………………….. …….. 94

3.2.4. Business cooperation and discounts, rebates and rebates can be

prohibited, unless otherwise agreed in an inter-professional framework ………… 95

3.2.5. In terms of ” sales without price “, or ” price after sale “, a reflection remains to be done.

lead …………………………………………. ………………………………………….. ……………………….. 96

3.2.6. The establishment of a mechanism intended to contain the distribution margins by

crisis to mitigate its effects presents risks …………………………………. ……… 97

3.2.7. The question of advertising with price ……………………………………. ……………………. 103

CONCLUSION OF PART THREE 105

GLOSSARY 107

APPENDICES 110

4

INTRODUCTION

By letter of assignment of 22 June 2004 1 , the Minister of State, Minister of the Economy,

finance and industry, brought together the group of experts provided for in the agreement signed on June 17

2004 2 between the main operators in the retail and industrial sectors.

As this letter suggested, this group 3 was formed to bring together the

necessary documentation, to carry out the 4 useful hearings and to lead a reflection

collective in order to meet the assigned objectives.

The engagement letter invited an analysis of the existing legislation, in legal terms and in terms of

from an economic point of view, then to make reform proposals to facilitate relations between

suppliers and distributors, to strengthen, in the interests of consumers,

price competition mechanisms and to lower the prices of products from

Big consumption.

With regard to existing legislation, the results of which have been drawn up, the group has mainly

examine what constitutes Chapter II of Title IV of Book Four of the Code of

trade. This indeed seemed to him to be the spirit of the agreement of 17 June 2004 and the object of the

engagement letter. In order to carry out its work, the group could not, however, exclude from its

general reflection on other aspects of competition law or commercial law, under

it was hard to avoid certain essential dimensions of the questions put to him. It is him

thus appeared necessary to take into account the main effects of the concentration of

distribution caused or aggravated by legislation relating to commercial town planning.

For a long time, relations between producers and distributors have been problematic.

A summary, but significant clue to the sensitivity of this subject is certainly the

succession, at a high pace, of texts aimed at facilitating or better balancing these relations.

To stick to the recent period, the order of 1 st December 1986 was particularly

modified by two important laws, that of 1 st July 1996 and that of 15 May 2001 on the

new economic regulations. Three years later, a commission of experts was set up

in place to formulate reform proposals: the durability of the texts is reduced to

as difficulties appear or persist.

If to counterpoint to the frequently invoked asymmetry of the strengths of actors, distributors

on the one hand, suppliers on the other, is a constant concern of the public authorities, the

group was underpinned by the final objective determined by the engagement letter: that of

strengthen price competition to lower prices in the interests of consumers.

The promotion of a balanced development of trade relations cannot, in fact,

have as price an excessive inflation of consumer products supported by

consumers who are foreign to the mechanisms governing negotiations between

distributors and suppliers. It is in this perspective that the group has conducted its

reflections, both to take stock of existing legislation and to consider

reform proposals.

1 Annex I – Mission letter from the Minister of State, Minister of the Economy, Finance and Industry.

2 Article 6 of the commitment of June 17, 2004.

3 Annex II – List of members.

4 Annex III – List of people or organizations interviewed and number of meetings.

5

This report provides the diagnosis that the device relating to the prohibition of resale to

loss is satisfactory, as are the rules relating to invoicing. He underlines

However, the upward trend in consumer prices is the product of the

combination of three factors: the high degree of concentration in the

distribution, on the one hand, the behavior of operators, who have moved the negotiation

commercial towards what is commonly called the “rear margins”, since the entry into

force of the law of 1 st July 1996 the other, and finally the protection of situations

acquired from which distributors benefit as a result of the legislation relating to town planning

commercial. An artificial market equilibrium that is very unfavorable to the consumer has thus developed.

stabilized (part 1) .

The answer to these difficulties lies, in the first place, for the group, in the strengthening of

conditions of application of the law. The operators’ submission to the rules that govern

their relationship must be secured. The capacity of courts to deal with cases in

deadlines that are those of the business world and the effectiveness of their decisions are here

essential. Second, the problems raised by the relationship between industry and the

trade do not call for even more systematic regulation of these relationships, but

the gradual abandonment of the framework for commercial negotiations as implemented

up over time. To carry out this process, the public authorities can borrow

different avenues, some requiring accompanying measures, and this report

offers several options in this area. Finally, special attention should be paid to

concentration control of the distribution sector (part 2) .

During his speech during the installation of the group of experts, and by a second

letter addressed to the Prime President of the Court of Cassation 5 , the Minister of State, Minister of

economy, finance and industry, stressed the importance of the agricultural issue

for the work of the group. The specific difficulties that have arisen in the agricultural sectors, and

particularly those encountered by the fresh fruit and vegetable sector, seemed to make

necessary the constitution of a specific working group 6 , which also carried out

7 hearings , to review them. The report of the work of this working group and the

its proposals appear at the end of the report drawn up by the group (part 3) .

Finally, it should be specified that have been received, from persons or organizations,

auditioned or not, written contributions. Some people or organizations have accepted

that they be made public in the appendices of the report.

5 Annex IV – Letter from the Minister of State, Minister of the Economy, Finance and Industry, dated 29

July 2004.

6 Annex V – Composition of the working group to examine agricultural issues.

7 Annex VI – List of people interviewed by the working group responsible for examining the questions

agriculture and number of working group meetings.

6

  1. THE CURRENT BALANCE, EMERGED IN PART OF THE

EXISTING LEGISLATION, MUST BE CHALLENGED

TO REBUILD PRICE COMPETITION AT

THE CONSUMER ADVANTAGE

7

1.1. The legislative system created in 1996 has achieved its objectives

State intervention in relations between industry and commerce is old. Without

to make history, we note that the obligation to establish an invoice for purchases of products

or the provision of services between professionals was imposed by the ordinance of June 30

1945 relating to prices 8 . It appeared indeed as the best instrument of control

of the prices established by this ordinance. The prohibition of resale at a loss has, for its part, been

introduced by article 1 st of the Amending Finance Act for 1963 of 2 July 1963 9

maintaining economic and financial stability. The objective was already to protect

small traditional retail businesses in the face of the growing power of supermarkets.

The order of 1 st December 10 1986 on freedom of prices and competition

taken 11 resale at a loss that was so fixed, without changing fundamentally.

In 1996, the legislator carried out a profound reform of these texts which now appear

in Title IV entitled, “Transparency, practices restricting competition and

other prohibited practices ”of Book IV called“ Freedom of prices and

competition ”of the French Commercial Code.

1.1.1. The law applicable to relations between suppliers and distributors

underwent a significant development in 1996

A – THE SYSTEM PRIOR TO 1996 WAS A SOURCE OF INSECURITY

LEGAL

Three main criticisms were leveled at the pre-1996 regime.

resale at a loss had, on the one hand, uncertain outlines. The billing rules were,

on the other hand, difficult to enforce. Legislation relating to the extension of large

surfaces seemed, finally, to have to be rearranged.

  • The ban on resale at a loss had uncertain outlines

The law of July 2, 1963 put in place the prohibition under penalty of a fine for the resale of a

produced as is at a price lower than its actual purchase price, providing that ” the price

actual purchase price is presumed to be the price shown on the purchase invoice, plus taxes on the

turnover, specific taxes relating to this resale and, where applicable, the price of the

transport ” 12 .

8 Articles 46 to 49 of ordinance n ° 45-1483 of June 30, 1945

9 no.63-628.

10 n ° 86-1243.

11 In its article 32.

12 Article 1 st of the Act of July 2, 1963

8

This measure responded to complaints expressed by suppliers that when a

distributor charged too low a price, others suspected the supplier of having

conferred benefits and demanded a reduction in the price. Distributors engaged in

a “price war” which resulted, among distributors, in practices of “price

appeal ”on certain branded products and compensation claims addressed to

suppliers on the grounds that they considered themselves victims of discriminatory practices and wished

match the lower price charged by a competitor.

Unlike the United States or other European states 13 , France has thus set up

a system in which the practice of reselling at a loss was made unlawful in

self.

In 1993, this system was deemed to comply with the Treaty by the Court of Justice of the Communities.

European 14 .

In 2001, as part of its draft regulation on sales promotions in the

internal market 15 , the Commission has however proposed to prohibit any provision

likely to constitute an obstacle to the free movement of commercial communications

relating to sales promotion operations by expressly providing for the authorization

resale at a loss 16 . This authorization proposal was rejected during the adoption of

this draft regulation by the European Parliament on September 4, 2004 17 .

The order of 1 st December 1986 18 on freedom of prices and competition

included 19 this resale threshold at a loss fixed as being the ” effective purchase price ” and identified

as the price shown on the purchase invoice. Established for the benefit of the victim, the presumption

simple, which assumed that this purchase price must correspond to the invoicing price, has

also been maintained. So that the reseller sued could provide proof

of a different effective purchase price.

This ban had the desired effect since it was noted a significant decrease in the

resale at a loss: the infringement rate of 15.4% in 1986 having been reduced to less than 6% in

1990 20 .

13 See 1.4.4.

14 The Court of Justice has also ruled that the application to products from other Member States of

national provisions which limit or prohibit certain methods of sale, was not such as to hinder

directly or indirectly, currently or potentially, trade between Member States ” provided

that they apply to all the operators concerned exercising their activity on the national territory and provided

that they affect in the same way, in law as in fact, the marketing of national products and

those from other member states ”CJCE judgment of 24 November 1993, case C-267/91 and C-268/91

Keck and Mithouard (point 16).

15 Proposal dated 2 October 2001 for a regulation on sales promotions in the internal market

from the European Parliament and the Council (OJEC n ° C 075 E of 26/03/2002).

16 The draft regulation provided in Article 3 § 3: “The provision prescribes that sales at a loss must be

authorized ” (Com. / 2002/585).

17 At the end of November 2004, the European Council will give its position on the new version submitted to it by the

Commission. A second reading by Parliament can then be initiated. Article 3.3 of the new

Regulation provides: ” This article shall apply without prejudice to national provisions concerning the

sale or resale at a loss ”. The Commission will be responsible for reporting on the impact of these bans

national authorities on the functioning of the single market in two years.

18 The order of 1 st December 1986 No. 86-1243

19 Article 32 of the Ordinance of 1 st December 1986

20 Report to Parliament on pricing practices between companies in France (BOCCRF of 12 January

1991)

9

Subject to variations, the concept of a resale at a loss threshold was, however, denounced

as a source of legal uncertainty.

  • The invoicing rules were complex

The obligation to draw up an invoice for the purchase of products or the provision of services

between professionals was imposed by the ordinance of June 30, 1945 on prices 21 . And

the abolition of price controls by Ordinance No. 86-1243 of 1 st December 1986 has not

resulted in the removal of this obligation.

By virtue of article 31 of this ordinance, were included in the ” purchase price “

rebates, discounts and rebates ” whose principle (was) acquired and whose amount (was)

quantifiable during the sale (…) regardless of their payment date ”.

If the rebates the benefit of which was future but unconditional should, in the same way as

those definitively acquired and quantified during the sale, be mentioned on the invoice and

consequently come as a deduction from the actual purchase price, the question of the deductibility of

conditional discounts was strongly debated 22 , the notion of “ acquired principle ” being the

more controversial.

The rules prohibiting resale at a loss have been interpreted by professionals in such a way as to

artificially inflate the mentions on the invoices in favor of the presumption of the price

actual purchase “deemed” to be the price shown on the purchase invoice.

The technique known as ” the pot ” consisting in including on the invoice a fictitious price does not

not mentioning the price increases intended to supply the hidden fund created by the

parties, nor the reductions that it compensated for when a promotional operation was carried out

by distributor 23 has also been denounced as a result of the law.

Above all, the doctrine has retained the growing development of another technique known as

” Facturology ” and presented as a “science” allowing the establishment of invoices

artificially in accordance with the requirements of law 24 .

  • The expansion of supermarkets was already severely limited.

With the stated concern to avoid ” a disorderly growth of new forms of

distribution does not crush the small business ” 25 , the law of December 27, 1973

orientation of trade and crafts, limited the installation of new large

21 Articles 46 to 49 of ordinance n ° 45-1483 of June 30, 1945.

22 Read the debates of the administration and professional organizations (in particular Les Petites

September 29, 1988 Page 14 and 1 st November 1989 page 15).

23 Advantageous practice for the distributor in that it enabled him to combine the advantages resulting from

the opacity of the purchase price lower than the invoiced price and thus lower the threshold for resale at a loss.

24 Jean-Marc Mousseron, “A new science: facturology”, Cah. dr. entr. 1988 /4.3.

25 Article 1 st law of 27 December 1973 No. 73-1193.

10

surfaces by providing for the installation of commercial enterprises beyond a certain

surface, as well as certain store extensions, would be subject to the approval of

departmental commercial town planning commissions.

A creation, or an extension, of a retail store should, therefore, be

the subject of an authorization request when the sales area exceeded 1,000 m² for a

municipality of less than 40,000 inhabitants and 1,500 m² for a municipality of more than

40,000 inhabitants.

In order to protect small producers and local commerce, the

regulated commercial establishments in the sense of a firm and controlled limitation of

development of supermarkets.

Certain corruption cases quickly marred the functioning of the committees

responsible for granting these authorizations, so that in 1993 their composition was changed

by the provisions of the law of January 29, 1993 26 and the government has provisionally

suspended the opening of large areas.

B – OBJECTIVES AND CONTENT OF THE REFORMS TAKEN IN 1996

Law No. 96-588 of 1 st July 1996 on fairness and balance of trade,

known as the “Galland” law, which reformed part of the ordinance of

1 st December 1986 had two main directions. It aimed, on the one hand, to ensure a

fairer competition in the retail sector, by combating resale practices

loss, on the other hand, to improve relations between producers and distributors, by simplifying

invoicing rules, clarifying price negotiations and strengthening the role of

general conditions of sale (GTC).

  • The ban on resale at a loss has been reinforced.

The logic according to which the resale threshold at a loss is determined by the purchase price

actually paid by the distributor to his supplier who appears on the invoice has been

preserved. Article 11 of the Law of 1 st July 1996 included in Article L.442-2 paragraph 2 of the Code

of trade, however provided that: “The effective purchase price is the unit price appearing

on the invoice plus turnover taxes, specific taxes relating to

this resale and the price of transport ”.

This resulted in a double constraint for the distributor: on the one hand, the prohibition of

resell the products at a lower price than that shown on the invoice, on the other hand, that of

include on this invoice a price that does not correspond to that actually paid to the supplier,

under penalty of a fine, the quantum of which has been increased 27 .

26 Law n ° 93-122 of January 29, 1993 relating to the prevention of corruption and the transparency of

economic and public procedures.

27 From 100,000 F to 500,000 F (i.e. € 75,000).

11

Article L.442-2 of the Commercial Code provides as follows:

” The fact, for any trader, of reselling or announcing the resale of a product in

the state at a price lower than its actual purchase price is punished by a fine of 75,000 euros.

(…)

The actual purchase price is the unit price shown on the invoice plus taxes on the

turnover, specific taxes relating to this resale and the price of

transport ”.

The law of 1 st July 1996 thus given a legal definition, clear and simple, the resale

at a loss. It thus limited any interpretation or questioning: the actual purchase price was

reduced to the only price mentioned on the invoice.

This definition has enhanced the effectiveness of controls. During the first two months of

1997, the services of the Directorate General for Competition, Consumer Affairs and

Repression of Fraud (DGCCRF) intervened with 600 hypermarkets or

large supermarkets, representing all the brands and spread throughout France, to

examine the resale prices of 60,000 food and non-food items.

Compared to the number of products checked, the infringement rate was 0.8%, i.e. five times

less than what had been observed the previous year at the same time. Render more

transparent and simpler, the system relating to resale at a loss was therefore immediately

deterrent.

The fact remains that, gradually, companies have moved from negotiating

commercial sales price invoiced as it results from the application of the general conditions

sales (GTC) towards price reductions excluding invoice and commercial cooperation, this

together constituting what is known as the “rear setback”.

  • Billing rules have been changed to ensure greater

tariff transparency.

In order to simplify the invoices and make the actual price appear more clearly

practiced, the billing rules have been changed.

The rather vague notion of ” acquired principle ” has been replaced by that of: ” price reduction

acquired on the date of the sale (…) directly linked to this sale transaction (…) at

the exclusion of discounts not provided for on the invoice ”.

This article 10 of the Law of 1 st July 1996 became Article L.441-3 paragraph 2 of the Code of

trade which states that: ” The invoice must mention (…) the unit price excluding VAT of

products sold and services rendered as well as any price reduction acquired on the date of

the sale (…) and directly linked to this sale transaction (…) excluding discounts

not provided for on the invoice ”.

12

The mention on the invoice of the price reductions “acquired” on the day of the sale is therefore

become an obligation and are excluded from the benefit of the deduction any discounts, rebates or

refunds whose actual benefit remains subject to the fulfillment of a subsequent condition

for sale itself. This is the case with discounts for reaching an annual volume level.

Invoicing has thus been simplified: the different categories of rebates have been reduced.

and the product of the discounts is mentioned on the invoice which becomes more legible.

The invoicing rules have therefore been amended and their implementation simplified, so

that the invoice has become, at the same time, a more transparent instrument of the relationship

commercial and a benchmark for operators ensuring them greater security

legal.

The table reproduced below shows the composition of the price for the supplier and the

distributor.

Conditional rebates

not acquired at the time of sale 1

List price

Net price net

Net price on invoice

merchandise

Unconditional discounts

acquired during the sale 11 Margin

forward: 3

Net price net net

Margin

rear: 29

framing

by the GTC

from the supplier

(transparency)

Discounts

of price

granted by

supplier

on the sale of

merchandise

Purchases of

services

cooperation

commercial

billed by

the distributor

no zone

transparency

on the initiative

from the distributor

FRAMING

PRICE OF GOODS

OBJECTS OF NEGOTIATION

MARGIN

DISTRIBUTOR

RESALE THRESHOLD AT LOSS

88

PVC

89

100

60

GOODS SERVICES

92

Construction of the supplier price / distributor price

(TARIFF STRUCTURE)

Specific services

distributor 28

These measures were accompanied by reforms aimed at rebalancing relations

commercial 28 .

The law strengthened the control of promotional offers from distributors on products

perishable foodstuffs by specifying, in Article 9, that when the ” operations

28 ML Allain and C. Chambolle: “Relations between producers and suppliers: results and thirty-year limits

of regulation ”, Revue française d’économie 2003 n ° 4, vol. XVII p. 169-212.

13

promotional activities are likely, by their magnitude or frequency, to disrupt

markets, an interministerial or, failing that, a fixed prefectural order, for the products concerned,

the frequency and duration of such operations ”. The promotion periods were therefore

better framed.

In addition, the law of 1 st July 1996 removed the right alignment, consisting of a

exemption from the prohibition on resale at a loss, intended to protect price competition

variations in supply conditions: the ‘ right of alignment’ thus allowed

a distributor to sell a product at a loss to match the prices of a direct competitor,

located in the same catchment area. This deletion does not apply to stores

food of less than 300 m² and non-food of less than 1,000 m². The law has thus

maintained, at least theoretically, an additional advantage to local shops.

Referral bonuses paid without real compensation have been prohibited. Article 14

of the Law of 1 st July 1996 included in Article L.442-6 of the Commercial Code, provided

the prohibition ” of obtaining or attempting to obtain an advantage, a prerequisite for

placing orders, without accompanying a written commitment on a purchase volume

proportionate and, where appropriate, a service requested by the supplier and having been the subject of

of a written agreement ”. Thus, the current practice of these bonuses has been regulated and the

distributors who solicited them had to make a clear commitment to purchase a minimum quantity

proportional to the premium. But the text remains imprecise because no threshold is determined.

“ Abusive de-listing ” is prohibited. The legislator forbids ” to break suddenly,

even partially, a commercial relationship established, without notice taking into account the

previous commercial relationships or uses recognized by agreements

interprofessionals ” 29 . The termination of a commercial relationship was therefore framed by a

written notice.

Finally, the threats of de-listing used to obtain commercial conditions

discriminatory practices were prohibited: the fact ” of obtaining or attempting to obtain, under the threat

a sudden termination of commercial relations, prices, payment terms,

terms of sale or terms of business cooperation clearly

derogations from the general conditions of sale ”is no longer authorized. It remains that, there

again, practice has shown that this measure, which aimed to prohibit blackmail in

delisting during negotiations between suppliers and distributors was difficult

applicable 30 .

  • A concomitant stricter regulation of authorizations for

the establishment of supermarkets

The law of 1 st July 1996 is contemporaneous with that, on 5 July 1996 on the

development and promotion of trade and crafts. The latter revised the

sales area thresholds established in 1973 in the direction of a significant extension of the

scope of the authorization.

29 Amended by Law No. 2001 of May 15, 2001 to take into account the supply of products under the brand name

distributor and the absence of inter-professional agreements.

30 Modified by Law No. 2001 of May 15, 2001 to take into account the total or partial nature of the sudden rupture.

14

The terms of the authorization have been simplified by removing any distinction

demographic between the municipalities and the establishment of a single threshold of 300 m² now

applicable to all commercial town planning operations when the activity is

predominantly food 31 .

The threshold level is therefore five times lower than that which was previously in force for

municipalities of 40,000 inhabitants and three times lower than that in force in

municipalities with less than 40,000 inhabitants.

The system thus put in place allows tighter control of the development of large

surfaces in the food sector. In fact, since 1996, the number of openings

supermarkets decreased significantly 32 and, in 1997, 25% of the opening plans were

rejected by the departmental commissions.

C – CHANGES SINCE THE 1996 REFORM

Later, in a context of progressive circumvention of the legal system and a

shift of commercial negotiation from the invoiced sales price to reductions in

price excluding invoice and the development of the rear margin, the law n ° 2001-420 of the

May 15, 2001, on new economic regulations (NRE).

Its purpose was to strengthen the minister’s power of action before the courts.

commercial, by the possibility of requesting the cancellation of the contracts in question and the

pronouncing civil fines. The law has also attempted to define abuses in relation to

business cooperation.

Account was thus taken of the abusive nature of certain commercial cooperation agreements.

The law now makes it possible to sanction ” the fact of obtaining or attempting to obtain from a

business partner any advantage that does not correspond to any service

commercial actually rendered or manifestly disproportionate in relation to the value of the

service rendered ”by taking into account in particular the absence of common interest and the

disproportion in consideration 33 .

The debates in Parliament provided an opportunity to transpose the directive into national law

on late payments by amending the provisions of the Commercial Code relating to

terms of payment.

A Commission for the Review of Commercial Practices (CEPC) was also created.

whose mission is to give opinions or make recommendations on relations

trade between producers, suppliers and resellers. This commission has the

31 Including the creation of retail stores, extension of the sales area, reuse to

retail use following a transfer of existing activities or change of activity sector.

32 Less than 200 per year whereas there were more than 300 per year between 1986 and 1995.

33 Article L. 442-6 I 2 ° a) of the French Commercial Code.

15

ability to express an opinion on questions relating in particular to the development of

good business practices. Finally, it has an observatory role for these practices 34 .

Since 2001, the system has not been modified, but, always with the objective of balancing the

trade relations, the government intervened by drawing up, on May 16, 2003,

a circular, known as “Dutreil”, relating to commercial negotiations between suppliers and

distributors.

Thus, two years after the last legislative reform of Book IV of the Commercial Code, a

new text, but devoid of normative value, was taken to encourage, once again, the

distributors and suppliers to normalize their relationships.

This mode of intervention was not new and the circular in question was

included in the continuation of other administrative texts on the subject 35 .

First, the circular expresses the wish for a transfer of rear margins to

front margins 36 .

Secondly, it affirms the primacy of the general conditions of sale over the conditions

general purchasing terms and then specifies their content 37 . But it invites differentiation

tariff by supporting the principle according to which this can exist without falling within the

abusive discrimination. This is how it is specified that: ” it is not prohibited for the buyer to

negotiate the terms of purchase with the seller thus leading to deviate from the terms

general sales. However, on the one hand, the seller is not bound to accept requests

of the purchaser (b), on the other hand, the resulting differential treatment must be

justified by a consideration ”.

In this context, suppliers are encouraged to use the possibilities offered by the GTC

which can be differentiated according to the type of client and by the particular negotiations of

sale (with the possibility of setting up special conditions of sale).

Finally, commercial cooperation is defined and distinguished from false

cooperation.

Undoubtedly, the existing legislation has had positive effects on the relationship

between suppliers and distributors.

34 Article 51 of the NRE law now Article L. 440-1 of the Commercial Code.

35 The circular of January 10, 1978, known as the “Scrivener”, relating to commercial relations between companies and

circular of May 18, 1984, known as “Delors”, relating to tariff transparency in commercial relations

between companies.

36 In the introduction, it is stated that: “it has been observed, gradually, the displacement by companies

the commercial negotiation of the invoiced sale price as it results from the application of the general conditions

sales towards price reductions excluding invoices and commercial cooperation, this set constituting this

that it is agreed to call the rear margin. The growing importance of these advantages, which do not appear

on the sales invoice of the products, but some of which could find their place in the conditions

general sales, is not without influence on the level of prices charged to consumers, including the

purchasing power must be a high priority. “

37 Price list, terms of payment, rebates, discounts and rebates, discounts.

16

The device described above, designed to rebalance relations between suppliers and

distributors by acting on the very behavior of operators, has resulted in a certain

moralization of practices.

By imposing written notice, the law has made it possible to improve the conditions for the termination of relations

commercial and avoid abusive de-listing. Likewise, the provisions relating to

payment deadlines and the powers of the administration to initiate actions have been

improved.

In fact, the law of 1 st July 1996 by reforming the resale threshold mechanism loss, and

limiting the use cases of the concurrency exception 38 , contributed to

end the “price war”.

Suppliers are no longer under the downward pressure caused by the behavior of

distributors who used to their advantage the flexibility of the definition of SRP set by

the order of 1 st December 1986.

The provisions relating to price transparency and the prohibition of discrimination,

appearing today in Articles L.441-6 and L.442-6 I 1 °) of the Commercial Code, facilitate, by

in addition, for distributors, the reading of the price mentioned on the invoice, and, thereby, the

knowledge by the latter of the resale loss threshold applicable to each product.

The legal uncertainty weighing on the legal levels of resale prices, which had justified

the intervention of the law 1 st July 1996 was lifted. In total, and due to a definition

rudimentary at this threshold, the objective invoice-based mechanism is easy to apply. The

Mandatory T & Cs have also improved commercial negotiation. This law had

specific objectives that it has, after all, achieved.

1.1.2. But the law of July 1, 1996 brought about a significant modification

commercial negotiation

A – THE CONTENT OF THE TRADE NEGOTIATION

  • The distributor’s commercial margin has two aspects: the “margin

front ”and“ rear setback ”.

Commercial negotiation, which aims to determine the terms of a purchase or transaction

sale between a supplier and a distributor, relates both to the net invoiced price and what

agreed to call the “rear margin”.

This commercial negotiation takes place on the basis of the GTC, offered by the suppliers, who

list all the price reduction items 39 .

38 The matching right, which allowed a product to be sold at a loss in order to match a competitor’s prices

direct located in the same catchment area having been deleted except for food stores of less

300 m² and less than 1,000 m² for the others (article 11 now article L. 442-4).

17

The GTC, when they exist, are “transparent”, that is to say that they are

communicated to all distributors who so request, by application of article

  1. 441-6 of the French Commercial Code, and are therefore likely to be known to all

operators at the start of trading.

All these advantages directly linked to the purchase operation are, on the basis of the device

introduced in 1996, mentioned on the invoice and allow, when subtracting the price on

invoice the resale price to the consumer, to determine the ” front margin “.

The buyer can however benefit from financial advantages distinct from those which appear on

the bill. These advantages, which constitute part of the ” rear margin “, are for

most of the rebates, subject to conditions not met on the day of the sale 40 , which

therefore a retroactive effect.

These discounts excluding invoice, which appear in the T & Cs but do not count against the threshold of

resale at a loss, however no longer constitutes the bulk of the ” rear margin “, henceforth

occupied, in the agrifood sector, by ” commercial cooperation “.

Diagram of commercial negotiation and invoicing

GTC Supplier invoice

  • Price list
  • Quantity discount on the price
  • Discount linked to sale
  • Discount (if provided for by the

convention)

  • price

Net invoiced price Determines the

front margin

  • Conditional rebates (no

directly linked to the act of purchase-sale)

  • Specific services (provided for in

CGV or special agreements)

Deferred invoice Back margin

or have

= net net price

Commercial cooperation

Distributor invoice

Services not linked to the purchase of products Separate = net net price} Other margins

back

39 The scale itself, as well as the discounts, rebates and discounts deductible from the selling price of the product.

40 They can be linked to results to be achieved but for which the conditions for achievement are not met.

when the contract is concluded (end-of-year discount, discount granted by revenue level or according to

the increase in this turnover).

18

  • Commercial cooperation

There is no legal definition of business cooperation.

In fact, in Article L. 441-6 paragraph 5, the obligation to write a document does not explicitly concern the

commercial cooperation because it is simply stated: ” specific services ” (concept

rather imprecise). Likewise, the provisions of Article L. 442-6, I 2 ° a), refer to a

” Commercial service ” without specifying its nature and those of article L. 442-6, I 4 °, evoke

simply ” conditions of commercial cooperation ” without specifying their content.

Apart from the law, therefore, attempts have been made to define commercial cooperation.

Already in the circular of January 10, 1978, reference is made to: “ A cooperation

closer commercial relationship between supplier and distributor (which) can be concretized in

contractual agreements: these agreements allow producers to develop their expansion

and distributors to stimulate their commercial strategy ” 41 .

This formula was taken up and improved, in the circular of May 22, 1984, in the manner

following: ” Commercial cooperation is a contractual agreement concluded between a

supplier and a distributor who, within the framework of their respective policies, decide to

collaborate to increase their commercial efficiency at a lower cost ”.

In 1990, the Court of Cassation considered that it could only be a question of a ” service

specific going beyond the obligations usually contracted between suppliers and

distributors ”and specified that it constituted“ exorbitant special obligations of

usual contractual relations ” 42 , criteria which have since been constantly used.

Finally, under the terms of the circular of May 16, 2003, commercial cooperation is defined

such as: ” a service provision contract, the content and remuneration of which are defined

by mutual agreement between a supplier and a distributor. The content of this contract covers

on the supply, by a distributor to its supplier, of specific detachable services

simple obligations resulting from purchases and sales (…) These services cover

actions likely to stimulate or facilitate for the benefit of the supplier the resale of its

produced by the distributor ” 43 .

In practice, however, commercial cooperation corresponds to very different services 44 .

B – THE INFLATION OF THE REAR MARGINS

If commercial cooperation has gradually become the dominant item of the margin

rear, it was not however born from the application of the system put in place in 1996. The

41 Point 6 of the “Scrivener” circular of January 10, 1978 (relating to commercial relations between

companies).

42 Cass. com. February 27, 1990. n ° 315. Appeal n ° 88-12.189, bull IV, n ° 59, page 39

43 Point 3.1 of the circular of May 16, 2003.

44 See 2.2.1.

19

circular “Delors” already recommended to limit it by noting that ” these advantages do not

may be limited in scope compared to those granted under the

general conditions of sale ”. However, following the entry into force of the law of 1 st

July 1996, trade cooperation experienced a strong development.

In 1990, commercial cooperation did not (or little) exist in certain sectors such as

as fruits and vegetables, electrical equipment, and seafood.

food industry, mainly in the manufacturing sectors, the rates of

observed remuneration varied from 1 to 15% with a predominance of rates lower than

5% 45 .

Moreover, according to data provided by the Institute of Liaison and Studies of Industries of

consumption (ILEC), rear margins have grown steadily.

1998 1999 2000 2001 2002 2003

Rear margins in%

of the net invoiced price

22%

24%

27%

29%

30 %

32%

Source: ILEC

These figures, which reflect an average, all categories and all suppliers combined, do not

do not reflect sectoral differences. The rear margins are variable according to the

product categories. At the start of 2003, the figures fluctuate between less than 10% and

60%. They also vary depending on the supplier.

Distribution of the commercial margin in% between front and rear margin

1995 1997 1999 Sectors

activity forward backward forward backward forward backward

Grocery 26% 74% 19% 81% 12% 88%

Fresh products/

ultra fresh /

fresh frozen

50%

50%

46%

58%

34%

66%

Interview/

hygiene-beauty

-6%

106%

18%

82%

14%

86%

Liquids -1% 101% 18% 82% 11% 89%

Other sectors

(toy, textile,

etc.)

61%

39%

58%

42%

56%

44%

Source: ILEC

45 DGCCRF report on pricing practices (BOCCRF n ° 1 of 12 January 1991).

20

The table showing the distribution of commercial margins, expressed in percentages, shows that

for the year 1995, the front margins are on average negative in the two sectors

that are “maintenance / hygiene-beauty” and “liquids” particularly conducive to

resales at a loss.

  1. SUPPLIERS AND DISTRIBUTORS FIND THEIR INTEREST IN

INFLATION OF REAR MARGINS

If the phenomenon of commercial cooperation existed before the legislation adopted in 1996,

its expansion is posterior to it and can be explained by two essential reasons. On the one hand, the

commercial cooperation is not subject to any obligation of transparency; she presents

therefore for some the advantage of a certain opacity. On the other hand, not being reflected in the

consumer, it therefore constitutes a guaranteed margin for the distributor.

By the effect of the mechanism thus described, the rear margins have greatly increased on

recent years.

  • Inflation of rear margins favored suppliers and distributors

The development of rear margins and mainly of trade cooperation has been

very favorable to mass distribution.

Since the second half of the 1990s, it no longer orientates its strategy towards

negotiation of purchase prices and the development of commercial practices aimed at

launch call prices on sensitive products, but towards negotiating a rate of

Significant rear margins, which provide it with a sufficient and guaranteed level of profitability.

Distributors’ margins thus rose sharply from 1997. Over the period

from 1995 to 1999, their growth is summarized by the following table:

Margin rate (margin / turnover)

Accumulation

1996/1999

1996

1997

1998

1999

Gross margin + 22.8% + 3.3% + 4.3% + 7.2% + 6.3%

Margin

commercial

+ 11.5% + 2.7% + 2.5% + 2.1% + 3.7%

Services

billed 46

+ 94.3% + 7% + 14% + 31% + 16%

Source: INSEE trade accounts

46 INSEE records the services invoiced, which is a broader concept than that of cooperation

commercial.

21

Having doubled over the period, the rear margins alone explain more than half of the

20 points of growth in the total margin of distributors. During the same period, the

stock market performances of listed groups, such as Carrefour or Casino, were very

favorable conditions and in particular made it possible to develop an international extension financed by

favorable development of the internal market.

Thus, not only, distributors have experienced a marked improvement in their situation

since the mid-1990s, but they have shielded themselves from price competition.

Larger stores were not the only ones to benefit from the expansion of the

business cooperation and back margins. The mechanism also had a positive effect

on the smaller format trade and the town center trade, which saw the differences in

selling prices with hypermarkets decrease and stabilize. But it must nevertheless be held

account of the development at the same time of the hard discount of small format.

On the supplier side, the situation is more nuanced, but, when it comes to major brands,

the disappearance of intra-brand competition has at least enabled them to control the

definition of their price to the consumer. Price is obviously a determining factor in

the strategy of large industrial groups and their “ marketing mix ” 47 . Suppliers are

protect distributors’ counterclaims, and can, moreover, better

control their selling price to the consumer. The result of the negotiation on cooperation

price is invisible, and large manufacturers can differentiate their

customers without affecting the consistency and discipline of Recommended Selling Prices (RRP).

For SMEs, the effects of expanding business cooperation are more mixed.

The weight of own brands of SMEs in the shelves of large and medium-sized surfaces

(GMS) could suggest that they no longer find their place in saturated shelves.

Products from SMEs, except those under private label (private label), do not

represent, in fact, that 18% of the linear against 60% for the references coming from

large groups.

Likewise, the turnover from products from SMEs – always excluding private label –

reaches, on average, only 17% of the total turnover of a supermarket 48 . But,

specifically, the development of private labels has been carried out for the benefit of SMEs which, in order to

the essential, manufacture them. Private labels represent around 20% of average turnover

of a large area 49 and 22% of an average linear, but they are produced, for nearly

90%, by SMEs with a workforce of less than 500 employees, of which 70% are French SMEs.

From an administrative point of view, the system was easy to control and the relations between

distributors and suppliers, for a moment, seemed at ease. The big brands

as the other forms of commerce found their account in legislation with the effects

unexpected, suppliers could de facto set a minimum selling price, SMEs

benefited from the development of private labels and… no one was selling at a loss.

47 Including price, quality, communication and services.

48 Source: International Panel FCD 03/2001 study.

49 To be a little more precise, the share of private labels represents today in value 23% of the market of

food; according to Secodip: 41% for self-service cold cuts, 35% for frozen foods, 31% for

self-service catering products.

22

In addition to the questions that we can have on the anti-competitive effect of such a system, we

notes that only one market player has gradually lost: the consumer 50 .

1.2. The distribution sector in France is oligopolistic

Competition in a sector of activity is the result of several elements: degree of

concentration, multiplicity of economic models of stakeholders, existence of barriers

at the entrance etc. Assessment of the competition situation in the retail trade in France

is mixed.

1.2.1. Hypermarkets are still dominant in France but are

contested by hard discount

Beyond the provision of a product to the consumer, the retail trade is

a service activity. Indeed, the consumer has the choice, in the French panorama, between

different levels of services which differ mainly on the basis of proximity criteria,

speed and convenience of purchase, choice, price, advice, etc. These different levels of service are

distinguish according to whether the store is predominantly food or non-food.

  • The predominantly food trade (turnover achieved in the

food sector below 33%)

Convenience stores include non-specialized stores (mini-libresservices,

mini markets) and specialty stores (bakery-butcher). The mini-libreervice

(less than 120 m²) offers a narrow assortment of common products (around 300

references) ; the mini-market (area between 120 and 400 m²) offers an average of 1,700.

The catchment area of ​​these two stores is small, of the order of five minutes from

shifting.

Supermarkets offer a diverse range of food products as well as a

assortment of non-food products varying according to the surface area occupied (from 400 to

2,500 m²) and geographic location. The number of references is between 3,000

and 5,000 of which 500 to 1,500 relate to non-food products. They are located in

city ​​centers or in the outskirts of large agglomerations and they

can perform a convenience store function. The area of ​​attraction of

supermarkets is around ten to fifteen minutes away. Their turnover

80% is made with food products.

50 See 1.4.1.

23

Hypermarkets, stores with a surface area greater than 2,500 m² and capable of reaching and

even exceeding 20,000 m², are, with rare exceptions, located on the outskirts or outside

agglomerations. They very often play the role of ‘locomotive’ of an ensemble

commercial consisting of either a shopping mall or a set of stores

supermarkets non-food specialized, these sets can reach surfaces

very extensive commercial areas (more than 100,000 m²). Their catchment area includes

consumers for whom the journey time from their home to the store does not exceed

about thirty minutes.

The number of references they offer is 15,000 to 30,000 food references and

10,000 to 60,000 non-food references. The supply of non-food products was

generally developed, to the point that for the largest, it represents more than 50% of

their turnover. Services are frequently offered to consumers: services

banks, tourist agency …

Hard discount stores, which have appeared in recent years, have a

area between 300 and 800 m² 51 , which are arranged in a summary way, offer a

limited assortment of basic and mid-range products, mainly food,

of drugstore and maintenance, sold at very attractive prices. The small number of references

proposed allows a supply in large quantities on a limited surface; the

fresh products are poorly represented. Private label brands are very present.

Cybermarkets (websites for the online sale of food products) have sprung up all

recently. They are still struggling to find their economic model. Their assortment is rather

short given the logistical constraints.

MARKET SHARE OF CIRCUITS (PGC)

8.7%

12.2%

31.8%

47.3%

8.8%

10.7%

32.3%

48.2%

0% 10% 20% 30% 40% 50% 60%

Proximity

hard discount

Super

Hypermarkets

2nd quarter 2002

2nd quarter 2004

Source: Secodip for Ilec

The hyper format is still the dominant format in France, however, like all the others.

formats it cedes ground in favor of hard discount.

51 Average surface area of ​​just over 600 m².

24

  • Non-food trade (turnover in the sector

food less than 33%)

Department stores and popular stores are located in city centers or in

commercial complexes such as shopping malls. They favor products like

clothing, textiles, household items 52 . Department stores offer a number of

very high references (up to 300,000).

The mail order sale of products offered on paper catalogs or on the Internet and which

is carried out by mail, telephone or Internet, has significantly extended its range of products beyond

personal equipment 53 .

Large specialized stores operate mainly in the equipment sectors

home and hi-fi, records and books, crafts, gardening, household items

sports and leisure, clothing and, more recently, toys. They offer a wide choice

in their area of ​​specialization, ranging from entry-level to high-end. They

carry out promotions and offer consumer services such as advice,

home installation, after sales service, etc. They are located either in the center,

either on the outskirts of towns in commercial complexes, generally next to a

hypermarket.

The traditional petty trade includes companies belonging to the networks of

branch or franchise and independent or benefiting from purchasing structures

groups.

Between these different forms of commerce, law 1 st July 1996 by its inflationary effects

on the prices of the big brands, obviously lost to the “hyper and super” formats

part of their attractiveness to consumers, to the benefit of stores

“Hard discount”.

Indeed, one of the main differentiating elements of hard discount stores by

compared to traditional supermarkets is their offer of an assortment containing a very

low proportion of major brands and a large majority of private labels and

products at low prices.

In order to compensate for this loss of competitiveness and price vis-à-vis the stores

hard discount, the hyper and super formats attempted to strengthen their differentiation by

improving their sales services to consumers. This improvement in the

sales service was not enough, however, to prevent consumers from turning away

gradually towards hard discount.

52 Tableware, furniture, household linen.

53 Fnac.com is, for example, the leading retail site in France.

25

Hard discount stores were therefore not directly affected by the measure.

prohibition of resale at a loss but rather indirectly through the loss of competitiveness

relative to their hyper and super competitors.

1.2.2. A strong distinction between independent trade and

integrated commerce exists

There are generally two categories of companies which correspond to two modalities

of trade: independent trade and integrated trade.

  • Leclerc, Intermarché and Système U operate in the form of a business

independent

The independent trade federates under one or more brands of the owners of

stores that remain legally independent. It is characterized by a high number

small and medium-sized businesses.

Among the predominantly food distributors, groups such as Leclerc,

Intermarché (ITM) and Système U belong to this category of businesses that are

also found in the specialized distribution sector 54 .

  • Carrefour, Casino and Auchan operate in the form of an integrated business

Integrated commerce includes, in particular, retail sales of establishments

belonging to companies operating large food stores. Businesses

hypermarkets such as Carrefour, Casino and Auchan have this status. The chains of

department stores such as C & A, Galeries Lafayette or the Pinault-Printemps-La group

Redoubt can be classified in this category, as can popular stores such

the Monoprix brand.

However, distribution networks are often mixed. Carrefour, company initially

fully integrated, added franchisees following the merger with the Promodès group.

Some non-food distribution networks also combine franchising and branching.

like Afflelou, Descamps or André.

Schematically, the self-employed have lower fixed costs (especially head office) therefore

lower operating costs (around 15%) than companies operating under the

form of an integrated trade (around 20%). They thus potentially have an advantage in

price competition.

54 M. Bricolage, Jouetland, Intersport, Krys opticians, Plein ciel.

26

Conversely, companies that operate in the form of an integrated trade, thanks in particular to

to their “marketing” teams, have an advantage in the competition in terms of the services offered

to the consumer, to advertising investments. At the international level, these have

much greater investment capacities to support installations of

stores abroad.

1.2.3. French distribution groups are powerful

The business in France is overwhelmingly owned by companies of French origin.

In food distribution, foreign companies only operate in the format of

hard discount 55 . In non-food distribution, the foreign presence is stronger

since the British company Kingfischer owns the But, Darty and Castorama brands.

French operators have an important place at European level. Indeed, there are four

French groups among the top ten with Carrefour number one. Likewise, at the level

worldwide, three groups are French among the top twenty and we find the group

Carrefour in second position.

French food groups are all present in several formats, some being

even present on all formats:

Groups Hypermarkets Supermarkets Proximity Hard discount

Carrefour Carrefour Champion Shopi, Comod,

Eight to eight

ED

Auchan Auchan Atac – –

Casino Géant Casino, Franprix Petit Casino Leader Price

System U Hyper U Super U Market U 

Intermarché  Intermarché Ecomarché Netto

Leclerc Leclerc Leclerc – –

Cora Cora Match – –

Some have a strategy integrating non-food specialists: Auchan has

notably Boulanger, Décathlon, Leroy Merlin and St Maclou.

The Intermarché group (ITM) is also present on the market for specialists in

DIY (Bricomarché) and textiles (Vêtimarché).

Thus, behind an appearance of choice linked to a large number of brands, the consumer

is in fact faced with a reduced number of companies.

55 Such as the Aldi and Lidl groups.

27

Although the competition authorities, both French and European have always considered

that each format was in a separate relevant market, given the difference in

service provided to the consumer, the global food market breaks down as follows:

Market Share in Value (PGC)

base 100 = GMS- Annual cumulative at the end of June

Leclerc

crossroads

Intermarket

Auchan

System U

Champion

Giant

Lidl

Leader Price

Cora

Atac

Monoprix

Ed

Aldi

Casino

Franprix

Match supermarkets

Netto

2003

0.6

0.8

1.4

1.8

1.6

1.9

2.1

2.9

3.1

3.2

4.0

4.2

7.7

7.6

10.3

11.7

13.9

17.1

0.7

0.7

1.4

1.6

1.8

1.9

2.1

2.9

3.0

3.3

4.1

4.2

7.8

8.0

10.2

11.2

13.3

17.7

2004

Source: TNS Secodip

The Leclerc group is by far the strongest brand in France, with an increase of

market share between 2003 and 2004.

However, the hierarchy is different if we reason by distribution group:

MARKET SHARE OF DISTRIBUTION GROUPS AT THE END OF JUNE 2004 (PGC)

0.4%

1.8%

2.1%

3.7%

4.1%

8.0%

10.5%

11.9%

13.1%

17.7%

23.0%

The Mutant

Aldi

Monoprix

Cora

Lidl

System U

Casino

Intermarket

Auchan

Leclerc

crossroads

28

1.2.4. There is a phenomenon of regrouping in the form of power plants

purchase

The relatively limited choice in downstream (retail) markets is even more

restricted on upstream markets. Indeed, medium-sized companies have regrouped

to reach a critical size allowing them to achieve economies of scale and above all

reach certain quantitative thresholds appearing in the GTC and guaranteeing access to the

better resale threshold at a loss.

  • Food centers

The Système U and Leclerc groups run the Lucie purchasing center. Monoprix is ​​affiliated with the

Central Casino.

The central purchasing Francap 56 left the center of Casino at 1 st January 2004

that of Cora. Internationally, the Auchan and Casino companies have a common central

negotiation of major international suppliers.

Thus, in food, five purchasing centers have more than 86% of market share like the

shows the following table:

Power plants Market shares

Lucie 25.7%

Carrefour 23%

Auchan 13.1%

Casino 12.6%

Intermarket 11.9%

  • Non-food power plants

In the non-food sector, the concentration is less strong.

Only Darty and But are grouped together in a central purchasing office: Kesa.

Thus, the outlets are narrower if you are a consumer industrialist.

(food and drugstore; hygiene; perfumery) that if we act on the non

food.

56 Coccinelle, Diagonal etc.

29

The purchasing power of food plants is therefore stronger vis-à-vis suppliers

of food than that of non-food power plants vis-à-vis their suppliers.

1.3. Supermarkets suppliers have

heterogeneous characteristics

Distributors mainly obtain their supplies from two types of suppliers:

large groups and SMEs. These two categories are not equal in negotiation

agreements with central purchasing bodies.

For consumer products, the distribution of suppliers between SMEs,

groups and private labels is as follows:

3%

56% 59%

96%

25% 19%

1%

19% 22%

Number of

suppliers

Number of references Share of figure

business

Private label

SME

Groups

Source international panel, 2003 data

The origin of suppliers is changing and the recent period shows a crumbling of companies

French companies (SMEs and groups) for the benefit of those of foreign origin. The Europeanization of

supermarkets supply partly explains this phenomenon. The

disposals – acquisitions also come into play.

Table on the evolution of the nature of supermarkets suppliers

In% In number of suppliers

1999/1992 2001/1999 1999/1992 2001/1999

SME

French – 0.7% -0.3% – 35 – 20

foreign + 0.5% + 1.4% + 15 + 36

Groups

French – 1.5% – 1.3% – 1 – 1

foreigners 0.5% + 0.9% – 1 + 2

Source: Panel International. Study FCD 03/2001

30

1.3.1. Groups are concentrated and have strong brands

Groups that supply large French retailers with high-end products

consumption are 70% foreign; only five of them are French among the twenty most

important. They are international for 95% of them.

  • Large suppliers have strong bargaining power

In consumer products, large groups only represent 3% of

suppliers but 56% of references and 59% of turnover. Their power to

negotiation is therefore considerable. Indeed, on certain categories of products, they have

very significant market shares.

Table of the cumulative market shares of the top three suppliers by category

Coffee 69%

Diapers 71%

Cereals 72%

Shavers 96%

Canned vegetables (2 suppliers) 74%

Aniseed aperitifs (1 supplier) 86%

Colorations 98%

Source Goldman Sachs, Nielsen

Large groups devote very significant advertising and marketing budgets which

allow the product to “pre-sell” to the consumer and give it a character

essential in the eyes of the distributor.

  • Large suppliers have a high level of profitability

The economic model of large groups is different from that of distributors: they have a

lower turnover but a significantly higher operating margin. Indeed, the

worldwide turnover of the largest supermarkets suppliers, such as Nestlé

($ 62 billion in 2003), Unilever ($ 49 billion) or Procter and Gamble ($ 43 billion

of $) is much lower than that of Carrefour or Wal Mart (respectively 62 and

$ 220 billion).

In terms of operating margin, the major French distributors are around 4%

when the groups are between 10 and 30%.

31

Table of 2003 results, at world level, of the largest PGC suppliers of

French distributors

2003 turnover

PGC (in millions)

Companies

Brands

$ € *

Operating margin

2003

Nestlé AG

(Swiss)

Maggi, Buitoni, Herta, Ricoré,

Nesquik, Gloria …

61,733 50,217 10.7%

Altria Group

(USA)

Philip Morris, Marlboro, Map

black, Milka, Côte d’or …

60,272 49,032 26.2%

Unilever

(UK; Netherlands)

Bertoli, Findus, Iglo, Knorr,

Lipton, Slim Fast 

48,614 39,548 12.9%

Procter &

Gamble

(USA)

Always, Herbal Essences,

Pampers, Pantene, Pringles,

Tampax …

43,377 35,295 18.1%

Pepsico Inc.

(USA)

Pepsi, Tropicana, Quaker,

Frito Lay …

26,971 21,947 18.9%

Coca Cola

Co. (USA)

Coca cola, Fanta, Sprite,

Minute Maid …

21,044 17,121 29.5%

Sara lee

Corp . (USA)

Dim, Playtex, Wonderbra,

Aosta, Coffee house …

18,291 14,882 9.1%

Mars Inc.

(USA)

March, M & M’s; Snickers,

Whiskas, Pedigree, Uncle Ben’s

16.200 13.185 –

L’Oréal L’Oréal Paris, Garnier,

Biotherm, Vichy …

15,882 12,931 13%

Danone

(France)

Danone, Evian, Lu … 14,865 12,102 12.2%

Kirin

Breweries

(Japan)

Four roses Bourbon 12,140 9,881 6.5%

Diageo Smirnoff, Guiness, Baileys,

J&B …

10,777 8,768 31.9%

Kimberly

Clark

Kleenex … 10,699 8,705 16.8%

Cadbury

Schweppes

Hollywood, Colt, 1848,

Krema …

10,534 8,574 11.6%

* USD 1 = 0.813988; 1 EUR = 1.22852 USD

Finally, the largest distributors are less advanced than the leading industrial groups.

in their internationalization process, and therefore they each represent only one

low share of their sales globally. For example, Carrefour would only represent 1

to 2% of the worldwide turnover of Procter and Gamble, of which France concentrates less than

5% of outlets in 1999.

32

1.3.2. SMEs are more fragile

French supermarkets call on around 7,900 SMEs with 20 to 500 employees (5,200

French and 2,700 of foreign origin). In consumer products, SMEs

represent, with their brands, 96% of suppliers but only 25% of references and

19% of turnover.

  • The position of SMEs varies according to product categories

Sector% of SMEs in number

companies

Contribution of SMEs to turnover

of the sector (%)

Agrifoods industries

– meat 99 51.3

– milk 94.5 35.6

– drinks 97.1 37.6

– miscellaneous food 99.7 46.2

Manufacturing industries

-soaps, perfumes and

of cleaning products 94.2 22.5

– paper articles to

sanitary use or

domesticated

80.4 14.1

Source: SUSE 2000 tax database

SMEs in the agri-food sector represent an important part of production (from

third to half depending on the sector) while SMEs in the manufacturing industry occupy

a much smaller place in consumer products.

  • SMEs are favored for the manufacture of private labels

In France, 90% of the references under private label are manufactured by SMEs. Thus, the total weight

of SMEs, under their own brand and under private label is of the order of 35% of the turnover of the large

distribution. Thus, in recent years, they have greatly benefited from the increase

considerable number of private labels (+ 30% between 1999 and 2003).

For international distributors, most “ basic ” private labels , which have the same

specifications for several countries, is the subject of international calls for tenders. SMEs

French women are then faced with European or even global competition.

33

1.4. The current balance is not satisfactory

1.4.1. A balance that has been established to the detriment of the consumer

The consumer is sensitive to the price, but also, among other things, to the diversity and quality of

products offered to it, the diversity of forms of trade, the quality of services

of sale, to the accessibility of different forms of commerce …

The following table shows that the more frequent a household of large surfaces, the more it is

attentive to the specific qualities of the store:

Criteria for choosing the main GS No. of GS

frequented

(in %)

the +

convenient

price –

high

choice of

products

quality of

products

do not know together

Only one 77 11 8 3 1 100

two 66 17 12 5 0 100

Three and more 54 22 16 7 1 100

Overall 67 16 11 5 1 100

Source: monthly Conjoncture survey of households, April 1998, Insee

Identify the impact of the prohibition on resale at a loss, as clarified in 1996,

on all these parameters is a particularly complex task. However, it appears quite

clearly that the measure prohibiting resale at a loss has affected both prices

practiced by distributors and on the evolution of the structure of the commercial sector.

The implementation of the Law of 1 st July 1996 have been several types of effects on prices. A

effect, first of all, punctual, direct and obvious on the products previously resold by the

distributors below the now clearly defined threshold. These products are, moreover,

traditionally those whose demand is very sensitive to price and especially

top brand products that consumers use primarily to compare

the prices of different points of sale 57 .

For these products, the clarification of the prohibition on resale at a loss has resulted in a

price increase. But beyond this first one-off effect, the implementation of the 1996 law

has led to a profound change in behavior, producers and distributors

gradually adapting their strategies to the introduction of a predefined resale threshold at

loss.

57 In practice, not all major brand products are used as “lead products” by retailers.

distributors. This practice, consisting in selling at very low prices, even at a loss, a given product in order to attract

the consumer at the point of sale – and “recover” the sacrifice thus made on the sales of others

products – seems to affect fast food consumer goods more than big brands

other departments such as textiles or DIY.

34

A – THE IMPACT OF THE BAN ON LOSS RESALE ON PRICES

MAJOR BRAND PRODUCTS.

In fact, the prohibition on resale at a loss, as implemented by the law of

1 st July 1996 authorizes a practice generally considered anticompetitive and

this title prohibited: the imposition of a minimum resale price by producers on

distributors.

Indeed, the resale at a loss threshold is defined as the price appearing on the invoice, which

may be significantly higher than the “three times net” price finally paid by the distributor

to the producer, taking into account the various rebates, rebates and deferred rebates.

It is therefore possible, by simultaneously increasing the starting price and the discounts and

discounts granted, to raise the threshold for resale at a loss without modifying the price “three times

net ”of the product to the distributor. When the resale threshold at a loss is thus set at a

higher than that which would result from competition between distributors, these prices

line up (upward) on the resale at a loss threshold and the consumer price is then,

in fact, set by the producer rather than by the free play of intra-brand competition between

points of sale.

As can be seen, this possibility of controlling final consumer prices by

producers is not so much due to the principle of the prohibition of resale at a loss as to the reference

to an artificial loss-making resale threshold, disconnected from the economic reality of transactions and

moreover manipulable.

Indeed, it is the impossibility of retroceding the rear margins that makes the legal threshold

of artificial resale at a loss, different from what economic reality implies, and thus allows

as a consequence to the producer to control the price to the consumer.

Any possibility of retroceding part of the rear margins on the resale price would tend to

this fact bridges the gap between the legal and economic definition of PRS. Can also

Note that the law of 1 st July 1996 does not require the use of resale threshold as a tool

control of final prices, but allows this practice and, in fact, producers and distributors

have used it for many products.

The resale at a loss threshold therefore allows a powerful producer to control the price of

resale of its products, by increasing the price on the invoice (which must appear in the conditions

general sales and must not be discriminatory) 58 and by remunerating distributors through

bias towards stronger rear margins, so that they agree to market the product despite

the higher price.

Distributors, who compete with each other particularly fiercely in a small number of

major brands, are the first to benefit from this measure prohibiting resale to

58 In practice, a producer could differentiate the price he charges his distributors. But he didn’t

necessarily interest in introducing such differentiation. In addition to the fact that the producer may fear a

certain transparency between distributors, it is indeed the practice of a uniform and artificially invoiced price

high which allows the producer to control the selling price of his products.

35

loss, since this floor price mechanism then directly limits intra-brand competition 59

on these products.

The producer also benefits directly from this practice. For example, by eliminating the

intra-brand competition, the introduction of a resale threshold means that consumers do not

benefit more from the purchasing power of distributors 60 ; consumer prices

increase, which increases the joint profits of the producer and the distributors – to the detriment

of consumers. This increased profit can then be shared between the parties through

rear margins 61 .

Producers can also benefit indirectly from resale pricing practices

imposed or minimum prices imposed, always to the detriment of consumers, by a

reduction of inter-brand competition.

Imposing a uniform resale price for all points of sale can facilitate

tacit collusion between competing brands 62 , but these practices can negate any

competition, both inter-brand and intra-brand, in the context of cross-relationships that

characterizes distribution agreements between producers and supermarkets 63 .

Finally, this alignment of the prices of major brands among distributors has created another effect

pervert who has come to feed this ” inflationary spiral “. Indeed, distributors

partially renouncing price competition on the products of major brands

are making stronger competition on their sales services. These commercial services

being expensive, they turned to their suppliers in order to share the costs by the

bias of the rear margins.

Thus forced to pay higher rear margins to distributors, suppliers have

compensated by an increase in their tariffs which came directly to maintain the

“Inflationary spiral ” of products from major brands.

Beyond the one-off and expected impact of the prohibition on resale at a loss, the implementation

the place of an artificial threshold of resale at a loss can therefore lead to an increase in prices at the

consumption of major brand products in all points of sale.

59 Intra-brand competition refers to the competition between distributors for the sale to

consumers of a particular branded product.

60 M.L Allain and C. Chambolle, ” Loss Leaders Banning Laws as Vertical Restraints “, forthcoming in Journal of

Agricultural & Food Industrial Organization , 2004. In the absence of purchasing power, two articles by Hart and

Tirole [1990] “ Vertical Integration and Market Foreclose ” Brookings papers on Economic Activity

(Microeconomics) 205-285 and O’Brien and Shaffer [1992] “ Vertical Control with Bilateral Contracts ” Rand

Journal of Economics 23 (3): 299-308 also show that the imposition of a floor price allows a

producer to better exercise his market power and maintain higher retail prices, to the detriment of

consumers.

61 When producer and distributor set their respective prices, each de facto affects the profit of the other; in

the absence of price control by the producer, this leads the distributors to practice prices in spite of themselves

too low from the point of view of joint profits. Indeed, distributors first of all exercise their purchasing power

to reduce their acquisition cost as much as possible. But intra-brand competition then transfers to

consumers, in the form of lower prices, part of the gains thus achieved. Thanks to the resale threshold at

loss, the producer eliminates intra-brand competition and can thus maintain, via a higher invoiced price,

selling prices maximizing joint profits; producer and distributor then divide the profits of

the operation by negotiating the rear margins.

62 MM Jullien and Rey [2000] “Resale Price Maintenance and Collusion” IDEI Working Paper.

63 MM Rey and Vergé [2002] “ RPM and horizontal cartels ” IDEI Working Paper.

36

This price increase reflects the elimination of intra-brand competition – between

supermarkets, but also between supermarkets and small shops – as well as a smaller

intensity of inter-brand competition.

  1. THE IMPACT OF THE BAN ON LOSS RESALE ON THE PRICE OF

OTHERS PRODUCTS.

For the categories of products for which the producers are not very powerful vis-à-vis the

distributors, such as private labels or first prices, the distributor has

adjusted its prices in various ways depending on the competitive environment it faced.

Two types of opposite reactions can thus be highlighted 64 .

In order to maintain its competitive position, a distributor may lower the price of other

products (for example its private labels), on which it previously produced

large margins. This adaptation has a cost for the distributor because lowering the price on

products with less elastic demand is a less efficient way of attracting

consumers. If the distributor faces strong competition, it is even possible in theory

that the price reductions granted for other products compensate – or even beyond – the

price increases on products previously sold at a loss. The effect of the measure on a

Strong competition from distributor is therefore not necessarily inflationary.

However, if competition between distributors is less keen, the measure prohibiting the

reselling at a loss may lead distributors to gradually abandon a strategy of

volume (the phenomenon of consumer attraction through low prices is no longer sufficient

efficient) for a margin strategy. The effect of this measure is then inflationary. This effect

was favored by the law on commercial town planning, which limited the number of openings of

supermarkets 65 , and by the wave of concentrations observed in supermarkets 66 .

1.4.2. The rise in the prices of consumer goods

is explained by the combination of the concentration of the sector and the

legislation

A – SINCE 1996, THE PRICES OF CONSUMER PRODUCTS (PGC)

INCREASED

The principles mentioned above have been translated in practice into an increase in the prices of

products, including major brands. A study by Nielsen management panels measured,

64 C. Chambolle (2004), “Strategies of resale at a loss and regulation”, to appear in the Annales d’économie et

statistics.

65 See point 1.1.1.

66 See point 1.2.

37

during the two months following the entry into force of the Law of 1 st July 1996 67 ,

price trends for the 1,500 “ most widely distributed ” references, all

national brands. This study revealed an average price increase of 4.14%.

According to this survey, the products of large industrial groups are more affected by this

increase than those of SMEs: 76.3% of the former experienced an increase of more than 4%,

against 24.2% for the latter.

On the other hand, in the sample considered, only 8.3% of the products of large groups saw

their price decrease, against 18.9% of the products of SMEs. Moreover, according to Nielsen, this

increase concerns all supermarket, hypermarket and discounters brands.

A counter-investigation by the DGCCRF published in March 2002, concludes that the prices of

consumer products only increased by 0.5% over the same period.

The difference comes from the fact that the DGCCRF has, for each product of large

consumption of its sample, noted the prices of three references: a national brand,

a private label and a low cost product.

Four main trends can be observed.

First, the prices of food products, after increasing less quickly than

the whole of the prices until 1996, evolved at a pace similar then faster to

as of that date.

Evolution of food prices (IAA) and the all-items index since 1994

Source INSEE

Second, consumer goods, including non-food items, have

experienced significant price momentum. The following table illustrates this with

examples of products whose prices particularly increased between November 1998 and

November 2002.

67 See the article entitled: ” Loi Galland: how far will prices go up?” »In Linéaires n ° 1529, March 6

1997.

38

Price trends for consumer goods

Year-on-year change

cumulative

nov-99 nov-00 nov-01 nov-02 nov-98

to nov-2002

Oils and margarines 0.9 -0.4 2.9 6.4 9.8 Food

Yoghurts and dairy desserts 0.2 3.6 5.3 1.4 10.8

Hygiene products

bodily

2.5 2.7 8.5 6 21.1 Non food

Soaps and cleaning products 0.8 3.2 4.6 3 12.1

Source INSEE

Third, the prices of so-called “national brand” products have also sharply increased.

progressed.

A study recently carried out by Libre Service Actualité (LSA) revealed a

particularly sharp increase in the price of large consumer goods

brands. According to this study, the average increase, at products and stores strictly

Comparable 68 between 2000 and 2003, was 9%, split between 11.2% price increase

major brands, 4.3% price increase for private labels and 4.1%

inflation of the price of first-priced products. Between 2001 and 2003, the average price increase

was 4.1%, that of the big brands 5.8%, that of private labels 0.6% and that of

first-price brands of 1, 2%.

However, it seems that the upward trend in the prices of consumer goods

gave way to a deflationary trend since February 2004 (source IRP – LSA

n ° 1876-1977, October 7, 2004).

More than the overall level of price increase, the differential between the evolution

the price of major brands and that of distributor brands and first-price products

is particularly striking in this study.

In certain markets such as rice, tissues, paper towels, this study of

LSA even shows that the strong inflations on national brands were partly

offset by deflationary efforts on private labels. Thus, according to a Nielsen study by

2003, the share of private labels increased between 1996 and 2003 from 21.8% to 24.4% of turnover

consumer products (excluding fresh agricultural products) even though their price

increased less quickly than those of big brand products. The prohibition measure

resale at a loss seems to favor, to the detriment of the big brands, a postponement of

consumers towards private label products and first prices.

68 Many measures of the evolution of inflation have been proposed, but one of the main criticisms that

was opposed to them was the failure to take into account the importance of the renewal (innovation) of products in

store shelves over time. This LSA study is particularly interesting because it answers

precisely to this review and offers a measure of inflation to products and stores strictly

comparable.

39

Finally, this upward trend is specific to France and is not found in

the scale of the Euro zone.

Evolution of the prices of food products and

non-alcoholic drinks in France and in the Euro zone

Evolution of food prices excluding fresh products and meat

in France and in the Euro zone

Source: Eurostat

This development is similar for national brands, according to price indices.

communicated by ILEC for around fifty major brands.

40

Table on the evolution of price differentials in seven countries of the European Union

(VAT excluded)

France Germany UK Italy Spain Portugal Netherlands

1997 (4 th trim.) 96 95 127 98 88 96 106

1998 ( 2nd trim.) 96 96 125 99 89 100 103

1998 (4 th trim.) 98 97 122 99 91 102 103

1999 ( 2nd trim.) 98 93 130 97 88 108 103

1999 (4 th trim.) 96 92 128 94 91 98 107

2000 ( 2nd trim.) 98 93 119 96 90 98 108

2000 (4 th trim.) 95 90 120 96 92 99 108

2001 ( 2nd trim.) 97 92 112 96 95 97 105

2001 (4 th trim.) 100 92 110 97 95 102 104

2002 ( 2nd trim.) 101 91 110 97 96 103 102

Source: ILEC

According to a 2003 Nielsen study, established from a sample of one hundred products of large

consumption, international brands, food prices in France are

now within the average price in industrialized countries in Europe. The prices

in France would be higher than those of Germany, Belgium, Spain, Italy,

Great Britain, the Netherlands and Austria but lower than those of Greece,

Portugal, Sweden, Finland, Switzerland, Ireland, Norway and

Denmark.

B – THE COMBINATION OF A HIGH DEGREE OF CONCENTRATION OF THE

LARGE DISTRIBUTION, FROM A REGULATORY ENVIRONMENT

PROTECTOR AND THE INCREASE OF TRADE COOPERATION

EXPLAIN THE RISE IN PRICES.

It is difficult to measure and above all to isolate the real impact of existing legislation on

the evolution of retail prices. Hardly passed, the law of 1 st July 1996 was criticized as

leading to higher prices 69 . Ascribing these changes solely to the regulatory framework

would not take into account the complexity of factors which can work in opposite directions and with

differentiated effects over time. Economic factors 70 and the changeover to the euro 71

also partly explain the upward trend in the prices of large-scale products.

consumption.

69 See the Nielsen study of March 1997 above.

70 Climatic conditions for fresh products, depreciation of the euro for raw food materials

or an increase in labor costs per unit of added value.

71 The changeover to the euro has indeed disrupted the schedule for price increases. The price freeze in the large

distribution between November 2001 and March 2002 justified staggered increases, carried out either in advance,

during the third quarter of 2001 or, by catching up, during the second quarter of 2002 (cf.

conjoncture of INSEE (“A first assessment of the effect of the changeover to the euro on prices”, June 2002).

41

Assume responsibility for the rise in consumer prices at the start of the

2000s to the only existing legislation would be an analytical error. She could not provoke

the effects now criticized only because of its combination with two other elements:

on the one hand, the phenomenon of concentration in the mass distribution sector 72 , on the other

on the one hand, the protection of situations acquired by the main operators, made possible by

regulations which have made linear and more expensive to access. She could have caused

qualitatively similar effects but of smaller magnitude.

Concentration in the retail sector has reduced price competition:

few in number, monitoring any strategic shift in their competitors, operators have

tended to harmonize their market behavior. To this phenomenon is added, for

some products, the market power of large suppliers. With the mastery of

their selling prices to consumers, they were able to increase them without consumers

can benefit from the impact of increases in rear margins.

The effects of this concentration have been amplified by the legislation on town planning

which, today, protects the main operators of mass distribution.

The legislation relating to commercial town planning, as has been said 73 , has been an incentive to

concentration of distribution through external growth, by limiting the possibilities of

internal growth.

The development of trade cooperation and rear margins described above is,

in this environment, a mechanism that contributes to price inflation.

If we take schematically the example of a supplier who sells his product for 100 per year

N and pays 30% business cooperation, he receives a net proceeds of 70. If the

supplier needs to increase its net product by 1 point in year N + 1, to bring it to

71, he must increase his selling price to customers by 1.40 to take into account the 30% of

commercial cooperation that he must pay. If, still for this year N + 1, the

distributor intends to claim 31% of commercial cooperation, the supplier must, then,

set its price at 102.90. Such a mechanism, reproduced several years in a row,

mainly for branded products, results in an increase in selling prices at

consumer and a growing gap with the prices of private labels and first prices.

1.4.3. The measures introduced in 1996 did not produce the effects

expected in terms of safeguarding “small trade”

The law of 1 st July 1996 was a difficult to separate the effect of the law of 5 July

1996 relating to the development and promotion of trade and crafts on

the evolution of the French commercial landscape. On the one hand, the first law was implemented in

part in order to protect small businesses from the loss-making practices of large

surfaces, considered “predatory”. On the other hand, the second aimed directly at

curb the development of large surfaces and at the same time the movement of disappearance

72 See point 1.2

73 See point 1.1.1

42

small shops. These two laws adopted simultaneously therefore had objectives

common.

By lowering the authorization threshold for the opening of supermarkets to 300 m², the law on

commercial town planning has slowed down the development of hypermarkets, supermarkets, and

large “hard discount” stores that had started to develop

strongly before 1996.

The table below gives the evolution of the number of points of sale in the vicinity of

1985 to 2003 :

Proximity formats 1985 1990 1994 1996 1998 2000 2002 2003

Small self-service – – – 19,033 16,300 Nd Nd 15,000

Superettes 5,808 5,038 4,831 4,337 4,500 4,526 4514 4,605

Supermarkets

proximity <1200 m²

– – 4,030 3,831 3,500 3,154 3,130 2,931

Hard discount

<1200 m²

0 242 1,044 1,791 2,300 2,574 2,727 3,049

Convenience-store – – – 385 400 na na na

Total – – – 29,377 27,000 na – na – 26,000

Source: IFLS (nd: figures not available) –

This table shows that in the general food convenience store sector, the

1996 legislative framework did not lead to a clear break in the evolution of

different categories of outlets apart from a return to the growth in the number of

mini-markets since 1996. Thus, the number of local supermarkets, small free services,

and other small independent businesses continuously decline as well before

since 1996.

In addition, the number of “small hard discount” type outlets which

was already increasing before 1996, grew by more than 70% over the period 1996-2003. The law on

commercial town planning has also slowed down the number of hard discount openings

“supermarket” format. In reaction, these developed even more under small

formats, thus directly competing with small general food stores

on their land, proximity.

This may explain why the brake on the development of large surfaces, both by the

limitation of openings only by the elimination of intra-brand competition on

lead products, did not lead to a break in the evolution of small

proximity, as it is exposed to stronger competition from discounters,

condemned to develop in local commerce.

43

Finally, if the mini-markets (excluding hard discount) experienced a resumption of growth (+ 6.17% on

the period 1996-2003 after a drop of -4.1% over the period 1990-1996), almost all

of this type of local outlets now belong to the large retail groups.

distribution. According to the Federation of Commerce and Distribution Enterprises,

large French distribution groups represent around 85% of convenience stores

whose area is between 199 m2 and 1199 m2. These small or medium businesses

organizations therefore benefit from supply conditions similar to those of large

surfaces and are not, ultimately, the most threatened by possible practices

predators of large areas.

Moreover, whether in the commercial craft sector or in most small

specialist shops, their number has continued to decline since 1996, except in

a few rare sectors (beverage trade, various specialized retail trade,

tobacco retail trade…).

Finally, it seems that the two laws of 1996 did not really offer the protection

expected at “small businesses”, and that the law on commercial town planning has probably

accelerated the gradual replacement of small independent businesses by traders

organized within the small general food trade, whether through

traditional large groups or by local hard discount. From the standpoint

the diversity of the sales formats offered as well as that of maintaining

proximity, the consumer does not seem to have reaped the benefits announced from this device

regulatory.

44

1.4.4. France is characterized by a regulatory environment more

binding than other European countries

Over the recent period, France has experienced more marked changes in the prices of PGCs than

throughout the Euro zone. This trend should be compared to the relationships between

suppliers and distributors in Europe 74 . It reveals, with nuances, that the concentration

observed in France in the distribution sector is found, to varying degrees, in the

other European countries. But French regulations are less liberal than in these states.

A – THE CONCENTRATION OF THE SECTOR AND THE RELATIONSHIP BETWEEN INDUSTRY AND

TRADE

In most European countries, distribution, especially in the food sector,

was strongly concentrated around a few large leading brands, with a tendency

more marked in the countries of the north compared to those of the south.

In the United Kingdom, the level of concentration is comparable to France: the top five

food distributors represent 71% of the market and the company Tesco weighs about 30%

of the turnover of its suppliers. Hard discount is having difficulty establishing itself in

75 because of the relatively strict commercial equipment legislation 75 and the

“ Everyday low price ” led by the two leaders, the Tesco and Wal groups

Mart / Asda.

In Germany, the concentration is less marked, but ten distributors

represent around 80 to 85% of the market. The hard discount is particularly important

developed and reached 30% of the market, including 15% for the Aldi brand alone. Only the

Belgium has seen a comparable development in this market segment over the last few years.

years.

The other countries of northern Europe present a similar situation: in Austria, the

four main distributors share nearly 90% of the market and in Sweden, the group

national ICA reaches 35% of the market.

The phenomenon is less marked in the southern countries. In fact, in Portugal, nine points of

out of ten sales belong to small trade and, in Spain, it still exceeds 30% share

Steps.

The peculiarity of Spain lies in a dual distribution system. On the one hand, the

modern large stores type GMS and, on the other hand, a small traditional store on

formats less than 400 m² in area maintained by independents. There are 18 brands

on this market, the first eight represent 61% of the market share in value 76 and the

hard discount is enjoying increasing success there.

74 In view of the time allowed for the commission to deliver its conclusions, it was only able to engage in

fairly summary comparative examination of the various national legislations.

75 “ Planning policy guidance ”, updated in 1996.

76 In 2002, source: TN Sofres consumer panel, Carrefour alone reaching 23% of the market.

45

B – THE LEGAL FRAMEWORK

The United Kingdom is arguably the country with the most flexible legislation. The rules

invoicing are mainly fiscal and there is no rule relating to resale to

loss. The Competition Commission has identified abusive practices in relations

commercial 77 but felt that a Code of Practice would be the appropriate way

to resolve these difficulties due, for the most part, to purchasing power. This code of good

practices, assessed by the competition authorities, had little effect on the behavior

distributors and the established mediator was not contacted by the suppliers.

In Germany, with regard to the regime applicable to invoices, the parties to the contract decide

freely to include what they wish. Aldi company can negotiate prices three

times net without mentioning the benefits granted on the invoice.

To date, the Federal State has not adopted specific legislation relating to the sale or

resale at a loss. These practices are only framed by the law of 1 st January 1999 on

to the restrictions of competition under the terms of which: “The undertakings which are in a position

force on the market vis-à-vis small and medium-sized competitors should not exploit this

position in order to hamper, directly or indirectly and unfairly, the activities

of these competitors. There is an anti-competitive practice within the meaning of the first sentence

especially if a company that offers commercial goods or services

practice of systematic loss-making, unless this is justified by the facts ” 78 .

In other words, industry-trade relations come under common competition law,

and the control of the device is exercised by the Bundeskartellamt (BkartA) which acts on complaints. He

is provided with the proper documents to allow the checks but without intervening

in company premises.

In November 2002, the practices of the company Wal-Mart, established in Germany since

1998, aimed at selling milk and sugar below purchase prices, were sanctioned and

a first fine was imposed in December 2003 against

from a drugstore chain that offered photographic development services to a

price lower than its cost price. But most often litigation is not necessary.

In the northern countries, in a fairly comparable way, no specific legislation relating to

selling at a loss does not exist, this practice remaining governed by the only applicable rules

abuse of a dominant position. This is the case, for example, in Finland 79 , where resale to

loss is only liable to be sanctioned when it is put in place by a

company holding a dominant position, provided that it is likely to lead to a

restriction of competition in the relevant market. Similarly, section 11 of the

77 Counterclaims, payment of benefits without compensation …

78 §20 of the law of 1 January 1999 and §5 indicates that: “ If in the light of general experience, some

facts suggest that a company has exploited its strong market position within the meaning of paragraph 4, it

it is up to this company to refute this impression and to clarify what, in its industry, could have

create such an impression, insofar as the competitor concerned or an association within the meaning of Article 33

cannot do it and where it itself, on the other hand, has every facility to do so and may be asked to do so ”.

79 Article 7 of the “ Act on Competition restrictions ” n ° 480/1992 relating to the abuse of a dominant position.

46

” Danish competition act ” is interpreted as prohibiting the establishment of prizes

foreclosure by a company in a dominant position on the relevant market.

The two pieces of legislation closest to French law are Irish legislation and

Spanish.

Ireland has had legislation since 1987 prohibiting the practice of resale at a loss,

provided for by article 11 of the “ Restrictive practices order ” 80 . The Central statistics Office

considers that this legislation has had a significant impact on retail distribution, and has had the

effect of reducing competition, by estimating that the gross margins of the

“ Grocery products ” fell from 15.8% in 1988 to 20.1% in 1993.

A study carried out in 2001 81 on the evolution of the gross margin of distributors during the

period 1984-1994 concludes that the measure prohibiting resale at a loss would amount to 4.6

points, at the origin of this growth in gross margin.

The prohibition of resale at a loss was therefore discussed in the 1990s and the CMRG

Competition and Merger Review Group ) recommended dropping this legislation.

In 2002, however, it was decided to maintain the legislation as it stood, following

the intervention of different interest groups who underlined two positive aspects of the

legislation.

The law would, on the one hand, have the merit of allowing independent retailers to be more

competitive compared to mass distribution. The authorization of the sale at a loss would entail,

on the other hand, a price war, the inevitable consequence of which would be the eviction of certain

retail and more limited choice for consumers.

In Spain, since 1991, the law on unfair competition has prohibited predatory pricing. AT

Originally, the law prohibited resale at a loss only if it was likely to induce

consumers in error about the reality of prices; if it harmed the image of a

competing product or retailer; or even if it was part of a strategy tending to

eliminate a competitor from the market 82 .

This device did not have the expected results, which justified its questioning in

1996, with the intervention of the law of January 15, 1996 83 relating to the organization of trade

Retail. The principle prohibition of resale at a loss is enacted there in article 14 84 .

80 According to which “… a retailer shall not sell grocery goods (other than grocery goods whose date of

minimum durability has expired) at a price that (after the deduction of the cost to the retailer of any discount or

other benefit given by him on the sale o the goods), is less than whichever of the following is applicable- (a) in

case charges in respect of carriage, insurance or other costs not included in the relevant invoice have to be paid

by the retailer to the supplier or any other person to obtain the delivery of the goods to his premises, the amount

obtained when the said charges or costs are added to the net invoice price of the goods (including value added

tax), or (b) in any other case, the net invoice price of the goods (including value added tax). “

81 Collin A., Burth S. and Oustapassidis K., “ Below cost legislation and retail conduct: evidence from the

Republic of Ireland ”, British Food Journal, 103, 9, p. 607-622.

82 Article 17 of Law n ° 3/1991 of January 10, 1991 relating to unfair competition.

83 Law n ° 7/1996 of January 15, 1996

84 According to which: “ 1. Notwithstanding what is indicated in the previous article [relating to the free determination of

price], it will be prohibited to offer or make sales to the public at a loss, with the exception of the cases provided for in the

chapters IV and V of title II of this law, unless the one who does so seeks to achieve prices of one or more

several competitors with sufficient capacity to significantly affect its sales or whether

47

The mechanism is quite similar to the French system: the resale threshold at a loss is the price

purchase of the goods appearing on the invoice, after deduction of the proportional part

discounts and rebates appearing therein. On the other hand, price reductions are excluded

corresponding to services provided by the brands, i.e. the sums paid to the

title of business cooperation.

Spanish legislation, which is not far from French law, is considered rather satisfactory by the

economic operators, and its application has not been accompanied by an evolution

increase in consumer prices 85 . If we except for reasons due to the structure of the

market itself, and therefore to the competitive situation specific to Spain, two reasons

are put forward to explain the positive results of legislation similar to the Galland law and

adopted at the same time 86 .

On the one hand, the contract judge intervenes to ensure the application of the device, the

unlike France where this task is entrusted to the criminal court. The Spanish judge is therefore,

it seems, better prepared to develop reasoning of an economic nature, so that

the control it exercises is better suited to the particular case of industry-trade relations.

On the other hand, the legislator did not wish to force operators to communicate their

Conditions of sale.

The difference between what falls under the services provided by the distribution on one side and the

price reductions on the other hand is poorly regulated, and there is, moreover, no mechanism

on discrimination. Trade negotiations are therefore much more flexible,

professionals who come to terms with this situation and negotiate, as the case may be, up front or

the back. We thus observe that the hard discount negotiates in three times net whereas the

French brands present on the Spanish market use margin negotiation

back and promotions.

Suppliers are not required to have general sales conditions. They dispose

generally a base price which sometimes includes quantitative discounts. The prices

final, discounts applied and commercial cooperation agreements are subject to

negotiations applied and trade cooperation agreements are subject to

special negotiations with each client.

of perishable items arriving on dates close to their expiration (…) / 2. For the effects indicated in point

above, it is estimated that there will be a loss-making sale when the price applied to a product is lower than that of

acquisition according to the invoice, after deduction of the proportional part of the discounts appearing therein, or at the price of

replacement if this is lower than the first quoted, or the actual cost of production if the item was manufactured

by the trader himself, increased by the direct taxes levied on the operation. / 3. We will not hold

account, for the effects of the deduction in the price referred to in the previous paragraph, of the remuneration or

bonuses, whatever their type, which would represent compensation for the services rendered. / 4. The

joint offers or gifts offered to buyers should under no circumstances be used to avoid

the application of the provisions contained in this article. 

85 In addition to the comparisons made below and above, in June 2003, with respect to an index of 100

for Euroland, Spain was at 95.5, that is to say among the cheapest states, while France reached

101.4.

86 See the ILEC bulletin, October 2003, special Spain: “Regime of resale at a loss: The model

Spanish ”.

48

If suppliers are free to communicate their scale or not, they exercise this freedom

within the limits of the provisions of the law on unfair competition 87 which in particular

prohibits abusive discrimination as in France.

1.4.5. The progression of hard discount is constant

A – THE SPECTACULAR PROGRESSION OF THE MAXIDISCOUNT INCREASES THE

COMPETITIVE PRESSURE WEIGHING ON LARGE DISTRIBUTION AND

LOCAL TRADE

  • This dynamic can be explained by a change in the behavior of

consumers.

Hard discounting has experienced strong growth since 1996, which

accelerated for three years 88 .

This rapid development can be explained in part by cyclical reasons. The context

macroeconomic policy of recent years, characterized by a higher GDP growth rate

low and a rise in the unemployment rate, may no doubt justify the increasing use of

hard discount.

But its expansion also stems from more structural causes. On the one hand, growth

constant park leads, almost mechanically, to an increase in the penetration

of this segment of the distribution. On the other hand, the consumer has undoubtedly modified the

main cost items in its basket. New important positions have appeared, such

cell phone, cable, multimedia or DVD subscriptions, which

contributed to reducing the budget devoted to other forms of expenditure (food,

clothing…).

Finally, there is little doubt that the consumer finds hard-discounting

landmarks that he gradually lost in supermarkets. The latter created, then

multiplied and finally sophisticated the new promotional instruments (PIN), to try

to attenuate, at least, the impression of rising prices of hypermarket products and

supermarkets felt by consumers. The latter are looking for promotions,

use their loyalty cards, sometimes with suspicion, but in total they do not use

systematically the advantages which are thus granted to them and are faced with an offer

which they consider complex and too diverse.

Faced with this development, in addition to its traditional advantages (price and time), hard discounting meets

better to consumer expectations. It generally offers a net price, without promotion,

87 Law n ° 3-1991 of January 10, 1991

88 See point 1.2.1

49

easily readable, and facilitates the choice of the consumer by the composition and the organization

clear of his offer.

The store has superior access proximity and allows a small but quick choice. For

schematize, the consumer lost in the aisles of distant hypermarkets and overcrowded

promotional offers that give him the impression of being manipulated turns to the

simplicity.

  • The breakthrough of hard discounting worries both large retailers and

suppliers of branded products.

Supermarkets perceive the rise of hard discounting as a threat

which makes him fear a development similar to that of the retail trade in Germany.

The competitive situation is comparable there, even if the concentration of the sector is

lower than that observed in France 89 . The regulatory framework, with regard to town planning

commercial is, it is true, more flexible 90 .

However, in Germany, the hard discount market share has exceeded 30% for several years

for 30% of sales areas. Distributors have been subject, in particular since 1999, to

intense price competition led by hard discounting. The existence of factors

specific to Germany which would explain this success is not demonstrated. Firstly,

Contrary to popular belief, the share of food is not lower in the budget

German households 91 . On the other hand, hard discounters offer more and more

assortments of national brands.

The specter of an evolution on the German model therefore worries large retailers

French. In a market characterized by a strong penetration of mass distribution,

market shares conquered by hard discount correspond to a loss of hypermarkets

and supermarkets: inter-format competition would gradually replace competition

intra-format.

The disruption of the balance of power to be expected from the success of hard discounting must

however, be put into perspective for one main reason: today, the market share of

hard discount brands which are subsidiaries of the major market operators remains

preponderant 92 .

But large-scale distribution nevertheless fears the regression of the market shares of its formats.

classic. To resist, it increased the presence of first prices and private labels on its

linear, in order to retain its customers.

89 The first five distribution groups (Metro, Rewe, Edeka-Ava, Aldi and Tengelmann) represent

about 65% of the market.

90 It is also more complex since the regulations are both local and federal. But in

schematically, retail businesses can set up without special request below 700 m² of

area.

91 This share was even 22 points in Germany in 1996 against 18 in France in the mid-1990s.

(source: AC Nielsen 1996 for Germany and INSEE BDF survey 1995 for France).

92 Around 2/3 of the hard discount market share is carried out by the subsidiaries of major brands (Ed.

for the Carrefour group, Leaderprice for the Franprix group or Netto for Intermarché).

50

A vicious circle can arise: this policy reduces the margins of large-scale distribution, which

must compensate by demanding more commercial cooperation, and therefore back margins

brands.

In summary, the increase in rear margins has encouraged the expansion of hard discounting, to

to which the major brands respond with a strategy that results in increasing them by

new.

Today, the strategy of major brands is shifting. They claim, on the one hand, to have

for priority the improvement of their positioning on the price and the gain of market share

in French hypermarkets 93 . On the other hand, the big brands are testing new

formulas of “hypers discount” in order to resist the success of hard discount. These

experiments consist, in supermarkets, in essentially offering first prices

and private labels 94 , in an approach that aims to reduce the place of brands

national in the shelves as well as their number. Finally, they did not give up

price competition, as evidenced by the birth and multiplication, the latter

years, new promotional instruments (PIN).

B – MAXIDISCOUNT, MAJOR BRANDS AND PRIVATE PRODUCTS

The total of brands in the PGC market represented, in the second quarter of 2004,

around 76% of the turnover of hypermarkets and supermarkets, compared to 77.4% in 2003

and 78% in 2002. On a rolling annual basis, the changes are summarized in the table below.

Market share of

marks on

major categories

2002

2003

Year-to-date

sliding to

2 nd Quarter 2004

Total PGC and costs 77.7 77.2 76.8

Grocery

– Salty

– sweet

80.7

76.2

84.7

80.4

75.7

84.5

80.1

75.4

84.2

Liquids 82.8 82.9 82.9

PLS Fixed weight 69.8 68.7 68.1

DPH 83.4 83.1 82.7

Source: Iri Secodip / ILEC distributor panel.

This erosion of the brands’ market shares accompanies the increase in their prices

caused by the growth of business cooperation. In the second quarter of 2004,

93 For example, the press conference by Mr. Bernard, CEO of Carrefour, on Wednesday, September 1, 2004 during

the announcement of its half-year results.

94 The Carrefour group has thus converted a 5,800 m² store into an “ economic hub ” in Saint-Denis, the

Auchan group, for its part, created the banner ” La Halle d’Auchan “, small hypermarkets concentrated at 90

% on food, and Casino is opening ” Casino discount “.

51

all the brands are at an index of 112.3, against 109.6 in the third quarter of 2003 95 . In

rolling annual cumulative, over the same period, the index goes from 108.3 to 111.

In parallel with this development, private labels represent, on the PGC market, on the

second quarter 2004, around 24% of hypermarket sales and

supermarkets, against 22.6% in 2003 and 22% in 2002. The average price index of private labels

goes from 76.3 in the third quarter of 2003 to 72.7 in the second quarter of 2004. In other words,

while national brands see their market share decrease, the price difference between

they and private labels is widening: it goes from 33.3 in the third quarter of 2003 to 39.6 in the second

quarter 2004. All the brands are penalized but, among them, these are the brands

“Challengers” who are most threatened by the expansion of private labels.

In total, the inflation of the rear margins paid by suppliers for cooperation

paradoxical consequence of financing the expansion of private labels which

contributes to reducing their market share while justifying a further increase in margins

back…

It follows from all of the above that, over the most recent period, the large operators have

perceived the danger of preserving, at all costs, the balance created following the adoption of the

Law of 1 st July 1996 while having difficulty waived. The margin mechanism

back and the development of trade cooperation constitute a comfortable trap

from which it is difficult to extricate oneself when one is not sure of having exhausted all the

advantages. No professional is ready to make, alone, an effort to give up

the balance that has been described, under penalty of seeing its competitors continue, a little longer, to

perceive the fruit in its place.

These findings no doubt explain the insistence with which professionals

oppose any modification of the current system.

95 Base 100: All PGC products.

52

CONCLUSION OF THE FIRST PART

________

The diagnosis thus drawn up shows that the consumer has been the victim of a mechanism whose

one of the determining factors is the mode of fixation of the SRP. So it makes sense

that today, the final objective of public intervention is to create,

again, the conditions for price competition between distributors.

However, the law seems condemned, since 1963, to approach only imperfectly a

definition of the ideal SRP. The legislator is undoubtedly confronted with objectives which do not

not always converge: improvement in the purchasing power of consumers,

improvement of know-how and modernization of French mass distribution,

regulation of relations between suppliers and distributors, and preservation of the

proximity and differentiated distribution networks. Other imperatives should be taken into account

account: job maintenance, international competitiveness of distribution groups and

protection of SMEs.

The legislator also gave up, very early on, to take into account the overheads of

resellers: the definition of SRP has always been based not on the cost price but

on an effective purchase price. The economic approach of the SRP was discarded in 1963 and then in

1986 on the grounds that the incrimination would have depended on variable and uncertain considerations

which would have put the judge in difficulty.

Two main reasons, which can be summarized here, explain the difficulties encountered by

public intervention.

In the first place, the public authorities, whose concern today is to re-establish a

balance more favorable to the consumer, are at the crossroads of two complex questions:

that of vertical relations between distributors and suppliers, on the one hand, and that of the

horizontal movement of concentration between distributors, since the 1990s, other

  1. These two aspects are linked and explain the evolution of the balance of power over the period.

recent: the price to pay to access shelf space and to avoid de-listing is very

high, taking into account the risk incurred, in terms of turnover and margin, for the

provider. If the movement towards concentration in mass distribution were to continue

continue, and if the barriers to entry were to be maintained, it will be impossible for the

legislator, to continue to try to regulate a sector by the only regulation of contracts

between suppliers and distributors. By the degree of concentration they have reached, sheltered from

any threat of new entrants, the major national referencers place their

suppliers in a vulnerable position that the legislator can hardly correct

by modifying only the device relating to resale at a loss. Upstream of the problem

of distributor-supplier relationships, is that of concentration in the large

distribution in a national market protected by entry barriers, which implies a

reflection on its control.

53

Second, the review of the regulations relating to relations between industry and

trade is mixed. In this sector, questioning the effectiveness of the intervention of

authorities keep coming back because of the difficulty of establishing rules that do not

are not quickly obsolete given the ability of operators to bypass them enough

quickly. The reference to discounts, the principle of which is acquired and the quantifiable amount when

of the sale or service has produced dysfunctions: negotiations between

suppliers and distributors focused less on products, conditions of sale or

reciprocal services only on the conditional or unconditional nature of such delivery or

rebate and their presence on the purchase invoice. Suppliers suspected their

customers to try to justify abnormally low prices while the latter feared the

disguised minimum prices, and the actual purchase price had become a subject of dispute. After the

1996 reform, the improvement in the application of the prohibition on resale at a loss has had,

as we have seen, as a counterpart, permitted rather than provoked by legislation, the expansion of

rear margins in large food retailers, and ultimately an unfavorable situation

to the consumer. To tell the truth, it is probably less appropriate to denounce the ineffectiveness of

legislation than to note the lively capacity of professionals to use and

exploit it in their best interests. Suppliers and distributors are constantly seeking to

reduce, as much as possible, the impact of legislation on their activity, even though they

could themselves claim certain changes. Examination of the sector reveals

imagination and skill that they deploy, sometimes in concert, to escape what they

appears unfavorable in the applicable regulations. The frequent adaptations of the

legislation, often in the sense of a stricter framework, therefore regularly come up against

innovations introduced by operators to derive unexpected benefits from a

regulatory environment that continues to produce effects that were not expected.

Distribution is a politically and economically sensitive sector for which

public authorities are subject to frequent demands from operators. However, on

long period, regulation seems to play only a marginal role in the changes

deep that he has undergone 96 so that public intervention gives the feeling of having

often a time behind in relation to these developments. To change a situation born out of

balance of power, the legislator intervenes and succeeds with more or less success but,

very quickly, a new equilibrium is formed again. In addition, state intervention is

subject to the uncertainty weighing on the medium / long term evolution of the distribution.

In 1996, the legislator was unable to anticipate the trend towards concentration in the sector which had

as a result of strengthening the power of mass distribution over its suppliers.

Today, it is just as difficult to predict the general movement of the sector, the

behavior of its main players or the possible emergence of new operators.

Under these conditions, given the importance of the distribution sector for the

overall economic performance, relax regulations to favor gains

efficiency and consumer benefits seems to be the way forward for the

reform.

96 See J. Lubeck and J.-L. Schneider, “The distribution sector in France” in CAE, Régulation des

relations between suppliers and distributors, p. 47.

54

  1. THE PROPOSED REFORMS

55

The group’s proposals are broken down into distinct objectives; they offer options

to the public authorities and can be combined with one another according to methods which take into

takes into account the need for measured and gradual application. They consist of:

– Strengthen the administrative and judicial system for implementing the

regulation

– Clean up commercial relations

– Lower prices by a return to the laws of the market

– Lower prices by adjusting the SRP

– Act on the concentration level of distribution

2.1. Strengthen the administrative and judicial system for

regulation work

Since the intervention of the order of 1 st December 1986 coexist penal repression

offenses referred to in Articles L. 441-6 and L. 441-3 of the Commercial Code 97 and the possibility of

to engage the civil liability of ” any producer, merchant, industrialist or person

registered in the trades directory ”, author of illicit practices covered by the article

  1. 442-6 of the same Code.

At the end of the group’s work, it appears that it would be, in any event, imperative to

strengthen the application of this system, so that, whatever option is chosen, no

reform cannot be dispensed with an intense effort to improve the efficiency of procedures

existing.

A number of measures are proposed to strengthen both actions

civilians engaged in relations between suppliers and distributors, that the repression

criminal law of illicit practices resulting from these same relationships.

These measures also presuppose an adaptation of the survey methods and of the apparatus.

judicial.

Finally, a modification of the texts should make it possible to punish more effectively the abuse.

buying or selling power as well as anti-competitive practices in the relationships

between industry and commerce.

97 The provisions of article L.441-6 concern commercial relations between “producer, supplier of

services, wholesaler or importer ”and“ purchaser of product or requester of services ”;

the provisions of article L.441-3 concern invoicing.

56

2.1.1. Make recourse to the judge more effective, both in civil matters and

criminal plan

A – MAKE CIVIL PROCEDURES MORE EFFICIENT

In view of the general remarks made by many operators, on the deadlines, the means

and the sanctions, it is essential that the referral to the judge and the course of the procedure

be accelerated and that the terms of reparation are adapted to the challenges

economic.

  • Speed ​​up procedures

The time limits within which judicial decisions are made have been greatly

criticized. While this question is not specific to disputes of an economic nature, it

is particularly sensitive in these matters. It must and it can be answered to this

concern of operators, through various measures based, on the one hand, on adaptation

of the summary proceedings, on the other hand, on the systematic use of techniques

procedures capable of shortening delays.

The conditions for recourse to the summary judge may be adapted. In its writing after

of the law of May 15, 2001, on new economic regulations, with regard to the

jurisdiction of the summary judge, Article L. 442-6 IV provides that: ” The summary judge may

order the cessation of discriminatory or abusive practices or any other measure

provisional ”. However, as under the empire of the previous legislation, this text does not exclude

not expressly the obligation for the interim judge to comply with the general rules

of this procedure as defined by articles 808 and 809 of the new Code of

civil procedure, or by their equivalents in commercial matters, Articles 872 and 873 of

this same Code. The pronouncement of provisional measures therefore presupposes either the finding of

the urgency, either that of the risk of occurrence of an imminent damage, or that of

the existence of the clearly unlawful disturbance.

This assessment of the existence of the manifestly unlawful disorder may prove to be delicate in

economic matters where the complexity of the relationships in question can render illegality

“Less” obvious than required by the pronouncement of provisional measures.

This may explain why the judges may have shown a certain reserve in the application.

from the summary proceedings to actions based on restrictive practices despite the

jurisprudence of the Court of Cassation, which, recalling in this regard the “classic” conditions

of the pronouncement of a precautionary measure, indicated that the existence of a

serious does not prevent the interim judge from prescribing the necessary measures

to prevent imminent damage or to put an end to a manifestly unlawful disturbance 98 ,

the office of the judge requiring him to analyze the evidence submitted to his assessment

to establish the existence either of the imminent damage or of the manifestly unlawful disturbance.

98 Cass. Com. January 30, 1996, appeal n ° 94-14.314, judgment n ° 194.

57

Under these conditions, in order to adapt the summary proceedings to this type of litigation, the

group recommends reformulating the provisions of Article L. 442-6 IV in the manner

following: “For actions initiated on the basis of Article L. 442-6 I, the judge of

summary proceedings may order the cessation of discriminatory or abusive practices or any other

provisional measure, without having to ascertain that the conditions set by the

articles 808 and 809 of the new Code of Civil Procedure or 872 and 873 of this same Code ”.

In addition, it is possible to systematize the examination on the merits at short notice of cases relating to

on this matter, including those which were the subject of decisions of the summary judge in

using existing procedural techniques. This is particularly the case with the so-called

of the “gateway”, which allows the interim judge to immediately refer the case whose

it is seized at the bottom. In addition, Article L. 442-6-IV should make it possible to introduce, instruct and

to judge such actions according to the fixed day procedure and according to short deadlines set by

advanced. This procedure, generally provided for by Articles 789 et seq. Of the

new Code of Civil Procedure but of a derogatory nature, must be

contrary to the rule in this matter. It demands action from seekers, and their guidance,

that they themselves are “ready” to have it judged quickly, insofar as the case

procedure must be complete as soon as the action is initiated, due to the obligation to

attach the documents and therefore the evidence, to the summons and of the absence of

status and the fixing by the judge of a date for pleadings from the summons stage.

As regards actions based on relationships between professionals, these techniques

procedures are perfectly adapted and relevant. They have proven themselves both in

stock market matters than in competition matters.

  • Facilitate the action for damages by reversing the burden of proof

During the hearings, the difficulty for the injured actors of

provide proof of restrictive competition practices.

In this context, it would be possible to envisage, for this dispute, a reversal of the

burden of proof. It would be up to the distributor to prove that he has rendered a service

commercial or that the price of the services mentioned in a cooperation contract

commercial value is not disproportionate to the value of the services actually

provided.

The very high character of the rear margins, which can sometimes reach 60% 99 of the price

would justify such a reform.

To this end, the terms of article L. 442-6 I 2 ° should be amended. The same reinforcement

could be considered for the other practices referred to in Article L. 442-6.

  • Improve the repair of damages and make it a deterrent tool

The assessment of damages must be closer to economic reality. From

of the elements provided by the parties, the reasons for the decisions must in this respect be more

explicit. The compensation must take into account the particularity of the economic damage and

99 see point 1.1.2

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explore in this regard the concept of potential harm. A methodology for the evaluation of

prejudice suffered in the exercise of competition as a result of restrictive practices should be

studied and made practicable for the judge, without resorting to expertise

necessarily, subject to the most difficult cases. In this hypothesis of recourse to

expert, his method should also be standardized, specified and transparent.

In addition, another avenue can be explored: motivated by the desire to sanction, the judge

could take into account the seriousness of the fault committed by the company responsible for the practice

unlawful and then pronounce damages going beyond the prejudice suffered. This

second approach, certainly delicate because it calls into question the principle of reparation

integral, would nevertheless have the advantage of helping to overcome the resistance of certain

operators to initiate actions for compensation. It also fulfills a function

dissuasive. These punitive damages are present in foreign legislation and

their introduction in this type of liability action could constitute a field

appropriate observation. In the same spirit, legislative provisions could

explicitly incite the judge to restore to the victim, as a private sentence, the illicit profits

derived from prohibited acts, as has sometimes been done in the case of

discriminations.

Participates in the same process of dissuasion the establishment of a principle of publication

mandatory at BOCCRF for all decisions made in matters of practice

abusive trade.

With regard to the civil fines provided for in Article L. 442-6 of the Commercial Code, the

reiteration of practices could lead to the pronouncement of a “sanction

aggravated ”. In practice, this mechanism could be put in place from the consultation

a file containing all the civil fines pronounced on the territory.

B – MAKE CRIMINAL PROCEDURES MORE EFFICIENT

Criminal proceedings can also be improved by adapting legislation to

economic offenses and by strengthening its exemplary character, while the

cooperation between administrations can make it possible to mobilize the existing system thanks to a

common approach.

  • The adaptation of the penal system is likely to accelerate the procedures

Several paths can be explored, which go in the direction of an acceleration and a

simplification of procedures.

First, it can be envisaged to extend the powers of

summons of the accused conferred, on the instruction of the prosecutor, to the police officers

judicial. This special authorization, which would undeniably save time

important, would allow real-time processing of certain procedures.

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Then, it would be possible to extend the procedure of the penal ordinance 100 to the offenses

provided for in Book IV of the French Commercial Code. So that this simplified procedure

could be implemented by the prosecutor when the offense is formal and

the facts appear to be established (non-existence of a commercial cooperation contract, lack of

invoice or, in some cases, the offense of resale at a loss).

Finally, the penal composition, which constitutes an alternative to prosecution 101 , could be

extended to this type of offense subject to two adaptations which are, on the one hand, its

extension to legal persons which do not fall within the current scope of this

text, and, on the other hand, the possibility that an agent of the DGCCRF can bring to the

knowledge of the accused the proposed criminal composition of the prosecutor who, if it is

accepted and executed, terminates the proceedings.

  • Increase the dissuasive nature of fines

Apart from the fine for resale at a loss, which may exceed € 75,000, two other

criminal offenses relate to the rules of invoicing and the formality of the contract.

In the first case 102 , the fine is € 75,000 for the natural person, author of

the offense and its amount may be increased to 50% of the amount invoiced or that which should have

be billed. For a legal person, the fine is equal to five times its amount

nominal amount, i.e. € 375,000 103 , and can be increased to five times half of the amount invoiced

or the one that should have been.

In the second case 104 , in particular when the commercial cooperation contract does not exist

or that its conclusion is subsequent to the service rendered, the fine amounts to € 15,000 for

natural persons and the amount is increased to € 75,000 for legal persons.

If the amounts of the fines incurred, rarely reached, may seem sufficient,

the exemplary nature of the sanctions would nevertheless be reinforced, like the proposal made for

the decisions pronounced in civil matters, by the establishment of a principle of publication

mandatory at the BOCCRF for all civil and criminal decisions pronounced in matters of

prohibited commercial practices.

  • Implement a penal policy based on the cooperation of

administrations

With a view to implementing an effective penal policy, the Directorate of

criminal affairs and pardons and the DGCCRF came together, during the works

of the group, with a view to drafting a joint circular.

100 Simplified procedure for criminal offenses and certain offenses by which the police court

decides, by penal order, to condemn or not the author of the contravention to a fine, without the latter

appear in court. In the event of a conviction, the person concerned has 30 days to pay the amount of

fine or oppose the decision, in order to present his defense before the court.

101 For certain offenses, the public prosecutor (prosecutor’s office) may propose to the perpetrator to execute one or more

obligations. This involves, for example, the payment of a so-called “composition” fine, the follow-up of an internship or

training. The fulfillment of the obligations puts an end to the criminal proceedings.

102 Article L. 441-3 of the French Commercial Code

103 Article 131-38 of the Criminal Code

104 Article L. 441-6 paragraph 5 of the French Commercial Code

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It is thus envisaged to:

– privilege and systematize the referral, provided for by article 704 of the Code of Procedure

criminal, specialized courts;

– recall the modes of pursuit;

– insist on the visibility and exemplary nature of adjudication times in this matter;

– mention the joint working protocols drawn up between the prosecution services and

DGCCRF services in certain departments;

– and refer to the methodological guide designed by the DGCCRF

In the same vein, the number of secondments of officers from the management services

general competition, consumption and the repression of fraud with

courts, as specialist assistants 105 , should be increased.

C – RATIONALIZING THE MODES OF INTERVENTION OF THE SERVICES OF THE

DGCCRF

The DGCCRF has indicated that it wants to reorient the methodology of the surveys carried out by its

services so as to address now successively, and at national level, each of the

supermarket chains, by “sifting through” all the components of

its behavior with its suppliers. Until now, she was carrying out checks

distributed throughout the national territory at the risk of a certain dispersion of its efforts

and loss of efficiency in prosecution.

The control should relate in particular to compliance with invoicing rules, the existence and

content of commercial cooperation contracts, late payments, relations with

certain specific partners (SMEs and agricultural producers), and the more

general provisions of Article L. 442-5, such as the abuse of purchasing power or

addiction.

In this diagram, the massive interventions, carried out by specialized teams, both

among distributors, but also on a panel of suppliers to qualify and corroborate the

elements collected, will improve the quality of files and their speed of

treatment, and consequently, the effectiveness of the legal action of these services.

The network of the various departmental directorates of the DGCCRF would be fully involved

the conduct of these verifications, which would be managed centrally by the appointment of a

“National investigator”.

D – ADAPT THE ORGANIZATION OF COURTS TO THE TREATMENT OF THIS

ECONOMIC LITIGATION

The technical nature of the procedures in question requires an improvement in the skills of the courts

and supposes that they are treated by judges trained to apprehend with relevance the

relations between industry and commerce.

105 According to the mechanism provided for in article 706 of the Code of Criminal Procedure, which authorizes such secondment

for a renewable period of three years.

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Specialization of courts in the field of restrictive competition practices

is essential for restoring the effectiveness of the legal system and could be considered

on the model of Article L. 420-7 of the Commercial Code which, in the context of the application

of Community competition law, provides for an allocation ” as the case may be to

courts of first instance or commercial courts, the list of which is fixed by

decree ”.

A decree in preparation could establish the list of jurisdictions that would be specialized in

the application of Articles L. 420-1 to L. 420-5 and provide for an extension of their competence to

Title IV of the Commercial Code.

A court of first instance by jurisdiction of the court of appeal would make it possible to group together the

civil and criminal litigation within the same jurisdiction 106 .

The implementation of such an orientation would however imply ensuring the training of

magistrates sitting there and to provide the means of operation.

This specialization at the level of the first instance could be extended to the procedure

call and be made:

– at the level of the Paris Court of Appeal 107

– and, failing that, on the model of interregional specialized criminal courts,

level of the corresponding appellate courts.

Article 704 of the Code of Criminal Procedure opens the way for this device, which however requires

the adoption of implementing measures.

E – IMPROVE THE POSSIBILITY OF SANCTIONING THE ABUSE OF POWER

PURCHASE OR SALE

The abuse of buying or selling power has been, since the intervention of the NRE law,

Article L. 442-6 I 2 ° of the French Commercial Code, according to which: “Engages the responsibility of its

author and obliges him to repair the damage caused by the fact, by any producer, trader,

industrialist or person registered in the trades register: (…) b) Abusing the

dependent relationship in which he holds a partner or his purchasing power or

sale by subjecting it to unjustified commercial conditions or obligations.

The notion of “buying or selling power” has been defined by case law. The board

competition has thus assimilated the purchasing power of distributors to a “strong power of

negotiation with suppliers ” 108 . The European Commission, for its part, has retained

that “Purchasing power gives (…) a commercial enterprise an influence

106 The specialization of the jurisdictions retained in the penal is, in fact, a jurisdiction by jurisdiction of the court of appeal.

107 The Paris Court of Appeal is moreover exclusively competent to rule on decisions of the Council of the

competition which are the subject of an appeal

108 Opinion of the Competition Council n ° 02-A-07 of May 15, 2002 relating to the acquisition of part of the assets of the

Moulinex group by the Seb group.

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considerable on the choice of products placed on the market, that is to say those that the

consumer can buy. Products that are not purchased by a company with

strong purchasing power have virtually no chance of reaching the consumer

final, insofar as for the supplier other outlets are rare. ” 109 .

The “abuse” of buying or selling power is, however, much more difficult to deal with.

apprehend. The CEPC has, it is true, recently stated that certain penalties for late

delivery imposed on the supplier by a distributor in its general purchasing conditions

fall under the abuse of purchasing power if it is a disproportionate and brutal sanction

failures of the supplier 110 . However, the judge remains in doubt as soon as he

For him, it is a question of characterizing what can be regarded as abusive in a pure

commercial negotiating.

The answer to this difficulty lies in a more precise definition of the abuse of power.

purchase or sale. The legislator could thus list, without limitation, from

generally observed practices, the constituent elements of such abuses, to guide the

judge in the matter.

F – SEIZE MORE SYSTEMATICALLY THE COUNCIL FOR COMPETITION OF

ANTICONCURRENTIAL PRACTICES IN RELATIONSHIPS BETWEEN

SUPPLIERS AND DISTRIBUTORS

In the current state of the legislation, the negotiation of significant rear margins not

passed on to consumers and the alignment of large distributors on the threshold of

reselling at a loss for major brand products has the effect of limiting competition

intra-brand between major distributors.

But this practice also has the effect of facilitating collusion between suppliers.

competitors. Therefore, in fact, that each of them knows that the large distributors

will resell products competing with its own at the resale threshold at a loss, that is to say in

made at the list price of the suppliers of these products, each supplier can

observe under conditions of great transparency the price of its competitors by noting

the prices charged by large distributors on the products of its competitors.

Under these conditions, any attempt by a supplier of a major brand product to

lowering its schedule price will result in lowering the resale threshold at a loss

product and by the immediate drop in the resale price of its products to distributors.

The supplier’s competitors will therefore be able to very easily detect any inclinations.

competition from the supplier and, consequently, to implement measures of

retaliation by lowering their scale prices themselves. In this circumstance, any attempt

to engage in price competition will be doomed to failure in such a way that a cartel

Tacit or explicit anti-competitive will exist between suppliers.

109 Commission decision of 3 February 1999 in the Rewe v / Meinl case concerning the large scale sector

distribution in supply markets.

110 Opinion n ° 04-04 of July 7, 2004.

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Also, it is not certain that the suppliers and producers of large-scale products

brand consumption are simply the “victims” of the demands of distributors

aiming to focus commercial negotiations mainly or exclusively on

rear margins. Suppliers of major brand products also have an interest in

a system of negotiation which allows them tacitly or explicitly to limit the

price competition between them. It is the consumers who are ultimately the

victims of a system that ensures supercompetitive margins for both suppliers and

distributors.

Thus the separation between practices relating to bilateral trade negotiations between

suppliers and distributors and anti-competitive practices less clear-cut than

seems a priori. Negotiating in certain professions with significant rear margins can

reflect the existence of a tacit or explicit agreement between suppliers and distributors to

eliminate price competition between them. The Competition Council has already had to

condemn anti-competitive practices of this nature in the calculator sector.

However, it appears that the Competition Council is only rarely seized of the conditions

in which negotiations between producers and distributors for certain products are successful

at very high rear margin rates and low price competition between

distributors.

In this regard, it would be desirable for the Competition Authority to be informed

systematic operation of the markets for which the amount of

rear margins is important (for example sectors for which the amount of these

margins is greater than 15%) and the concentration of suppliers substantial so that it

can establish whether this state of affairs is the result of tacit or explicit anti-competitive collusion

between suppliers and / or distributors in these markets.

2.1.2. Strengthen the role of the Practice Review Commission

Commercial (CEPC)

A – EXPANDING THE COMPETENCIES OF THE CEPC

The scope of action of the CEPC (established by article 51 of the law of 15 May 2001 known as NRE)

is very specific since Article L. 440-1 paragraphs 3, 7 and 8 entrusts it with the task of rendering

opinions and formulate recommendations. It is also responsible for observing the

commercial and advertising documents and relationship practices

commercial as well as contracts concluded between producers, suppliers and resellers.

Thus, provided that it is seized 111 or that it seizes ex officio, the commission can make

opinions on everything relating to relations between suppliers and distributors.

111 The commission is referred to by the minister in charge of the economy, the minister in charge of the economic sector

concerned, the President of the Competition Council and any legal person (professional organizations,

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The effectiveness and moral authority of the CEPC will only be guaranteed if its missions and

powers are strengthened.

Its preventive role would be better assured if it could be seized by a judge in order to avoid a

possible discrepancy between the decisions taken by the courts and the opinions delivered by the

commission. It could also be given the possibility of making public its opinions of its

own initiative and without any restrictions.

In addition, the CEPC constitutes an important cog in the regulation of relations between

suppliers and retailers. However, its action is currently hampered

by certain imperfections of the texts which govern it.

Three elements of reform are suggested.

In the first place, to remedy referrals the subject of which is far removed from the objectives having

presided over the creation of the CEPC, it would be advisable to reform the fourth paragraph of article

  1. 440-1 as follows: “The commission’s mission is to give opinions or

make recommendations on business issues, documents or

advertising, including invoices and contracts covered by a trade secret or

commercial, and the practices concerning the relations between, [on the one hand], the producers or

suppliers and, [on the other hand] the resellers who are subject to it. It ensures, under the

responsibility of its president, the anonymity of referrals and documents that are

submitted, including vis-à-vis members ” 112 . This means that the CEPC should only deal with

vertical relationships between economic operators.

In order to limit, secondly, the difficulties linked to the meeting of the required quorum, article 8

of decree n ° 2001-1370 of December 31, 2001 should provide that: ” the decisions of the

commission can only be adopted by half of its members present plus one ” 113 .

Lastly, with a view to facilitating the action of the CEPC when it receives contracts

partly including anti-competitive clauses, it would be possible to add a paragraph to

Article L.440-1 to provide that: “The commission may refer the matter to the Competition Council

for advice on matters brought before it which may, in part, be

undermine competition within the meaning of Articles L. 420-1, L. 420-2 and L. 420-5. The opinion of

Competition Council binds the Commission ” .

consumer associations, chambers of agriculture) as well as any producer, supplier, reseller

considering himself injured by a commercial practice (article L. 440-1 paragraph 4)

112 The current wording is as follows: “ The mission of the commission is to give opinions or formulate

recommendations on questions, commercial or advertising documents, including invoices and

contracts covered by an industrial or commercial secret, and the practices concerning the relations between

producers, suppliers, resellers who are subject to it. It ensures, under the responsibility of its chairman,

anonymity of referrals and documents submitted to it, including vis-à-vis members ”.

This wording led to referral to the Commission for disputes between producers, or

distributors among themselves, which distracts it from its original mission.

113 The current wording is as follows: “ The Commission can validly deliberate only in the presence of the

half of its members plus one ”.

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B – CREATE A SANCTION SECTION WITHIN THE CEPC

The idea is to provide for administrative repression of restrictive commercial practices of

competition. This repression could be entrusted either to an administrative authority

specially created independent, or to a sanction section attached to the CEPC.

This second solution seems preferable in that it would make it possible to establish a policy of

administrative repression informed by the doctrine established by the advisory formation and thus

to sanction illegal practices without the prior need to file a complaint.

There are at least three additional reasons for the creation of this section in the

within the CEPC:

– the field of activity of the CEPC is indeed that of relations between suppliers and

distributors;

– this commission is already an important cog in the regulation of relations between

suppliers and players in mass distribution;

– its recent establishment makes it possible to consider an extension of its powers.

Such an orientation would also have the advantage of avoiding too much blurring of the landscape.

institutional by a multiplication of authorities intervening in the same sector, that of

so-called “restrictive” commercial practices of competition.

In practice, the constitution of a sanction section would imply reforming article L. 440-

1 of the Commercial Code, by providing for its composition, which should include

administrative and judicial magistrates, and their missions.

2.2. Clean up commercial relations

2.2.1. FRAMEWORK OF TRADE COOPERATION

A – THE NEED FOR A LEGAL, SIMPLE AND CLEAR DEFINITION OF

COMMERCIAL COOPERATION

It was previously stated that there is no definition of commercial cooperation

in the Commercial Code. In fact, in article L. 441-6 paragraph 5, the obligation to write

does not explicitly relate to commercial cooperation because it is simply a statement of the

rather imprecise notion of “ specific services ”. Likewise, the provisions of article

  1. 442-6, I 2 ° a), refer to a “commercial service” without specifying its nature and those of

Article L. 442-6, I 4 °, simply evoke ” conditions of commercial cooperation “

without specifying its content.

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A legal definition of commercial cooperation would be justified all the more since

all of these provisions presuppose specifying the services that this contract must govern.

Likewise, article L. 441-3 which provides for the mention in the invoice of the exact nature of the

services and the date of their realization also refer to the need to define their content.

Finally, a clear and precise definition of commercial cooperation would allow the parties

better comply with the law and strengthen the effectiveness of the controls of the DGCCRF

Taking into account the elements of definition provided by circulars and case law, it

could be taken into account three elements which are: the reciprocity of the agreement, the need

that the service provided offers a real contribution to the supplier and a clear distinction from

obligations resulting from the deed of sale.

The practical identification of bogus trade cooperation is also an opportunity to better

identify what it covers. It would be characterized when:

– there is no real service rendered;

– there is a lack of correspondence between the agreed services and those

actually provided;

– there is a disproportion between the consideration paid and the service provided;

– there is a multiplication of invoicing for the same service apprehended under

different names (for example, services billed by the distributor to the

of commercial cooperation are already covered when they are already the subject of a

remuneration by way of price reduction under the terms and conditions of

vendor sale) 114 ;

– the remuneration of the service varies without any economic rationality;

– the consistency of the service provided for in the contract decreases significantly without justification;

– the counterparty has no positive commercial or financial translation for the

provider.

It should be noted, however, that the concepts mentioned of “economic rationality”, of

“Excessive financial participation” and “positive financial translation” are

difficult to control.

At the end of this analysis, we will retain that commercial cooperation can be defined

as a contract for the provision of specific services or not, detachable from the operation of

sale, made by a distributor, for the benefit of a supplier, with the aim of promoting the

resale and marketing of the latter’s products and for which the distributor must

provide a real and identifiable advantage, in return for remuneration that is not clearly

disproportionate.

114 These practices frequently observed by the DGCCRF have been recalled in the context of this

Commission

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B – THE CONTENT OF COMMERCIAL COOPERATION

On the basis of the definition adopted, it is possible, as an indication, to establish a list of

provision of services relating to commercial cooperation.

These are mainly services which are linked to the promotion towards the consumer.

by a particular highlighting of the products on the points of sale and that are:

– the allocation of privileged locations and “gondola heads” 115 or the placing

on special displays;

– creation of a tasting or demonstration stand;

– the presence of a facilitator who provides special information.

These are also services linked to “advertising promotions” 116 aimed at informing the customer.

consumer on the products concerned:

– both at points of sale by distributing flyers and messages in the store

sound or posters;

– that at regional or national level through the distribution of national prospectuses,

catalogs, various advertising media, etc.

Since it leads to advertising or promotion actions in stores, its

main channel, this conception of business cooperation has the merit of simplicity.

Other services may, in addition, be offered by distributors to their suppliers at

under commercial cooperation, such as the provision of information of a

economic or statistical such as market research or communication of

sales statistics 117 provided that the information given is related to the

product of the supplier and that this service is remunerated in a non-disproportionate manner.

Presenting themselves as brand loyalty operations organized by the

distributors but which concern specially identified products, the new

promotional instruments (PIN) could fall under the category of

commercial cooperation which has just been described, subject to further clarification and

be the subject of a prior contract.

C – SETTING THE REGIME OF COMMERCIAL COOPERATION

115 Specific promotional space for the presentation of products

116 term used in a judgment of the Court of Cassation (Crim., October 15, 1996, appeal n ° 95-83281)

117 Communications relating to market developments, data issuance (number of “facing”,

shelf capacity …)

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The rather imprecise nature of trade cooperation agreements makes it necessary to

stricter formalism.

Article L. 441-6 paragraph 5 provides that: ” The conditions under which a distributor (…)

is remunerated by its suppliers, in return for specific services, must do

the subject of a written contract in duplicate held by each of the two parties ”. In

the state, if the services rendered under commercial cooperation must meet the

formalism provided for in this article, it is not indicated that these services are linked to cooperation

commercial.

In this context, if it is provided for in article L. 441-3 that the invoice must include the name

exact price and the price of the services rendered, it is not expressly provided that the

commercial cooperation must make it possible to identify with precision the exact nature of the

services rendered, as well as the dates of performance of these services, so that correspondence

between this contract and the distributor’s invoice can be established 118 . A clearer layout

would have the merit of better ensuring legal certainty.

It would also be necessary for the commercial cooperation contract to be a contract for

determined time.

Finally, with regard to the system of proof, it is essential to ensure the materiality and

the effectiveness of commercial cooperation services. It is in this sense that the

demonstration of their fictitious character should be facilitated by the reversal of the burden of

the proof.

Thus, it would be possible to amend the law by providing in particular that the chapter: ” From the

transparency ”be entitled:“ Loyalty and transparency in the conditions of

sales and commercial cooperation ”, a chapter in which a certain

number of articles, the text of which is annexed to this report 119 . It is proposed on this

point of making commercial cooperation a named contract with substantive conditions

(training, performance, interpretation) taking into account the respective situation of the parties and

clearly expressed formal conditions. These provisions would be inserted in the title

IV modified, if necessary, within the framework of the orientations proposed in 2.2.4. in the continuation of

report.

2.2.2. Sanction abusive range discounts

A “range discount” can be defined as the discount granted by a supplier to a

distributor for the purchase of the whole range of its products or of a large part thereof.

In practice, a financial advantage is granted to obtain the presence on the shelf of

118 CA Paris judgment, June 29, 1998, which confirms the conviction of the ITM company for issuing an invoice

indicating without further precision “linear distribution” and “highlighting” (RJDA 1998 n ° 1407)

119 See Annex VII, giving indications for the modification of certain provisions of the Code of

trade.

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different references: various packaging of the same product, products of the same

different family or products but from the same supplier.

During the hearings, the idea was raised of prohibiting these discounts on the grounds that they would

the effect of making it difficult for SMEs and “outsider” products to access the shelves of

malls. Several operators insisted on the “defensive” character of certain

range agreements, used by the supplier to avoid the partial delisting of its

main products. Others, on the other hand, pointed out that the rate of these range discounts

remains limited and that this technique allows the end consumer to have an offer

diverse.

The examination of the consequences of this technique did not convince the group to propose

the principle prohibition of range discounts.

These should only be proscribed, under anti-competitive practices,

when they are designed to crowd out competing brands through shelf saturation,

as decided by the Competition Council in its decision n ° 04-D-13 of April 8, 2004,

relating to the practices implemented by the company of Cellars and Producers gathered from

Roquefort in the blue cheese sector.

This decision sanctions the commercial practice of a company in a dominant position which

gave its buyers loyalty discounts in order to restrict their ability to choose

between their suppliers and encourage them to obtain almost all of their supplies from it.

Operators therefore have a course of action to sanction remittances.

range that are abusive. Devoting this possibility could however

imply expressly mentioning range discounts among the abuses prohibited by

Article L. 420-2 of the French Commercial Code.

2.2.3. Insert preliminary provisions in Title IV of Book IV

relating to unfair competition

The Commercial Code includes, in its Book IV, a Title IV, (article L. 440-1 to L. 443-3)

entitled “Transparency, practices restricting competition and other practices

prohibited ”, a long list of legal obligations or prohibitions relating to

behavior in commercial practices (resale at a loss, discriminatory practices,

abusive rupture of relations …), mainly in relations between producers and

distributors.

This title, the provisions of which have been expanded with successive reforms, does not

reflects no overall inspiration, which undermines its consistency. Yet a denominator

common seems to be able to be found through the requirement of loyalty in the practices

commercial. This is why the current title could be replaced by the title

next: ” Loyalty in commercial practices” . These rules would then appear

as the counterpart of the principles intended to ensure freedom of competition.

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Title IV thus renamed could then be broken down into several chapters with a

internal grooming of titles:

– preliminary chapter: General provisions.

-chapter 1: Loyalty and transparency in the conditions of sale and

commercial cooperation [title replacing the current one: “Transparency”, too

imprecise], allowing the commercial cooperation contract to be framed.

– second chapter: Restrictive practices of competition.

-chapter III: Other prohibited practices.

In this spirit, the preliminary chapter of Title IV entitled ” General provisions “,

composed of a single article devoted to the Trade Practices Review Board

(art. L 440-1) could be effectively supplemented by an article L. 440-2 relating to the rules of

unfair competition. These are intended to apply, either in the absence of practices

prohibited by law, or as a substitute for the latter when the parties have chosen to

place oneself in the field of civil liability.

Whatever the choices made by the public authorities, among the proposals made,

the establishment of the rules of unfair competition, as defined by case law,

would allow the reforms undertaken to be put into perspective.

This new device would have the advantage of harmonizing national law with that of

main European countries (Germany, Spain, Belgium, Denmark, Switzerland, Hungary,

Poland, Czech Republic, etc.) who have chosen to legislate in the field of competition

unfair.

The definition proposed in the document in appendix 120 makes it possible to reconcile the

traditional basis of unfair competition and the gradual expansion of its scope

application. It is inspired by a three-dimensional design – protection from competitors,

protection of companies that are not in the same market segment and protection

of consumers – taking into account the fields of activity invested by this branch of the

law.

2.3. Lower prices by a return to the laws of the market

We can estimate that the relations between industry and commerce would be sufficiently

regulated by the effective implementation of competition law. According to this design, it

could be considered to remove the prohibition of resale at a loss and practices

restrictive of competition, according to necessarily progressive and supervised methods.

120 Annex VII

71

2.3.1. The prohibition of resale at a loss and, more generally, the right

restrictive practices, are hardly compatible with the free play of

market

All the provisions of Title IV of Book IV of the Commercial Code, which attempt to

to apprehend the relations between trade and industry, are criticized, and their abandonment

sometimes advocated. The report written in 1995 by Mr. Claude Villain had already

considered the deletion of these provisions, an option which was not retained, the following year,

during the operation of the law of 1 st July 1996.

This question deserves to be asked again.

The report written by Mr. Michel Camdessus and relating to the revival of growth in

France 121 , would also suggest calling into question the ban on resale at a loss.

On the one hand, indeed, as we have already underlined, the action of the legislator must not continue to

oscillate, according to the evolution of the balance of power, to regulate relations between

professionals, while, in other sectors, it does not intervene in order to

to balance. Restrictive practices could be dealt with on the basis of the law of

anti-competitive practices.

On the other hand, and above all, with the objective of re-establishing price competition,

rules of Title IV of Book IV of the Commercial Code hamper the freedom of operators and are

carriers of disturbances in the normal competitive game. In theory, nothing stands in the way of this

that relations between industry and commerce fall under the common law of

competition, without the need for special provisions to balance

the balance of power. At least from the consumer’s point of view, the rebalancing to which he has

process has had a negative impact over the past eight years, as shown in the first part of the

report.

According to economic theory, controlled by the law of anti-competitive practices, the

resale at a loss, understood as resale at a price lower than the actual purchase cost of the

dispenser is not necessarily harmful, if one considers that it cannot sustainably

be implemented when it is not practiced by a company benefiting from a power

important market. The systematic prohibition of all discrimination can also

be analyzed as harmful, if it ends up obstructing, de facto , differentiation,

decisive in commercial relations. In addition, authorize the granting of conditions

adapted to the different distribution formats could allow the preservation of several

forms of business networks. Finally, the requirement for transparency can have

contrary to the normal play of competition, in that it allows, on concentrated markets,

a very good readability of the offer. Uncertainty is the condition for effective competition.

The current method of fixing the SRP has had the effect of removing a large part of this

uncertainty: the sharing between the advantages agreed to be passed on to

consumers and the brand’s margin is therefore stabilized at the time of the

negotiation. Modifying the law on this point involves recreating the conditions of uncertainty,

to have an effect on prices.

121 In the process of being published

72

The group therefore considered the hypothesis of profound deregulation, which would consist of

decriminalize reselling at a loss and let the market operate under the control of the law

common competition. All in all, the very existence of legislative provisions

making up Book IV of the Commercial Code today would be called into question.

In such a scenario, the legislator would rely on the provisions of Articles L. 420-1 and

  1. 420-2 of the French Commercial Code to regulate the practices of resale at a loss of

distributors. Reselling at a loss could be considered a predatory practice

constituting an abuse by a company in a dominant position. Currently, the

producers’ sales practices at a loss rely mainly on these

only provisions.

To this end, it would however be necessary to modify Article L. 420-5 of the Commercial Code.

which today expressly excludes resale activities in its field

application, with a view to apprehending the abusively low price practices emanating from

distributors.

It would be a question of approaching the models which prevail today in Great Britain, in

Germany or the United States, which did not prevent the emergence in these three countries of

very powerful operators in the distribution sector, without causing a rise in prices

detrimental to the consumer since Germany is one of the cheapest countries in

the European Union when it comes to consumer products.

The group was divided on this issue of strong deregulation of the sector. Different

arguments indeed support the thesis according to which the maintenance of the right of practices

restrictive and, in particular the prohibition of resale at a loss, is justified.

Thus, beyond the fight against predation, maintaining a PRS has the effect of controlling the

commercial policy of distributors. Indeed, the activity of a distributor is essentially

multi-product and consumers, once at a point of sale, constitute a

“captive” customers.

The combination of these two characteristics gives rise to complementarities between the

products offered: even for products that are apparently independent, purchases may become

complementary for a consumer preferring to group his purchases at the same point

of sale in one place.

These complementarities economically justify the practices of low prices, or even resale at

loss on products with the most elastic demand 122 . Such practices are

independent of any predation motive and aim only to distribute as much as possible the margin of

distribution, by limiting the impact on purchasing volumes.

Such low prices may appear more with large distributors, offering

thousands of references, only from producers or distributors specializing in one type

of product. And even if the practice is not aimed at eliminating a competitor, businesses

specialized in the products with the most elastic demand, risk in fact

find themselves crowded out by supermarkets, which will tend to charge lower prices,

or even reselling these products at a loss.

122 Ramsey FJ ​​[1927], “ A Contribution to the Theory of Taxation ”, Economic Journal , 37, p. 47-61.

73

The particular situation of businesses offering a large number of references may also

make it difficult to assess predatory behavior. It can indeed become difficult

to judge whether resale at a loss is “innocent”, resulting from the simple play of complementarities

of products sold by the distributor, or if it is specifically aimed at eliminating a

competitor, in order to benefit from less competition thereafter.

Ultimately, abandoning the SRP would amount to refocusing the supervision of resale at a loss.

in the field of competition policy, aimed at making markets more

competitive, both in terms of production and distribution. Maintaining the SRP, which

is more in the field of unfair competition, however allows to protect

certain forms of distribution, which could suffer from the propensity of supermarkets to

compress prices on products with high elasticity. It also has the advantage of a rule

clear, in a context where the assessment of predation cases would be particularly

delicate.

In this hypothesis, it would be possible to rely on competition law to

distinguish the cases in which reselling at a loss constitutes an exclusionary practice

anticompetitive of those in which this strategy results from a practice

economically justified.

At the time when a reform of the existing legislation is envisaged, the group therefore considers

that giving up the ban on resale at a loss would undoubtedly revive the

price competition among distributors. However, the complexity of the assessments in

course in view of the urgency to react may justify certain objections formulated against

of such a solution. The same is true of that consisting in suppressing the right of practices

restrictive of competition.

In any event, this reform, implying a clear break with the choices made by

public authorities over a long period of time, the return to the free play of the market could not therefore be

do that very gradually and under the aegis of a regulatory authority.

2.3.2. The elimination of resale at a loss could only be done

gradually and under the aegis of a regulatory authority

Current regulations have created economic balances and habits whose

abrupt suppression could lead to upheavals legitimately feared by

many operators.

The return to the free play of the market could therefore only be done very gradually, according to one

process in which the substantial modification of the resale threshold at a loss could be the

first stage. In addition, this graduation, which could be done in a differentiated way by

sectors, should be carried out under the control of a regulatory authority capable of forecasting and

to implement an evolution adapted to the legislation, and endowed with a power

regulatory.

74

This would involve creating a specialized administrative structure, designed for a period of

determined, competent to prosecute and sanction so-called commercial practices

” Restrictive of competition “, gradually maintained.

Its mission would be to facilitate the transition towards the disappearance of several rules contained

in Title IV of Book IV of the Commercial Code, in a constantly evolving sector, where

the operators are diverse and for which the regulation by the State has shown its limits.

As soon as it responds to a need expressed at a specific time, this authority would be

instituted for a limited period in order to dismantle the body of rules which produced

reflexes and questionable behavior among economic operators. She would fade away

then for the benefit of regulation by the Competition Council or by the judge of law

common.

Such a regulatory mission could be entrusted to the CEPC, whose role, composition

and the powers would then be considerably changed.

To guarantee its independence, its composition should provide for the presence of magistrates from

administrative and judicial orders. It could have a self-referral faculty. This

authority would be endowed with the usual sanctioning powers, in particular the imposition of fines

and injunctions accompanied, where appropriate, by penalties. “Gateways” should be

established between it and the Competition Council, through the possibility of referral to

notice or the transmission of files in the event of suspicion of anti-competitive practices or

excessively low prices.

2.4. Lower prices by adjusting the SRP

The vast majority of operators interviewed by the group, some with the greatest

firmness, recalled their attachment to the prohibition of resale at a loss and to its method of

fixing as follows from the law du1 st July 1996 that it is in their eyes a vested

positive.

In addition, the resale at a loss threshold can constitute an effective control tool for

producers which allows the commercial policy of distributors to be framed.

2.4.1. The new threshold for resale at a loss envisaged

Despite the reservations formulated by certain professionals, the group endeavored to assess

at what level the PRS should be set in order to achieve the target of lower prices which

was assigned to him by the engagement letter. It also seemed essential to him to propose a

mechanism simple to apply by operators, difficult to circumvent, and easy to

control for administration.

The fixing of the SRP at the level of the purchase price “three times net” is the solution which seems to him.

meet all of these objectives.

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This concept of “three times net” price, familiar to suppliers and distributors alike,

corresponds to the purchase price all discounts, rebates, rebates and commercial cooperation

deducted. The following diagram illustrates this definition.

Conditional rebates 1

List price

Net price net

Net price on invoice

merchandise

Unconditional discounts

acquired during the sale 11

Margin

before:

32

Price 3 times net

framing

by the GTC

from the supplier

Discounts

of price

granted by

supplier

on the sale of

merchandise

Purchases of

services

cooperation

commercial

billed by

the distributor

Cooperation

commercial

on the initiative

from the distributor

FRAMING

PRICE OF GOODS

OBJECTS OF NEGOTIATION

MARGIN

DISTRIBUTOR

RESALE THRESHOLD AT LOSS

88

PVC

89

100

60

GOODS SERVICES

92

Construction of the supplier price / distributor price

(TARIFF STRUCTURE)

Specific services

distributor 28

Fixing the SRP at the “three times net” price would not correspond to a return to the rule of law

prior to the intervention of the law of 1 st July 1996 for at least four reasons:

– the prohibition on resale at a loss as set out in Article L. 442-2 of the French Code of

trade would not be called into question;

– clarity of definition of the PRS by the Law of 1 st July 1996 would be preserved,

it would only be brought closer to economic reality;

– the invoicing rules would remain simple;

– the rules applicable to the GTC would be maintained.

The technical aspects of the proposed reform can thus be specified:

– the invoice remains as a tool for calculating the SRP and remains the instrument of

control;

– the T & Cs are maintained insofar as they result from the positive results of the 1996 law,

reaffirmed by the circular of May 16, 2003. They include all discounts,

rebates and discounts directly linked to the purchase / sale transaction;

– unconditional discounts acquired during the sale reduce the price

net billed and SRP;

– conditional discounts are deducted from the SRP and are mentioned at the bottom

invoice;

– commercial cooperation is also charged to the SRP and is also included

of invoice. The implementation of this deduction assumes that the remuneration resulting from

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business cooperation is fixed as a percentage of turnover

net billed. For example, 5% of the turnover invoiced by the supplier to the

distributor will be devoted to the communication on prospectus. Moreover, if the

supplier offers different conditional discounts, a contractual rate will be

determined with the distributor and will appear on the invoice.

Such a reform, which would eliminate the rear margins, would imply an adjustment of

paragraph 2 of article L. 442-2 and article L. 441-3 of the French Commercial Code.

2.4.2. Such a reform would be simple and effective in achieving a

lower prices for the benefit of the consumer

  • A simple reform

In the first place, the purchase price “three times net” is a known economic concept and

understood by all operators. The device envisaged would therefore be very readable for

them and it would not require any particular educational effort with regard to its implementation.

Secondly, such a reform maintains the principle of the GTC and

trade cooperation, which are the two pillars of the current negotiations. It imposes the

negotiation of commercial cooperation agreements as a percentage of net turnover

bill. Current practice is that trade cooperation is sometimes determined by

percentage, sometimes in absolute value. In the latter case, there is nothing to prevent,

reduced to the turnover forecast by the co-contractors, it can be formulated in

percentage. This calculation is already used to evaluate the purchase price three times net. This obligation

would therefore be easy to enforce.

The recommendation formulated would imply, in the third place, that the operators

place the mention at the bottom of the invoice of commercial cooperation agreements. This new

billing rule should not pose a technical problem of implementation.

The invoice thus modified will be, as is the case today, a control tool for

administration.

  • A reform that opens the way to lower prices

The proposed system will allow distributors to provide their customers with all or

part of the financial benefits constituted by trade cooperation agreements.

With regard to consumer products sold today at the SRP, the

distributors will have to compete on price.

In this case, in fact, distributors could no longer limit themselves to setting their prices.

resale to SRP for all consumer products. They would be

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necessarily led to each develop their own business strategy. This strategy

would consist in choosing the products resold at levels close to the SRP and those on which

a margin must be made. Rather than systematically aligning with the SRP by realizing,

at the back, margins that cannot be passed on, distributors would be required to have a real

commercial policy leading to differentiation, between brands, of prices,

services and products sold. The expected result of this reform would be a real

competition between brands requiring productivity efforts to boost the

national commercial fabric.

The conditions for greater uncertainty as regards the state of competition would be

created by the return to a “single” margin, and distributors could choose this

which they believe possible to pass on to the consumer.

This increased possibility of price competition will certainly decrease the PINs that

may constitute a circumvention mechanism of the SRP as currently set.

Consumers will find more price readability and will be able to

easily compare between different store formats.

The proposed reform retains the principle of “transparency” of the GTC and

differentiation with regard to business cooperation. Indeed, the cooperation

commercial is the seat of the negotiation of the specific services which materialize the

differentiation between brands and manufacturers. This differentiation will become with this

reform an axis of lowering the SRP and therefore, improving competitiveness for the

distributor. The SRP can therefore be differentiated between brands. This difference may

be passed on to the consumer.

2.4.3. A transition period could be considered

The effectiveness of the reform consisting in setting the threshold for resale at a loss at the purchase price “three

times net ”lies in the importance of the behavior change that it demands on the part of

operators. These have, in fact, demonstrated in the past their ability to adapt to

successive devices and to bypass them. Taking into account the disruptions of economic equilibrium and

changes in trade policy which require such a reform, an implementation

progressive place is to be expected.

The solution would be to transfer the amount of trade cooperation agreements to

the calculation of the SRP in two years, at the rate of half of the total amount of the

business cooperation per year. The higher the transfer level, the faster the

three times net purchase price will be reached and no more bypassing by increasing the tariff

supplier will be difficult.

However, the billing principles set out for the solution of setting the SRP at the

“three times net” purchase price apply immediately: the cooperation share

transferred business must be included at the bottom of the invoice.

78

This solution has the advantage of taking into account the existing differences between

product categories: it adapts equally well to a sector where the practice in terms of

business cooperation is 30% than 10%.

It is pro-competitive because it takes into account the possible differentiations between

distributors with regard to business cooperation agreements.

The solution is perfectly suited to a new entrant distributor: it is easy to establish that the

half of the total commercial cooperation negotiated in the first year is deducted from the

SRP.

2.4.4. This reform should be accompanied by corrective measures

suitable for meeting other public policy objectives

If he is convinced that bringing the SRP closer to economic reality is a way

effective in re-establishing price competition, the group is aware that such

guidance is likely to have adverse effects on other public interests.

Among the effects frequently denounced during hearings, we can cite, on the one hand,

the fear of a deflationary spiral that would not have the expected effects in terms of power

purchase, on the other hand, the weakening of local shops and SMEs in return

a strengthening of leaders, whether they are distributors or suppliers or, finally,

workforce reductions among operators on whom productivity gains would be imposed.

These disadvantages should not be overestimated, since professionals have no

doubtless have been too long accustomed to benefiting artificially from legislation which

was not designed to provide them with a situation pension. However, it should not be

not neglect them, because the suggested modification of the SRP threshold would have consequences

important on economic balances and on trade relations as they arise.

have been installed since 1996.

The group’s mission does not, however, extend to all the public interests in question which

are also likely to be taken into account by the legislator.

In this regard, it should be remembered that certain mechanisms already exist.

As regards, for example, local trade, the safeguard of which is necessary, in

certain areas, in particular for social reasons, the FISAC (Intervention Fund for

services, crafts and trade) is intended to help the municipalities, in particular

rural areas, to preserve or develop a network of local businesses. This device is

designed to provide financial support to different categories of projects, in rural areas

like in an urban area.

Endowed with 67.08 million euros in 2002, the budget of this fund is supplied by direct debit

on the surplus of the trade and craft aid tax. This tax, which was created by the

Law n ° 72-657 of July 13, 1972 instituting measures in favor of certain categories of

79

old shopkeepers and craftsmen, sits on the surface area of ​​supermarkets built

since January 1, 1960 (sales area greater than 400 m²).

Since the agreement of June 17, 2004, the allocation of FISAC has been increased by 30 million

euros to allow in particular the realization of an advertising campaign in favor of

local commerce. Strengthening this instrument is one of the possible ways to

mitigate the possible effects of a modification of the SRP on local shops.

It was not within the scope of the mission assigned to the group to comment on

all the public interests likely to be affected by a questioning of the mode

current calculation of the SRP, and to provide all the necessary instruments to safeguard them. The

public authorities can strengthen existing arrangements or create new ones. In

On the other hand, account has been taken of the negative effects of the reform in that it is proposed

various mechanisms to gradually implement the revision of the current SRP.

2.4.5. The other avenues considered

A – LOWER THE SRP BY A TRANSFER OF A DETERMINED NUMBER OF POINTS

REAR MARGINS

This route would consist of transferring the amount of trade cooperation agreements to

the calculation of the SRP on a flat-rate basis, for example 10 points per year, within the limits of the margins

rear observed.

This could be a transition to reach the triple net purchase price.

However, this flat rate system does not take into account the existing differences between the rates.

of rear margins by product category. The transfer level fixed uniformly

could be understood by some as a minimum rear setback threshold and hamper

operators who trade on the basis of lower rates.

B – LOWER THE SRP BY APPLYING A REDUCTION COEFFICIENT

NET PRICE INVOICED

This solution consists in fixing, for example, the SRP at 90% of the net purchase price.

bill. The option goes in the direction of increasing price competition but it does not

not put an end to rear margin inflation. The temptation to reconstruct the decline in

SRP by new trade cooperation agreements would be strong.

80

C – INSERT THE PRINCIPLE OF THE SPECIAL CONDITIONS OF SALE IN THE

LAW

The group studied the possibility of enshrining in law the principles of the circular of May 16

2003, in particular the principle of the Special Conditions of Sale (CPV).

But, on the one hand, in reality, on this point, the circular does not add to the law. From a point of view

operational, on the other hand, transparency on prices in the sector makes it easy to identify, for

distributors, any advantage obtained by a competitor, which is immediately claimed at the

provider. This is why, few industrialists, following the intervention of the circular of

2003 proposed CPVs. To enshrine this principle in law would come up against the same obstacles.

Finally, the hypothesis, which certainly goes in the direction of increasing competition by

price, does not put an end to the inflation of the back margins. The temptation to reconstitute the

lower PRS through the negotiation of new trade cooperation agreements could

be strong, as in the previous option.

D – AUTHORIZE RESALE AT LOSS UNDER CONTROL

The group examined the possibility of authorizing the resale at a loss of a limited number of

consumer products up to x% below the SRP as currently defined

and for a limited time.

Such a scenario, by organizing a “rotation” of products that can be sold at a loss

allows:

– limit the predatory effects vis-à-vis small businesses.

– to prevent a single producer from being the systematic victim of the practices of

resale at a loss

– to reintroduce a little opacity on the level of the SRP: we could no longer

distinguish a resale practice at a loss decided by a distributor from a

special condition of sale granted by the supplier to the distributor

The difficulty of this solution which gives the initiative of the discount to the distributor lies in the

too many parameters to set: dates, number of products, amount of discount.

Thus, the measure would be very difficult to control and would have a limited effect on lowering prices.

E – CEILING THE LEVEL OF THE REAR MARGINS

The arrangement which would consist in fixing a maximum rear margin rate at, for example,

15% could allow the transfer of the surplus in the selling prices to the consumer.

81

However, this measure would amount to erasing the differences in efficiency between

distributors, in particular as regards commercial cooperation services and to be fixed

a threshold that could serve as a benchmark and pose a problem for sectors working on

lower rear margin rates.

Such a “freeze” of rear margins could be effected by means of an agreement between the

professionals, under the aegis of the public authorities. Despite the stated objective of reducing

selling price to the consumer of such an agreement, its compatibility with

competition would, however, be questionable.

It is true, however, that an agreement providing for caps on rear margins could be

regarded as contributing to economic progress, and to the well-being of consumers,

taking into account its effects on prices, which would authorize the invocation of article L. 420-4-I-

2 ° of the Commercial Code or article 81 § 3 of the EC Treaty. The benefit of these provisions

is nevertheless subject to strict conditions, and in particular that the progress

economic invoked results directly from the observed practice 123 .

In these conditions, a cap on rear margins would risk being regarded as

limiting the free play of competition, and it is not easy to assert that such a device

could benefit from the aforementioned provisions as a contribution to progress

economic.

2.5. Act on the concentration level of distribution

Abusive commercial negotiation practices resulting in unauthorized displacement

justified by the distribution of value for the benefit of large distributors and by a

weakening of intra-brand and inter-brand competition to the detriment of

consumers are facilitated by the fact that a small number of large distributors have

strong purchasing power.

This purchasing power results from the concentration of distribution which is, in part

substantial, due to the existence of a barrier to entry into this sector. This barrier to

entry is neither technological nor financial but is due to restrictive rules which

govern commercial town planning.

This barrier encourages distribution operators wishing to expand to proceed with

the acquisition of existing surfaces or to federate with existing distributors (in

independent chains) rather than creating new sales areas, thus strengthening

their purchasing power and does not remedy the problem of the scarcity of shelves. This

barrier also limits the development of new operators in the circuits of

distribution which could compete with the distributors already established and constitute, for

suppliers, an alternative allowing them to resist commercial demands sometimes

unjustified statements made to them by the main distributors. Finally, the restrictive rules

governing commercial town planning have the indirect effect of pushing suppliers to

123 Competition Council n ° 92-D-56; CA Paris December 10, 1992, SPAD de Sogédra.

82

concentrate in reaction to the concentration of distributors thus weakening competition

interbrand.

Thus, any action aimed at modifying the behavior of operators with a strong

purchasing power must be accompanied by action aimed at slowing down the movement towards

structural concentration of distribution and facilitate both the emergence of new

sales areas as the emergence of new competitors in the distribution sector.

2.5.1. Redesigning the merger control regime

The increase in the mandatory notification thresholds resulting from the law on new regulations

economic results in making most of the small gripping operations uncontrollable.

supermarket control. However, these operations can lead to the constitution of

local dominant positions. To better control the harm to competition resulting from this

situation, a mechanism is proposed allowing the DGCCRF to examine on its own

initiative of mergers which do not reach the notification thresholds

mandatory but which are likely to adversely affect competition. So when

25% market share threshold would be reached, the DGCCRF could take the decision to

ask the companies concerned to notify the transaction within three months.

To make this device operational, the last paragraph of

Article L.430-2 of the French Commercial Code: “When a concentration within the meaning of

Article L.430-1 has the effect of increasing the market share of companies carrying out the activity

referred to in article 18-5 I 1 ° of decree n ° 93-306 of March 9, 1993 above 25%, the Minister

may, within three months of the actual completion of the transaction, submit it to

the procedure provided for in Articles L.430-3 et seq. However, the provisions of article L.

430-4 are not applicable to these operations.

In the overseas departments, the provisions of the previous paragraph are also

applicable when a concentration within the meaning of Article L.430-1 has the effect of

to increase the sales area as defined in article L.720-4 beyond the threshold set in

same article. “ .

It should also be recalled that the procedure provided for by Article L. 430-9 of the Code of

trade may allow, in the event of abuse of a dominant position or of a

state of economic dependence, to modify, supplement or terminate all agreements and all

acts by which the concentration of economic power which enabled the

abuse.

2.5.2. Review commercial equipment legislation

Although they are applied with some flexibility by the equipment commissions

commercial, the rules for commercial equipment can be analyzed as

a barrier to the arrival of new sales areas. Thus, a new entrant, whose

strategy would be based on formats with a surface area greater than 300m², could only

difficult to establish itself except through the purchase of existing stores. So the

83

French distribution lives free from the threat of a new entrant, in particular an operator

significant.

Likewise, these rules protect surfaces already installed. Existing companies do not

can hardly do any organic growth by opening new stores. They

therefore favored the acquisition of existing stores, accelerating the concentration of the sector:

Carrefour has successively bought Euromarché (1991) then Comptoirs Modernes (1998)

before merging with Promodès (1999); buyout of Franprix-Leader Price by Casino

(1997) ; acquisition of Docks de France by Auchan (1996), etc. 124

This policy aimed at containing sales areas has made shelf space scarce and increased its price.

access, increasing the bargaining power of large retailers. At the same time,

distribution companies have seen, as a windfall effect, the value of their assets

real estate rise very sharply. Thus, if we take the hypothesis of the arrival of a

foreign distributor, the latter would have to pay a high price to acquire networks that have become more

important and more expensive.

The laws of July 1996 therefore reduced the competitive capacity of distributors

french:

– except to deploy costly efforts, they cannot make progress

significant turnover;

– the rear margins guaranteed them a profitability rent which did not encourage them to

achieve productivity gains;

– they were not threatened by a powerful new entrant.

In addition to the questionable effect of commercial equipment legislation on the protection

of “small trade” 125 , a recent study shows that its positive impact on

employment is also questionable 126 .

The group which, within the time allowed to submit its conclusions, was unable to

have all the necessary elements to forge a definitive conviction in the

material, considers however that a modification of the threshold currently in force should be

considered, if necessary by carrying out a local experiment.

It is also necessary to insist on the importance that the committees must give

of commercial equipment in compliance with competition rules.

It is true that they must reconcile potentially divergent principles to make

their decisions. If we summarize them, the essential principle is the prohibition of the crushing of the

small business which can, on its own, justify a refusal of authorization. Several other principles

are contained in the successive legislative provisions which have established the rules in

subject matter, three of which are important, the freedom of entrepreneurship in a

124 See 1.2.

125 See 1.4.3.

126 MM. Bertrand and Kramarz, “Does entry regulation hinder job creation? Evidence from the french retail

industry ”, Quarterly journal of economics, 2002, 117 (4), pp. 1369-1413.

84

healthy and fair competition, regional planning and employment development, and

two are more incidental, the principles of modernization and quality 127 .

Specifically, commercial equipment commissions are responsible for ensuring compliance

rules aimed at preserving the free play of competition, among which are

those aimed at preventing the risk of abuse of a dominant position 128 . From the point of view of

issues addressed by this report, this examination is essential: in the combination of

different substantive rules to be followed by committees 129 , the criterion

competitive must be decisive.

The combination of a relaxation of the rules relating to commercial equipment, and a

a rigorous examination of the competitive impact of operations subject to authorization by the

commercial equipment commissions could achieve two goals. He

would be, on the one hand, to reduce the protection of the acquired positions of distributors and,

on the other hand, to have a means of decentralized and strict control of the degree of

concentration of the sector.

127 On these questions cf. the conclusions of R. Schwartz on CE Sect. May 27, 2002 SA Guimatho and SA Dijori,

CCI de Touraine and others, Rec. Lebon p. 178, published in the legal news of administrative law

n ° 9/2002 pp. 702-714.

128 CE July 30, 2003 SA Caen Distribution n ° 227838, to be mentioned in the Lebon collection tables.

129 Cf. the above-mentioned decision SA Guimatho and others, which sets out the reasoning which must be followed by

commissions to combine the different principles that they must take into account.

85

CONCLUSION OF THE SECOND PART

________

Existing legislation can always be improved. Until now, in matters of the law of

restrictive practices, the legislator has always chosen to modify at a sustained pace

rules applicable to correct imbalances in the balance of power and repress

observed behaviors.

The frequency of these changes resulted in an unstable law and out of step with a

economic reality in constant evolution and to which it is vain to pretend

continually adapt. The body of rules that govern the relationship between industry and

trade, increasingly technical over time, has, as we have said, found itself far from

this very evolving market. In the extreme, economic mechanisms and legal framework

operated in parallel: after negotiating, distributors and suppliers

placed the result of this negotiation in a badly

defined which transcribed non-existent services. The economic reality, translated into a

uncertain legal system, was disguised to meet the requirements of book IV of the title

IV of the Commercial Code.

At the same time, the effectiveness of judicial review has not improved as

the intervention of the legislator intensified. The law is regularly denounced as little

respected by the most powerful operators, and the judge is rarely seized by the operators

the most vulnerable who fear reprisals. If he is seized, his decision is too long

expected and rarely known. Such a situation is pernicious: it discourages the actors

most powerless to seek before the judge the application of legislation

yet designed to compensate for their weakness.

Finally, the consumer has paid the price for the combination of three elements: the

concentration of the distribution sector, compounded by barriers to entry resulting from the

Law of 5 July 1996, the instrumentalisation by economic operators of the legislation

relating to resale at a loss and the protection of situations acquired by the effect of legislation

relating to commercial town planning.

This observation, summarized here in a schematic way, led the group to orient its

proposals in three main directions, which attempt to address the difficulties as well

raised.

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In the first place, it is proposed to improve the conditions of application of the law. Measures

considered on this point can be made without modifying the resale at a loss.

They relate, first of all, to the effectiveness of judicial control. The shortening of

trial deadlines and publication of court decisions, both in criminal matters

than in civil matters, are an imperative condition for strengthening the system. Regarding

of criminal offenses, the proposals relating to the extension of the criminal order, the

penal composition and on the summons by an agent of the DGCCRF as well as the referral of

economic and financial courts are decisive in speeding up proceedings

and give them priority as well as exemplary character. In civil matters, the

specialization of jurisdictions would allow an improvement in the handling of cases, by

magistrates better trained in the problems of the relationship between industry and commerce. The inversion of the

burden of proof, with regard to the services rendered, will improve the capacity of the

the State to sanction abuses committed in the area of ​​commercial cooperation. A

alternative option to these recommended efforts for better judicial review

then lies in the possibility of conferring sanctioning powers on the CEPC. Create a

sanction section within this commission would pursue three essential objectives:

creation of a set of rules adapted to the particular sector for which it would be responsible,

on the one hand, make it possible to sanction without complaint, with a better relay of the controls of

administration, on the other hand, and the possibility, finally, of addressing injunctions to

operators. In any event, several proposals tending to facilitate the action of the CEPC

are formulated in order to allow it to adapt its role to the gradual establishment of

proposed reforms. Finally, the reorganization of trade relations implies, for the

legislator, to define commercial cooperation, to give it a content and to fix its

contractual regime.

Whatever option is chosen, Title IV of Book IV deserves to be renamed; the insertion of

preliminary provisions on unfair competition would strengthen the consistency

overall system.

Secondly, it is proposed to reform the method of fixing the SRP. Several options,

all designed with the aim of achieving lower consumer prices, are

presented to public authorities. The choice of the legislator will depend, on the one hand, on the objective

final which it retains, on the other hand, from the taking into account of the external effects which it fears and,

finally, the pace at which it sees fit to proceed with this important change in

the regulatory environment.

If the objective is to restore the free play of the market and competition, the approach consisting

to renounce the prohibition on resale at a loss and certain rules constituting Title IV of the

book IV of the Commercial Code can be considered. No doubt she would drive

a reestablishment of price competition, the effects of which would be favorable to

consumers. The impact of this reform on SMEs or on the maintenance of networks

differentiated businesses, however, imply a certain degree of caution if such a change

radical was adopted. This is why the group encourages the public authorities, in this

hypothesis, to endow the industry-trade relations sector with a responsible authority, as

temporary, to accompany such deregulation.

To re-establish price competition between distributors, without however going back to the

principle of the prohibition of resale at a loss, it is suggested to bring the SRP closer to the

economic reality. In this regard, set this threshold at the price “three times net”, that is to say the price

87

minus forward discounts, reverse discounts and business cooperation, is a

recommended route. However, here again, the too sudden transition from the current regime to a

such a definition of the SRP may raise fears of harmful effects for operators who do not

would not be prepared. The group therefore assessed the different possibilities available to the

legislator to design an intermediate period in order to organize the transition to a

SRP thus fixed at the price “three times net”.

Emphasis is placed, in the third place, on the need to act on the structures of the

distribution. To have an impact on this point, the public authorities can act in two ways.

manners. The first is to relax the legislation on commercial town planning,

by re-examining the threshold determined by the law of 5 July 1996, the authorizations having to be

issued with increased vigilance with regard to competition rules. The second consists

to amend Article L. 430-2 of the Commercial Code to better control the transactions of

takeover of supermarkets.

These proposals, explained in this report and supplemented by other

recommendations, offer a wide range of choices for public authorities, depending on

main objectives that they will set themselves to revise the existing legislation.

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  1. THE SPECIFIC DIFFICULTIES ENCOUNTERED BY

AGRICULTURAL SECTORS, IN PARTICULAR BY THE

FRUITS AND VEGETABLES, CALL FOR OPERATION

RENEWED INTERPROFESSION SUPPORTED BY THE STATE

89

The working group responsible for examining more specifically the difficulties that have arisen in the

agricultural sectors 130 , focused its work on the fruit and vegetable sector, for four

reasons.

In the first place, the time limit to which he was subjected to carry out his reflection was extremely

in short, which involved circumscribing the scope of the study. Second, this sector is

dealt with specifically in the Agreement of 17 June 131 . Third, it is governed by

relatively unique economic mechanisms and is, moreover, subject to provisions

legislative or regulatory specific to it. Lastly, and most importantly, the group was

explicitly invited 132 to comment on the compatibility with the commitments

communities of France of a bill that specifically concerns this

sector 133 .

The working group should not nor, moreover, could not, for lack of time, attempt to

overall diagnosis of both the legal environment of the sector and its situation

economic. In view, however, of the importance conferred by the Minister of State,

Minister of the Economy, Finance and Industry on the agricultural question, the group of

work did not wish to stick to the sole assessment of the validity of the proposal

law mentioned above and broadened its reflections to other aspects related to the question of prices, in

agricultural matters, and the evaluation of the aforementioned specific texts.

To conduct its reflections, the working group held hearings specifically

focused on the agricultural issue 134 .

3.1. The economic sector studied operates according to

singular economic mechanisms by being subject to a framework

specific legislative and regulatory

3.1.1. The unique mechanisms of this economic sector

The market studied is characterized by elements around which a broad consensus has emerged.

cleared around the hearings.

They can be summarized according to eight main points.

130 Annex V – Composition of the working group to examine agricultural issues.

131 With other “unmarked raw agricultural” products, but the list of which, to be established

contractual, is not stopped.

132 Annex IV – Letter from the Minister of State, Minister of the Economy, Finance and Industry dated 27

July 2004.

133 Draft law n ° 207, registered at the Presidency of the National Assembly on September 24, 2002,

tending to regulate the margins practiced on perishable fruits and vegetables in times of crisis, presented

in particular by Mr. Jean-Michel Ferrand, deputy.

134 Appendix VI – List of people interviewed by the working group responsible for examining the

agricultural.

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1) These are consumable products “as is” with an eminently perishable nature. The

time of harvest and, consequently, of marketing, except for a few products

storable, is fundamentally dictated by nature.

2) Climatic conditions also have a strong influence on the demand side,

so that market balances experience significant fluctuations, which are difficult to

anticipate and frequent. The “crisis” in the fruit and vegetable sector is therefore not

structural in the sense that it results from a permanent market imbalance. It belongs

integral, at one or more times of the year, and almost inevitably, of the

functioning of the market.

3) This sector is facing very strong intra and extra-community competition from

foreign producers benefiting from production costs, in particular wages, more

favorable. This competition, which tends to increase, amplifies the imbalances

resulting from the market uncertainties described above.

4) The segmentation of this market remains weak and little valued, apart from a few examples of

interprofessional success, as in the potato sector.

5) Public market regulation instruments have almost disappeared, especially after

that the reform of the common organization of the market (CMO), has practically eliminated

public purchases for destruction, commonly referred to as withdrawals.

6) At national and community level, the state of potential supply remains largely

unrecognized.

7) The upstream sales organization remains very fragmented, despite efforts to

grouping into eight basin committees (producer organization associations). We

counts 310 producer organizations, marketing in total only about 60%

production, the balance passing through “physical markets” or being delivered directly

either to “shippers”, or to retailers, restaurateurs …

Opposite, the downstream reaches, as we know, a high degree of concentration: supermarkets absorb

two-thirds of the market and five purchasing centers concentrate two-thirds of wholesale purchases

intended for the domestic market. Note, however, that a strong upstream organization

does not undoubtedly allow you to be protected against crises: the example of the tomato,

80% marketed by the economic organization of producers, during the summer

last, is an illustration of this.

8) Finally, the selling prices of the production are, most often, determined daily

and are reflected by the quotations established by the Ministry of Agriculture (Service des

Market News).

Ultimately, and schematically, these are markets where the weather largely determines

the obligation to sell and this for a multitude of suppliers, subject to competition

increasingly lively international market, faced with very concentrated buyers and demand itself

strongly influenced by the weather. This situation produces amplifying effects of

episodic imbalances between supply and demand, and a ” non-sale psychosis ” in

the producers.

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Understanding the sector globally would however be an analytical error, as we

notes significant disparities between products: some are storable (apples by

example), others not (salads). In addition, harvest forecasts are less

subject to hazards for many fruits (perennial plants) than for most

vegetables. Finally, the upstream sales organization is very different depending on the product.

and ranges from 20 to 80%.

3.1.2. The sector is subject to a specific regulatory environment

The specificity of the rules governing the agricultural sector can be found both at the level

Community than at national level.

From a community perspective, the sector is governed by a Common Organization of

Market (CMO) 135 which practically no longer provides for interventions on the markets and

essentially involves structural measures. This organization is one of the few to

explicitly recognize the legality of inter-professional agreements as well as their capacity to

establish certain taxable rules for their members. However, their field of intervention is

limited and the Community regulation excludes, in particular, in its article 20, the agreements which

would result in the fixing of minimum prices. The CMO finally leaves the option to a Member State

to make the rules in question compulsory under certain conditions.

National law also subjects the sector studied to specific rules that are appropriate

here to briefly recall.

  • Interprofessional agreements

Articles L.611-4 and L.611-4-1 of the Rural Code provide that in the event of a crisis 136 , and for

certain products 137 , including fruit and vegetables, the “representative organizations of

producers “can enter into contracts with” organizations representing their

buyers ”and thus set a transfer price to the first buyer. The objective is in particular

to adapt the offer in terms of volume and quality to market needs. These agreements can be

extended, under certain conditions, by interministerial decree.

However, on July 7, 2004, the European Commission sent France a warning.

remains inviting it to send it its observations on the compatibility of these provisions

with community law. The legislative provisions in question are therefore threatened

with regard to Community competition law, in that they may not come into

135 Council Regulation No 2200/96 of October 28, 1996.

136 Crises are defined by the law as follows: “situations where the sale price of these products by the producers

or their recognized groupings is abnormally low compared to the average price observed during the

corresponding periods of the five previous campaigns, excluding the two periods during which

the prices were respectively the lowest and the highest ”.

137 “live animals, carcasses, production of perishable agricultural products or agricultural products to be

short production cycles or fishery or aquaculture productions’

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the scope of the exemption provided for by article 81-3 of the Treaty or in the exceptions

in Council Regulation 26/62 on the application of the competition rules to the

production and trade in agricultural products.

However, it should be noted that only one inter-professional agreement of the nature of those provided for by

the Rural Code has been extended: that fixing a minimum price for peaches and nectarines in

August 2000. An agreement of the same type concluded in July 2002 by the inter-profession did not

on the other hand, not been made compulsory.

  • The mechanism to fight against abuse has not yet been applied

As of the same products, Article 54 of the Law of 1 st August 2003 138 for the initiative

economic policy makes it possible to put an end, in the event of a ” cyclical crisis “, to the practices of “

abusively low ”and to oblige their author to repair the damage suffered. This device, which

allows to fight against these abuses under the control of the civil judge, has not yet been applied to

this day.

  • The advertising ban

Finally, article L.441-2 of the Commercial Code prohibits, in particular, with regard to fruits and

vegetables, any advertising with mention of a price outside the place of sale itself, unless

an inter-professional agreement provides otherwise. Such an agreement can be extended

in accordance with the provisions of articles L.623-3 and L.632-4 of the Rural Code. These

provisions were, however, the subject of a reasoned opinion of the European Commission dated

of 17 October 2003 and a new draft text is under discussion.

All in all, in the absence of an appropriate European mechanism, the national mechanisms are

today weakened with regard to the requirements of Community law.

3.2. Group analyzes and proposals

As a preamble, it is advisable to recall the limited nature of the analysis carried out by the

present study, even though the hearings clearly showed the need for

overall strategic reflection involving all stakeholders in the sector 139 . Will be here

138 Law n ° 2003-721 of August 1, 2003

139 With regard to the opportunities for the development of community texts, it should be noted, on the one hand, the implementation

in discussion of a Commission report on the CMO and, on the other hand, the initiation of a general reflection

on crisis arrangements in accordance with the decisions taken during the adoption of the latest reform of the

Common Agricultural Policy.

93

examined the main points which caught the attention of the members of the working group,

given the mission assigned to him and the debates that took place before him.

3.2.1. The contractual route seems to be the only one likely to be able to

be borrowed for minimum prices

Agreements between professionals, or national arrangements which result in the fixing of

prices, whether they are consumer or producer prices, are prohibited by the

Community law.

Indeed, the fixing of minimum prices would fall under Article 81 of the Treaty or would be

regarded as a measure having an effect equivalent to quantitative restrictions, especially since the

fruit and vegetable sector is, it has been pointed out, largely open to imports in

from other member states.

In addition, the existence of a national legislative mechanism does not protect the signatories of a

inter-professional agreement of a community sanction. The Court of Justice of

European Communities recalled that national law does not exempt operators of

their own responsibility only if the competitive behavior in question is imposed by the

law or if it leaves no room for autonomous behavior.

Under these conditions, there is little doubt that France will be led to give up, briefly

deadline, to the provisions currently provided for in Articles L. 611-4 and L. 611-4-1 of

Rural code 140 .

The contractual route therefore appears to be the only solution. She must be encouraged, while she

seems underdeveloped 141 . Really organizing the sectors by product implies better

secure supply commitments in volume and quality as well as prices, today

determined each day, at least for a part of the contracted volumes. The risks

climate can only be shared through better upstream organization.

There are examples in this area (in the wine sector or for potatoes) and

suppose an active role of the inter-profession. The latter should be invited to develop

standard contracts, by product, intended to serve as a normative framework for the award of contracts

individuals between operators 142 .

These standard contracts could in particular provide for:

– the need, for each particular contract, to set a price 143 , if applicable

for a significant part, but not for all, of the quantities committed by

the contract ;

– a scale of reductions / increases according to the quality of the products;

140 see page 91

141 On this point, the committee did not have specific information, but took into account the findings developed

by the people interviewed.

142 Cf. the agreement adopted by Interfel concerning peaches and nectarines in 2003.

143 Or the agreed rules for its determination, by reference, for example, to quotations.

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– finally, the principle of a contractual floor price, when the price is not

definitively fixed upon signature of the contract, and the amount of which would be agreed

by the parties .

The State could then make such standard contracts compulsory, according to the rules today.

provided for by the Rural Code, and monitor its application.

The development of such contractualization would certainly help to regulate the

market and to create a mode of relations between operators conducive to the development of a

segmentation and valuation policy, widely suggested by organizations

auditioned.

3.2.2. The application of concerted prices supposes a regrouping of the offer

Consultations between producer organizations for the determination of “prices

objectives ”or“ price brackets ”are called into question: threatened under the agreements,

these practices can lead to particularly high fines for operators.

In order to limit the excesses of the ” no-sale psychosis ” likely to affect the market

in times of crisis, some production organizations would nevertheless like these

practices can be legitimized.

The structural response to these fears is a real strengthening of the organization.

of producers and a regrouping of the offer, especially as the provisions

community organizations allow an association of producer organizations to act

commercially on behalf of its members, in the same way as an organization of

particular producers.

In any event, removing the legal obstacles to such practices would require an agreement

prerequisite of the European Union 144 .

3.2.3. The device aimed at cracking down on the practices of ” abusive pricing

low ”in a period of crisis seems doomed, as it stands, to ineffectiveness

No producer, under the constant threat of de-listing, can, in fact,

initiate the action provided for by the recalled provisions of article 54 of the law to

economic initiative.

Their effective application would at the very least presuppose the meeting of two conditions

essential:

144 Having regard, in particular, to the amount of the fines liable to be imposed on the operators.

95

– an objective definition of the concept of crisis 145 ;

– and the possibility for representative organizations of producers and for

administration to act.

3.2.4. Business cooperation and discounts, rebates and rebates

may be prohibited, unless otherwise agreed upon within a framework

interprofessional

The agreement of June 17, 2004 indicates, in particular for fruit and vegetables that “any

commercial cooperation is abolished; discounts, rebates and rebates, immediate or

deferred, in kind or in value, which do not constitute the fair consideration for the volume of

purchases made by the distributor from the producer, their regularity or services

logistics are suppressed. The negotiations take into account the circumstance that, on

certain products, quantity discounts are already included in the price. ”.

Commercial cooperation seems very limited or absent, in this area, for some

signs. In a sector without tariffs, moreover, it is not easy to grasp their scope except

through contracts distinct from the deed of sale itself, that is to say within the framework of a

specific service, detachable from the conclusion of the sale.

Under these conditions, two paths seem possible. The first would be the ban on

commercial cooperation in the sector in question, by extending what has been provided for by

the agreement of June 17, 2004. The second would be to provide for such a ban unless it is

provided for by an inter-professional framework agreement, under conditions which remain to be determined.

An equivalent solution could be considered with regard to discounts, rebates and

rebates. Conceived as counterparties to regularity, volumes or certain

logistics services, in so far as they do not fall within the actual function of the purchaser, they

are eligible.

However, apart from contracts, their meaning is more uncertain when it comes to purchases “at the

daily ”in a sector without tariffs: the volume, even if it is important, corresponds in

made to the instant needs of the buyer and the price already incorporates this data. The “regularity”

or “logistics” can perfectly well be only the “dressing” of pressure tactics on

suppliers condemned to sell.

Under these conditions, apart from contracts, the prohibition of discounts, rebates and rebates appears

justified. It would be possible to ask the interprofession, for the application of the standard contract

considered above, to establish rules 146 governing discounts, rebates and rebates. He

would therefore be possible to prohibit them except for specific forecasts agreed within a framework

interprofessional.

145 See below.

146 We can thus note that the standard contract mentioned above for peaches and nectarines, adopted in 2003,

provided for an a priori agreement between the parties, in an annex, on these discounts, rebates and rebates, to the exclusion of

any other later: a general inter-professional framework could regulate these contractual possibilities.

96

3.2.5. In terms of ” sales without price “, or ” price after sale “, a

reflection remains to be done

The practice of “after-sales price” (PAV) consists in selling a commodity whose price

is not initially fixed, despite a transfer of ownership. The supplier is therefore paid on

the basis of an invoice that refers to a resale price obtained by its buyer, i.e. a

deferred price, from which marketing costs are deducted.

This sales technique, specific to the fruit and vegetable sector, is mainly

practiced in France by “market wholesalers” 147 , for a fraction of 50 to 100% of

their purchases, and by shippers from many southern European countries.

It has gradually replaced “commission sales”, which is carried out without

transfer of ownership and only remunerates the service, in order, it seems, to introduce more

responsiveness in the relationship between supplier and wholesaler 148 .

This purchasing technique has been questioned by several organizations who believe that it

this is a not very transparent commercial method, a source of destabilization of the

firm price, and an aggravating factor of the crisis. However, some hearings have shown

that it can allow the disposal of products of lower categories, in particular by

crisis period. Under these conditions, its removal, otherwise impossible to control

especially for imported products, for which fictitious invoices could be

produced, would put some of the professional wholesalers who work with

their network of retailers.

The practice of VAP nevertheless gives rise to abuses, whether during normal periods or during

period of crisis when exercised in a commercial relationship of circumstance.

Ultimately, the group did not take sides on the advisability of banning the PAV or on the

conditions of its supervision. It is therefore suggested that a reflection prior to any

decision on the matter is carried out, for example within the National Office

Interprofessional of Fruits and Vegetables and Horticulture (ONIFLHOR) for the purposes of

evaluate in particular its real importance, its perverse effects, the consequences of its

outright ban and, failing that, the terms of its essential supervision.

In addition, on this point a strengthening of controls by the services of the DGCCRF

on compliance with billing rules would be desirable.

147 That is to say those which operate mainly on “physical” markets such as Rungis or

Perpignan and are strongly linked to the retail trade, by difference with the “service wholesalers”,

Pomona for example, who use this method very little and are more linked to large-scale distribution.

148 The amount of the transaction is established within 24 hours whereas the sales account was only remitted after

longer deadlines, sources of litigation and poor commercial responsiveness.

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3.2.6. The establishment of a mechanism intended to contain the margins of the

distribution in the event of a crisis to mitigate its effects presents risks

A – THE ESTABLISHMENT OF A MECHANISM INTENDED TO CONTAIN MARGINS

OF DISTRIBUTION IN THE EVENT OF A CRISIS REPLIES THREE MAJOR

GOALS.

  • The aim would be to pass on the producer price cuts to the consumer.

When the supply begins to be more abundant and the production season increases in

regime, the aim would be to prevent consumer prices from remaining at a level

high and quickly dissuasive as the increasing abundance of products leads to the

reduction in production prices. This concern is all the more valid in times of

crisis. Behind these considerations also arise concerns relating to the

“ordinary” functioning of relations, within the sector, between prices that are sufficiently

remunerative for production and reasonable prices for consumers. These

concerns become particularly acute in times of crisis.

  • Mechanisms likely to react quickly

During a crisis, the objective would be to have mechanisms capable of reacting

quickly, to avoid recurring procrastination, a source of great tension and liable to

to degrade the image of products in the eyes of consumers.

  • A mechanism that “mechanically” encourages buyers to raise their prices

purchase.

Finally, the objective of certain production organizations is to have a mechanism

“mechanically” encouraging buyers to raise their purchase prices.

It is in this context that both the aforementioned bill,

tending to regulate the margins practiced on perishable fruits and vegetables during

crisis that the so-called “ratchet” mechanism provided for in the agreement of 17 June 2004.

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B – ANALYSIS OF THE PROPOSED LAW

The bill in question provides for the implementation of a ” multiplier coefficient

between the purchase price and the sale price ”, increased when there is an assisted sale 149 . In case of

crisis, the Minister fixes, for a given period, the amount of this rate (s). These provisions

would apply to all products and would therefore be applicable to those which are

imported.

The goals pursued are, on the one hand, to encourage mass distribution to better remunerate the

producer, whose margin is a linear function of his purchase price, to correlate, on the other hand,

resale price and purchase price for the benefit of the consumer and, finally, to cause a

increase in demand, and therefore purchases, in times of crisis. The increased coefficient

would, moreover, encourage a “professionalization” of the departments of mass distribution and

would preserve retailers.

The bill therefore meets the objectives already mentioned.

The reality of the effects of such a mechanism remains questionable, however.

The claim that supermarkets will increase the volume of their purchases is

sometimes questioned. The risk of observing a shift towards substitutable products is

advanced. It is also argued that retail trade would then replace the large

distribution.

In addition, the intrinsic value of different fruits or vegetables is very variable and

would justify adapted coefficients. Likewise, due to more

or shorter, a uniform coefficient could generate perverse effects by favoring

short circuits. This multiplication of situations would therefore lead to control difficulties.

increasing.

Finally, the hypothesis of fraud that cannot be controlled is put forward: insofar as the law does not

does not allow the proposed coefficient to be applied to a single purchase price, the capping of

margins should be controlled by taking into account the actual purchase prices of each lot. We can

consider the possibility for the DGCCRF to act in the face of risks of mixing of

lots, fictitious invoicing, taking into account, moreover, the very high number of players in France

and the difficulty of verifying import shipments.

These difficulties should not be underestimated and they imply more expertise.

that the group was unable to carry out.

It should also be noted that the mechanism envisaged by the proposed law

question would be incompatible with the requirements of Community law.

149 That is to say a sale with a specialist seller, therefore most often to a retailer and sometimes to

large-scale distribution, when it ensures the presence of specialized salespeople.

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  • The bill presented on September 24, 2002 would be incompatible with the

Community law

The European Commission has intervened on several occasions 150 to assess the

compatibility with Community law of legislative or regulatory provisions

national agricultural matters. The proposed or adopted device has always been judged

incompatible, both in terms of:

– on the one hand, of Article 81 EC (prohibition of anti-competitive agreements) and of

Article 28 (prohibition of quantitative restrictions on the free movement of

merchandise)

– that, on the other hand, the CAP and the CMOs (common market organizations)

agricultural material.

We can think that the same assessment would be made for a device such as the one proposed.

by the proposed law examined.

It would be incompatible, in the first place, with the principle of free movement of

merchandise.

Article 28 (ex Article 30) of the Treaty of Rome provides: “quantitative restrictions on

importation, as well as all measures having equivalent effect are prohibited between the States

members … ”. In a Dassonville judgment of July 11, 1974, the CJEC specified that “ any

trade regulations of the Member States likely to directly hamper or

indirectly, currently or potentially intra-Community trade is at

to consider it as a measure having equivalent effect ”(case C. 8/94, rec. p.837). Are targeted

regulations that apply to both domestic and imported products

(measures applicable without distinction). Discriminatory intent is not required.

In a Keck and Mithouard judgment of 24 November 1993 , the CJEC nevertheless provided a

significant restriction of a field of application of Article 28 (judgment of 24 Nov. 1993, case C.

267 and 268/91, Rec. I. 6097). The Court now distinguishes between the modalities of

sale of a product (when, where, by whom and at what price the products can be sold) and

measures relating specifically to products (labeling, name, composition, etc.).

The former escape the application of Article 28, on condition, however, that these measures

” Apply to all operators concerned exercising their activity in the territory

national, and provided that they affect in the same way, in law as in fact, the

marketing of imported products and those from third countries ‘

150 Opinion of 17 October 2003, concerning the compatibility of article 49 of the NRE law prohibiting advertising on

prices for agricultural products; Letters of September 2000 and July 2002 concerning the interministerial decree

of 11 August 2000 extending an inter-professional agreement relating to the marketing of peaches and

nectarines; Letters of May 15, 2003 and July 7, 2004 concerning the economic initiative law in that it

amends article L; 611-4 of the Rural Code and inserts a new article L. 611-4-1, providing for the possibility of

conclude crisis agreements in the agricultural sector and the possibility of extending these crisis agreements by

decision of the public authorities.

100

The multiplier coefficient mechanism as envisaged by the law proposal analyzed,

could not benefit from the Keck and Mithouard case law.

Two decisions would support, however, such an application of this case law.

The Keck and Mithouard decision , itself, by which the ECJ considered that French law

prohibiting resale at a loss was a method of sale outside Article 28, would come to the

support for the bill. The same is true of the National Grouping of

Belgian potato traders (CJCE 11 August 1995, Aff. C. 63/94, Rec. 1995,

page I-2467), which considers article 28 to be inapplicable to the Belgian regulations prohibiting sales

providing only an extremely low profit margin. The Court considered that this

measure was certainly likely to restrict the volume of sales, and therefore the

volume of sales of imported products, but that it was applicable without distinction and

equally affected imported and domestic products.

However, and conversely, it is possible to argue, in accordance with the same

Keck and Mithouard case law , that the principle of the multiplying coefficient, admittedly

applicable without distinction, would in fact affect imported products more. Of confession

even from its initiator, this mechanism aims in particular to encourage

large retailers, deprived of part of their margins, to buy products

import. Importing products would indeed present a very reduced interest compared to

the current situation. This aspect, to which Community case law is very sensitive,

seems preponderant. The proposed device therefore appears to be contrary to Article 28.

It does not seem, moreover, capable of benefiting from a derogation based on a ground

of general interest.

Two sets of exemptions are possible.

The former are based on the grounds listed in Article 30 EC: public morals,

public order, public security, plant protection, protection of national treasures,

protection of industrial or commercial property. The objective pursued by the proposal

of law examined – addressing crisis situations in the agricultural sector does not

obviously not part of this exhaustive list.

The second derogations are listed by the ECJ in the Cassis de Dijon case of 20

February 1979 (case C 120/78, ECR p. 649): among them are the protection of

consumers and fair business transactions. This derogation can be

envisaged, provided that it is proven that it is appropriate, proportionate to the objective pursued

and that there are no less restrictive means. However, the position of the ECJ is

restrictive and it is unlikely that such an exemption will be granted.

The proposed law analyzed is, secondly, incompatible with the CMO for fruits and

vegetables and competition law.

The proposed device would suppose, for its concrete implementation, the adoption of multiple

agreements between stakeholders in the agricultural sector. These agreements, which would affect an element of

setting the selling price of the product – the margin – could be considered to affect

harm to competition.

101

In this regard, within the general framework of competition law, two principles must be

recalled and a remark made.

The first principle is that of the prohibition of anti-competitive agreements between

companies (Article 81 EC). Agreements that affect the price, or an element that determines the

prices, are viewed with the greatest suspicion. It is very unlikely that the chords

adopted in application of the envisaged system may benefit from an exemption under

Article 81§3 EC (contribution to economic progress). Crisis agreements have certainly

sometimes exempted by the Commission, but these were only agreements

planning capacity reductions in sectors suffering from overcapacity and decline

chronic. It would be excessive to characterize the agricultural sector in this way.

The second principle consists of the prohibition on member states from adopting laws or

regulations that place businesses in a position to infringe competition. Several

several times, the CJEC has read articles 81 and 10 (ex art. 5) 151 of the EC Treaty together.

and prohibits States from taking or maintaining in force measures, even of a

legislative or regulatory, likely to eliminate the useful effect of competition rules

applicable to businesses. This is particularly the case when they impose or facilitate the

conclusion of anti-competitive agreements

Finally, it is difficult for companies to take refuge behind a legal system, both in

with regard to domestic law than with regard to Community law.

From the point of view of domestic law, Article L. 420-4 I.-1 ° of the Commercial Code states that

“Are not subject to the provisions of Articles L. 420-1 and 420-2 the practices: which

result from the application of a legislative or regulatory text adopted for its application ”.

But to benefit from this justification, the practice must result directly and

necessarily from the legislative or regulatory text, and is not only made possible

or encouraged by him. (See decision 93-D-30 of July 7, 1993 concerning the scales

lawyers’ fees). In addition, the internal law is justified only insofar as it is

in accordance with Community law.

At the community level, it should be noted a Consortio Industrie Fiammiferi judgment of 9 September

2003 of the ECJ, case C-198/01, in which the Court states: “ in the presence of

conduct of companies contrary to Article 81§1 EC, which is imposed or favored

by national legislation which legitimizes or reinforces its effects, more particularly

with regard to price fixing, a national competition authority that has received for

mission, in particular to ensure compliance with Article 81:

– has the obligation to leave this national legislation unapplied;

– cannot impose sanctions on companies affected by behavior

passed when these have been imposed on them by this national provision;

– can impose sanctions on the companies concerned for their behavior

subsequent to the decision to leave this national legislation inapplicable, once

this legislation has become final with regard to them;

151 Article 10: States shall take all general or specific measures suitable for ensuring the execution of

obligations arising from the Treaty or resulting from acts of the institutions of the Community. They facilitate to

the latter the accomplishment of its mission.

They shall refrain from all measures liable to endanger the achievement of the aims of the Treaty ”.

102

– may impose sanctions on the companies concerned for behavior

passed when they were simply facilitated or encouraged by this legislation

national, while taking due account of the specificities of the normative framework in

which companies have acted i “

This judgment has already been applied by the Competition Council (decision 03-

MC-03 of 1 st December 2003). We can therefore think that the agreements likely to be

adopted in application of the mechanism envisaged by the proposed law, if they are deemed to be

anti-competitive, would have the greatest difficulty in being validated on the basis of

Article L. 420-4.

In the particular context of fruits and vegetables, it should also be remembered that there is a

common organization of the markets (Regulation 2200/1996). Exemptions from the application

of Article 81 §1 are envisaged in this context, but Regulation 2200/96 makes them subject to

formal (notification to the Commission) and substantive conditions.

Measures can of course be taken to encourage professional initiatives

making it easier to adapt the offer to market requirements, but these measures

must be taken at community level 152 . Member States do not have the competence

to interfere with the functioning of CMOs. However, the Ferrand proposal is likely

to cause such interference. According to constant case law of the CJEC,

the establishment of a CMO requires member states to “refrain from any measure which

would be such as to derogate from or undermine it ” 153 .

In these circumstances, taking into account the great caution that should be observed with regard to

of the mechanism considered, two complementary approaches seem possible to

achieve the objectives pursued.

C – TWO COMPLEMENTARY STEPS

  • The first step concerns crisis situations.

Ensuring the objectivity and responsiveness that are essential in such a situation involves

that the crisis situation be clearly defined and that its existence be noted by the

authorities.

This recognition would then trigger the implementation of provisions beforehand.

established. The legislator, constrained by the requirements of Community law, can

difficult to intervene. A mechanism inspired by the agreement of 17 June 2004 could, in

on the other hand, be established definitively. From the discovery of the crisis, the buyers, and

in particular the main ones in volume, i.e. the various retail brands,

152 Principle recalled by the Commission in the letter sent to the French government on 7 July 2003

(2003/2223, C (2004) 2469)

153 Judgments of 18 May 1977, case C. 111/79, Rec. 1977, p. 901; of 29 Nov. 1978, aff. C. 83/78, Rec. 1978 p.

2347; of January 16, 2003, aff. C. 462/01, Rec. I 781.

103

and undoubtedly the wholesalers, would engage, first in a framework agreement, then in

special agreements, to maintain or even reduce their immediately preceding margins.

This system would maintain competition between brands and would not violate the rules

competition law. Such a mechanism has already been created in Spain where

implement the commitments between the State and the distributors, in which the latter commit

to maintain their margin, freely fixed, or to reduce it, when a crisis is declared. He

These are unilateral commitments that do not aim to standardize selling prices: the

distributor only indicates that he will not take advantage of the production crisis to

increase its margin in volume and therefore pass on the fall in producer prices.

Defining crisis situations, however, is not an easy exercise. Article L.611-4 of the Code

rural gives, as we have said, the definition of a threshold. The group, within the time allotted to it,

did not have the means and the time to specify how it should be

established such a definition. The definition adopted should, in the event of an amendment to the article

54 of law for economic initiative, in the sense suggested above, find to apply

in this area: these provisions would thus provide the means to act in the event that the agreement

moderation of margins would not be respected.

  • The second approach concerns the functioning of the market outside the

crisis.

The objectives of a consumer price that takes into account both the necessary

attractiveness of the product by avoiding, for him, “abnormally high” prices, and a fair

remuneration of the producer and intermediaries are relevant. The regulatory route

however seems inoperative or closed.

Under these conditions, only the establishment of an interprofessional dialogue, in the respect

competition rules, can take into account these objectives and in particular the question

margins at the start of the campaign, when the supply becomes more important.

These proposals would make the observation of the crisis objective and would give

a possibility of rapid reaction. They would achieve the objective of repercussion

to consumers of lower producer prices, at least in times of crisis. They don’t

could, however, by themselves, have the effect of incentive buyers to a

increase in purchase prices targeted by the multiplier, nor the incentive to

professionalization of the fruit and vegetable departments.

3.2.7. The question of advertising with price

While all operators agree in considering that the ban on catalogs with

price is often justified for the products considered 154 , the fact remains that no

154 An ongoing audit examines the appropriateness of the means of promotion and publicity and could contribute to

inform the debate.

104

inter-professional agreement has not been reached since the entry into force of article L.441-2 of

Commercial Code, due to the opposition of the distribution, before that obtained in the

during the summer of 2004 with the promise of a revision of the law. However, this lack of publicity

was able to help maintain the crisis.

The corresponding amendment is now itself the subject of consensus: the ban

catalogs with prices is confirmed and other forms of advertising are framed by

deadlines in return for the abandonment of the prior need for an inter-professional agreement.

The European Commission is seized of this project which should be able to enter into force at the

end of the year.

105

CONCLUSION OF PART THREE

FOR A RENEWED INTERPROFESSIONAL OPERATION AND

SUPPORTED BY THE STATE

________

The following observations undoubtedly go beyond the strict scope of the group’s referral.

Without prejudice to the advances that could be obtained within the framework of the Union

European 155 , it should nevertheless be stressed that it is necessary to develop a

overall strategy for the sector examined.

An overly globalizing approach, and through prices, of relations between actors in the sector, which

sometimes seem to come down to a simple clash between production and distribution,

is reducing. Market segmentation, better valuation of products from the

production, right down to the shelf, with due respect for fragile products are

so many avenues still too little explored despite some revealing successes.

The need for better anticipation of difficulties seems necessary, particularly in

due to the fact that instantaneous imbalances are an integral part of these markets. She

also involves an effort to understand the offer and group it together

upstream.

The very great diversity of products and therefore of the fruit and vegetable markets implies

find a good balance between what needs to be defined by the professions themselves and the

guarantees that the public authorities can provide, taking into account the room for maneuver

offered by national and community legal orders.

The main objective should be to invite a renewed inter-professional functioning,

associating the Interprofession, the CTIFL Technical Institute and ONIFHLOR with the objective,

product by product, analyze the market and its prospects, build a strategy

shared based on better product segmentation and respect for quality ranging from

from production to display, to jointly set the promotion and promotion rules 156

products (“health” value, regional character, seasonality, etc.), in normal times and in times

crisis, and to develop the contracts essential to restore confidence

between actors.

155 As regards, in particular, increased support for a genuine economic organization based on

concerns about commercial efficiency, knowledge of the offer, generic promotion of products or

crisis arrangements.

156 An increased involvement of production in the definition of promotion operations would thus be

desirable, as well as the setting aside, within the inter-profession, of budgetary resources for promotion

in the event of a crisis as well as the a priori preparation of such operations.

106

The search for a better knowledge of the offer, if only at the national level,

but also at European level, seems essential. The same is true of an orientation

public support for investments which is closely linked to market prospects

and the strategies that could be defined by the inter-profession.

Beyond the regulatory provisions mentioned above, such a renewal of the action

interprofessional therefore requires, in the current context, strong action by the authorities

public, in particular for drawing up standard contracts and obtaining commitments

relating to the margin policy, particularly in the event of a crisis.

107

GLOSSARY

DIFFERENCE SCALE: Price variations depending on the size of the orders.

CENTRAL PURCHASING: Organization centralizing purchases on behalf of its

members. Centralization makes it possible to group together and make more efficient study activities

products, sourcing and negotiating purchases. The purchasing center has

in some cases distribution, organization and documentation activities. Its services

are reserved for the exclusive use of members bound by contracts.

INTRA-BRAND COMPETITION : refers to the competition between distributors

for the sale to consumers of a specific branded product

COMMERCIAL COOPERATION : these are specific services (prospectus, head of

gondola, etc.) produced by the distributor for the benefit of the supplier for remuneration.

These services are the subject of a contract between supplier and distributor and are invoiced by the

distributor. They enter the rear margin.

BRIDAL BASKET : financial contribution made by suppliers to

the occasion of regrouping between several brands. This contribution is justified by the

brands through the “massification of purchases” of the new entity.

DE-REFERENCING: Removal of a product from the list of references that can

the subject of an order, or breach of the referencing contract with a supplier.

ABUSIVE DISCRIMINATION: The practice of treating differently and without

counterpart to two competing operators in a comparable situation by providing one

advantage or disadvantage in the competition over the other.

INVOICE: Document summarizing the terms of the sales contract.

RANGE: Set of separate items for the same product category; by

extension, set of products offered by the same supplier

LINEAR : Length of shelves devoted to the display of products in a

sale.

FRONT MARGIN : This is the margin made by the distributor between the sale price

consumer and the invoiced net purchase price.

REAR MARGINS : These are all discounts, rebates and remuneration of

commercial cooperation granted off invoice by a supplier to a distributor. They don’t

can not come in reduction of the threshold of resale at a loss. Cannot be retroceded to

consumer, they constitute a guaranteed margin for the distributor.

108

MAXIDISCOMPTE (or HARD-DISCOUNT) : Sales format offering

consumers a limited assortment of products at low prices, and offering services

minimum sales.

Private Label : Abbreviation to designate the products sold to Private Label.

COMMERCIAL NEGOTIATION : covers the conditions under which a

Purchase or sale transaction takes place between a supplier and a distributor. These

conditions are reflected in the sale or purchase contract and obey the principle of freedom

contractual weighted by the existence of a balance of power

PIN (NEW PROMOTIONAL INSTRUMENTS) : these are advantages

financial (discount voucher, voucher, etc.) granted to the consumer by the supplier

or the distributor when he goes to the cash desk and which reduces his ticket

global. The consumer unit selling price of the products is not affected, so there is no

no resale at a loss. These financial benefits are largely funded by the

suppliers.

REFERENCING PREMIUM: Amount paid by the supplier in return for

the commitment of a distributor to purchase its products.

CALL PRICE : it designates a low price corresponding to certain products and giving rise to

advertising aimed at attracting customers to a point of sale.

NET NET PRICE: This is the net price on invoice minus any conditional rebates.

acquired during the sale.

PRICE 3 TIMES NET ( or NET NET NET ): This is the purchase price of the supplier

commercial cooperation deducted from the invoiced net purchase price.

DISCOUNT: Price reduction of a commercial nature granted in the event of a quality defect,

late delivery or non-conformity of the order.

REFERENCING: Procedure according to which a product (or a company) is approved

by a buyer acting on behalf of a brand or a point of sale.

DISCOUNT: Immediate reduction on the price of a good or service. It is calculated on the

gross sales price excluding VAT.

UPGRADE : this is a financial advantage granted by the supplier to the

distributor for the simultaneous listing of a certain number of references. he can

take the form of a discount on invoice entering into the General Conditions of Sale and

reducing the resale threshold at a loss or be the subject of a

business cooperation.

RESALE AT LOSS: Resale of a product (as is) at a price lower than the purchase price

appearing on the invoice plus turnover taxes and, where applicable, the price of the

transport.

109

DISCOUNT: Reimbursement to the customer of part of the amount he has already paid. She

is usually granted periodically based on the achievement of objectives that

condition its payment.

GONDOLA HEAD: Specific promotional space for the presentation of

products.

CHALANDISE ZONE : Geographical area in which the customers of a

store.

110

APPENDICES

111

APPENDIX II

Members of the expert group

Mr. Guy CANIVET

First President of the Court of Cassation

Chairman of the Committee of Experts

Mrs Claire CHAMBOLLE

Researcher in the econometrics laboratory of the Ecole Polytechnique

Mrs Emmanuelle CLAUDEL

University professor

Mr. Guillaume DAIEFF

Magistrate at the Ministry of Justice

Master Francis DELBARRE

CMS Bureau Francis Lefevre

Mr. Patrick HUBERT

Advisor to the Minister of Ecology and Sustainable Development (resigned

as of October 5, 2004)

Mr. Frédéric JENNY

former vice-president of the Competition Council

adviser to the Court of Cassation in extraordinary service

Mr. Yves PICOD

University professor

Director of the Institute of Judicial Studies of Perpignan

Mr. Patrick REY

University professor

Mr. Rémi TOUSSAIN

Director of the National Agronomic Institute Paris-Grignon

Rapporteurs:

  1. LAURENT VALLEE, master of requests to the Council of State, general rapporteur

Mrs CRAMESNIL de LALEU, rapporteur at the Competition Council, rapporteur

Mrs Sylvie JOLY, rapporteur at the Competition Council, rapporteur

112

APPENDIX III

List of persons or organizations

heard by the working group

Association Confederation of Consumer Affairs, Housing and

life

– Mrs Reine-Claude MADER, general secretary

– Mrs Frédérique PFRUNDER, project manager

National Association of Agro-Food Industries (ANIA)

– Mr. Jean-René BUISSON, president

– Mr. Olivier PICOT, Vice-President in charge of the Industry / Trade Commission

– Mr. Benoît MANGENOT, Managing Director

General Confederation of Food in Details (CGAD)

– Mr. Claude BELLOT, president

– Mr. Claude BOISSEAU, secretary of the CGAD office, president of the

National Grocery Federation

General Confederation of Small and Medium-Sized Enterprises (CGPME)

– Mr. Roger MONGEREAU, President of the Territorial Union of Commerce SMEs

– Mr. Dominique BROGGIO, lawyer

Coop of France

– Mr. Alain CHALANDON, general manager

– Mr. Bruno LANNEREE, economic officer

Federation of Commerce and Distribution Companies (FCD)

– Mr. Jérôme BEDIER, president

– Mr. François MALATERRE, general delegate

Federation of Businesses and Entrepreneurs of France (FEEF)

– Mr. Jean-Pierre BARJON, president of the company GEYER FRERES and president of

the SME / Large-scale distribution commission of the FEEF

– Mrs Noëlle BELLONE, general delegate

– Mr. François ARRIHI de CASANOVA, legal officer

AUCHAN Group

– Mr. Jacques DUBLANCQ, Purchasing Director of Auchan France

– Mr. Jean-Denis DEWEINE, PGC food purchasing director

CARREFOUR Group

– Mr. Daniel BERNARD, president

– Mr. RABIT, advisor

– Maître GASSENBACH, lawyer

113

CASINO Group

– Mr. Pierre BOUCHUT, general manager

– Mr. Jacques-Edouard CHARRET, Deputy Director General

– Mr. Benoît CORNU, deputy director

CORA group / MATCH supermarket

– Mr. Jacques BOURIEZ, general manager

– Mr. François BOURIEZ, president of MATCH

– Mr. Jean-Robert DESHERAULT, Managing Director of PROVERA Alimentaire

GEORGIA-PACIFIC Group

– Mr. Jean-Pierre QUERE, president

– Mr. Dominique de GRAMONT, general delegate of ILEC (Institute of links and

of consumer industries studies)

– Mr. Bernard BAREISS, operational general manager of the “lotus” department

– Mr. Patrick LEGRAND, operational general manager of the “Vania

expansion”

PROCTER Group and GAMBLE France

– Mr. Philippe CHARRIER, president

RECKITT-BENCKISER Group

– Mr. Denis MALAGANNE, president

– Ms. Dominique THESMAR, Legal Director

– Mr. Rémy BURCKEL, commercial director

SYSTEM group U

– Mr. Yves BARTHOLOME, president, accompanied by:

– Mr. Michel GALLO, Director General of the National Central

UNION group of large city center retailers (UCV)

– Mr. Philippe HOUZÉ, president

– Mr. Jacques PERRILLIAT, Executive Chairman UCV

– Mr. Bernardo SANCHEZ, Managing Director of Monoprix

LECLERC Centers purchasing group

– Mr. Michel-Edouard LECLERC, co-president of ACDLEC

– Mr. Mario AMADIO, lawyer

– Ms. Sophie BOUDON-LEGOFF, legal manager

Liaison Institute for Consumer Industries Studies (ILEC)

– Mr. Louis-Claude SALOMON, president

– Mr. Domnique de GRAMONT, general delegate

Civil society of the Intermarché Musketeers

– Mr. Jacques WOCI, Managing Director of ITM Entreprises

– Mr. Philippe MANZONI, Director of International Purchasing

114

– Mr. Benoît MAITRE, France purchasing manager

Canneries of Haute-Provence

– Mr. Yves FAURE, president

Federation of Mechanical Industries (FIM)

– Mr. Franck GAMBELLI, FIM Legal Director

– Mr. Eric JOURDE, legal director of the Federation of the electrical industry and

electronic

– Mr. Jean-Paul OUIN, legal director of Philips, relations committee

institutional structures of SIMAVELEC

DANONE Group

– Mr. Philippe-Loïc JACOB, Secretary General,

– Mr. Albin TAPIE, commercial director

– Ms. Sylvie GALLIARDE, “Public Affairs” manager

– Ms. Chantal ROTELLEUR, Legal Director

SEB Group

– Mr. Gérard SALOMMEZ, Managing Director France

– Mr. Raymond GRANDJEAN, Administrative and Financial Director France

National Union of DIY Industries (UNIBAL)

– Mr. Gilles CAILLE, president of Unibal and general manager of the DIY company

Red head

– Mr. Yves RAMBAUD, general delegate

Biscuit Bouvard Company

– Mr. Alain LAINE, CEO

– Mr. Jean-Luc TALON, Commercial Director General

HCL MASTER PIERRE

– Mr. Daniel PIERRE, president

FEYEL-ARTZNER company

– Mr. Jean SCHWEBEL, Chief Executive Officer

CASERTA company

– Mr. Régis D’INDY, Commercial Director

IBB company

– Mr. Jean-Yves MOLLET, commercial director

– Mr. François-Xavier LAMBLIN, store manager

KAMBLY company

– Mr. Francis DOMENECH, commercial director

– Mr. Bruno POLLIN, head of national centers

LIDL

115

– Mr. Pascal TROMPE, general manager

– Mr. Jérôme GRESLAND, co-manager, purchasing director

French Federation of Toy Industries – Childcare (FJP)

– Mr. Bruno BERARD, chairman of the committee for relations with distribution

– Mr. Daniel ABOAF, general delegate

L’OREAL Group

– Mr. Alexandre POPOFF, director of the France division

Federation of DIY Stores (FMB)

– Mr. Pascal MALFOY, president of the FMB

– Mr. Maurice VAX, vice-president of FMB, CEO of Mr. Bricolage

– Mr. François SARCHÉ, Castorama lawyer

– Mr. Didier DELPLACE, president of the Legal Commission of the FMB

– Mr. Guillaume HARDY, Legal Director of Leroy-Merlin

French Confederation of Wholesale and International Trade

(CGI)

– Mr. Arnaud de MORCOURT, Managing Director

– Mr. Hugues POUZIN, director of the French Federation of Trade Unions

wholesale potato and vegetable traders (FEDEPOM )

– Ms. Danielle LO STIMOLO, General Delegate of the European Federation of

Trade and distribution of frozen and refrigerated products (SYNDIGEL)

– Ms. Delphine Kosser, Head of Legal Affairs at CGI

Enrico COLLA

professor at NEGOCIA and researcher at CERIDICE (ECP -EAP)

Paul-André WEBER

former professor at ESSEC, former deputy general rapporteur on the Council of

Competition, former director of audiovisual operators at the CSA

Véronique SÉLINSKY

lecturer at the University of Montpellier I, lawyer at the bar of

Montpellier, consultant at the Jeantet firm, professor at the law school of

the company

UFC What To Choose

– Mr. Alain BAZOT, president

– Mr. Julien DOURGNON, deputy director of studies

French Association for Competition Studies (AFEC)

– Mr. Jean-Patrice de LA LAURENCIE, general rapporteur

– Master Philippe RINCAZAUX

– Master Arlette GASTALDY

– Master Jean-Louis FOURGOUX

116

– Master Chantal MOMÈGE

Mr. Jean-Michel FERRAND, MP for Vaucluse

Ms. Professor Marie-Anne FRISON-ROCHE

French Federation of Spirits

– Mr. Philippe MOUTON, President of the FFS (Pernod-Ricard Group)

– Mr. Jean-Dominique CASEAU, Managing Director of L’Héritier Guyot (Groupe

Boisset)

– Mrs Edith GIFFARD, director of the Giffard company

– Mr. Olivier POULET, Legal Director of the Pernod company

Mr. Jean-Paul CHARIÉ, Member of Parliament for Loiret

Professor Jean-Bernard BLAISE

Professor GLAIS

Assembly of French Chambers of Commerce and Industry

– Mr. Jean-François BERNARDIN , President

– Mr. Ghislain du JEU, Deputy Director General

  1. Louis VOGEL, professor at Paris II

Mr. Luc-Marie CHATEL, deputy for Haute-Marne

Permanent Assembly of Chambers of Trades

– Mr. Alain GRISET, president

– Mr. Albert MARON, Director of Legal Affairs of the APCM

National Automotive Professions Council (CNPA)

– Mr. Marc HAZIZA, president of the National Branch of Tenants-Managers of

gas stations

– Mr. Christian ROUX, president of the National Owner-Operator Branch

petrol stations and petroleum product distributors

– Mr. Philippe MARCHANDIER, Secretary General of the Retailers Branch in

fuels

Mr. Bruno PARENT, Director General of Taxes

117

118

APPENDIX V

Members of the working group

responsible for examining agricultural issues

Mr. Guy CANIVET

First President of the Court of Cassation

Mr. Rémi TOUSSAIN

Director of the National Agronomic Institute Paris-Grignon

Mrs Claire CHAMBOLLE

Researcher in the econometrics laboratory of the Ecole Polytechnique

Mrs Emmanuelle CLAUDEL

University professor

Mr. Patrick HUBERT

Advisor to the Minister of Ecology and Sustainable Development (resigned

as of October 5, 2004)

Mr. Frédéric JENNY

former vice-president of the Competition Council

adviser to the Court of Cassation in extraordinary service

Rapporteur:

Mr. Laurent VALLEE, Master of Requests

119

APPENDIX VI

LIST OF PERSONS OR ORGANIZATIONS HEARED BY THE

GROUP

RESPONSIBLE FOR CONSIDERING AGRICULTURAL ISSUES

National Federation of Vegetable Producers (FNPL)

Ms Angélique DELAHAYE, President of the FNPL

– Mr. Pierre DIOT, president of the national “tomatoes” section

– Mr. Bruno SCHERRER, director of the FNPL

National Federation of Fruit Producers (FNPF)

– Mr. Pierre BANC, president of the FNPF

– Ms. Sandrine MORARD, director of the FNPF

– Mr. Daniel GOMEZ, administrator of the FNPF

Rural coordination (CR)

Mr. François LUCAS, president

French Federation of Fruit, Vegetable and Horticultural Cooperation (FELCOOP)

Mr. Jean-Louis MOULON, president

Mr. Bernard CARDINAUD, director

Mr. Jean-Pierre FOURNIER, head of the economy / development department

Interprofession of fruit and vegetables (INTERFEL)

– Mr. Denis ONFROY, president

– Mr. Gilles VIGNEAUD, vice-president

– Mr. Bruno NÉOUZE, lawyer

Peasant Confederation

– Mr. Olivier KELLER, national secretary

– Mr. Pierre VEYRAT, fruit producer

– Mr. Jean-François CHOSSON, fruit producer

– Mr. Olivier CLEMENT, permanent Confederation

Federation of Commerce and Distribution Companies (FCD)

– Mr. Jérôme BEDIER, president

– Mr. Michel LEHMAN, leader in the fruit and vegetable sector

Young Farmers

– Mr. Antoine CROUTES, vice-president

– Mr. Benjamin LAMMERT, advisor

National Fruit and Vegetable Wholesale Union (UNCGFL)

– Mr. Bernard PITON, president

– Mrs Annick GROISY, director

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National Association of Shippers and Exporters of Fruit and Vegetables (ANEEFEL)

– Mr. Luc METRAL, president

– Mr. Bernard CHAUFFAILLE, member of the Bureau

– Ms. Valérie AVRIL, director

National Federation of Farmer Unions (FNSEA)

– Mr. Patrick FERRER, Managing Director

– Mr. Gilles PIVETTE, deputy director of the economic service

– Mrs Dorothée BRIAUMONT, head of the economic department

National Union of Unions of Fruit, Vegetable and Early Fruit Retailers (UNFD)

– Mr. Gilles VIGNAUD, president

– Ms. Sandrine CHOUX, general delegate

National Confederation of Family Farmers Unions (MODEF )

– Mr. Alain GAIGNEROT, director of MODEF

– Mr. Jean-Marc DELLAC, vice-president

Federation of Basin Committees and Federations specialized in Fruits and Vegetables

(FEDECOM)

– Mr. Philippe BAUWIN, president

– Mr. Jacques MALAGIE, secretary general

Civil society of the Intermarché Musketeers

– Mr. Jacques WOCI, Managing Director of ITM Entreprises

– Mr. Philippe MANZONI, Director of International Purchasing

– Mr. Benoît MAITRE, France purchasing manager

Federation of Commerce and Distribution Companies (FCD)

– Mr. Jérôme BEDIER, president

– Mr. François MALATERRE, general delegate

Coop of France

– Mr. Alain CHALANDON, general manager

– Mr. Bruno LANNEREE, economic officer

LECLERC Centers purchasing group

– Mr. Michel-Edouard LECLERC, co-president of ACDLEC

– Mr. Mario AMADIO, lawyer

– Ms. Sophie BOUDON-LEGOFF, legal manager

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APPENDIX VII

Indications for the modification of certain provisions

of the Commercial Code

Draft Law on Commercial Cooperation

Explanatory memorandum

Resulting from practice, commercial cooperation has today become the space

essential for negotiations between suppliers and distributors.

Indeed, the law of 1 st July 1996, called Galland law, by simplifying and limiting

the basis for calculating the threshold for resale at a loss, ending the

“Billing” and the price war. But, no longer being able to weigh on the price of

sale resulting from the conditions of sale (“the front margin”) – price listed on the

invoice, distributors have relied on non-invoice remunerations in order to

to obtain financial advantages (“the back margin”), essentially made up of

through business cooperation. This drift in the behavior of actors

economic growth has only grown in recent years, which has

strongly denounced by the Dutreil circular of May 16, 2003, which advocates a

clearer definition of commercial cooperation aimed at reducing practices

abuses that have taken place in this area.

In essence, the obligations resulting from this cooperation contract do not flow from

directly or indirectly from the right of sale. In addition to the sales contract, the

distributors have gradually taken over certain functions in the past

assumed by the suppliers: placement of the product at the head of the gondola, advertising

at points of sale or in catalogs … Distributors have therefore added to

their role as seller an activity of service provider whose scope is

considerable today.

The imperative of legal certainty therefore leads to legally defining and establishing a

true legal regime of commercial cooperation, symmetrically to

that of the conditions of sale.

Title IV of Book IV of the Commercial Code becomes the basis of rules governing

relations between suppliers and distributor. It will now be called: DE LA

FAIR TRADE PRACTICES , Chapter 1 in

which are inserted the principles governing commercial cooperation being

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renamed: Loyalty and transparency in the conditions of sale and

business cooperation.

  1. Legal definition of commercial cooperation

Until now, there is no real legal or regulatory definition of

business cooperation. Article L 441-6 paragraph 5 of the Commercial Code refers to

simply “the conditions under which a distributor or service provider

services is remunerated by its suppliers, in return for services

specific ”. Article L 442-6, I, 2 ° cites “the sales department” without specifying it.

nature, while article L 442-6, I, 4 ° uses the expression “conditions of

commercial cooperation ”without defining its content. This is why a definition

legal, simple and precise, commercial cooperation will shed more light on

the parties and strengthen the effectiveness of the Administration’s controls.

In accordance with case law and the Dutreil circular, the cooperation

commercial can be defined as a contract for the provision of services

detachable from the purchase and sale operation and consisting “of stimulating or facilitating

for the benefit of the supplier the resale of its products by the distributor ”. These

benefits may or may not be specific.

However, it is not possible to give an exhaustive list of what emerges from the

commercial cooperation and what must be included in the general conditions of

sale, so fertile is the imagination of commercial practice. But the definition

proposed legal framework can be illustrated by a few examples. Moreover, the precision

the purpose of the contract – marketing and promotion of products – makes it possible to

better understand the content of commercial cooperation.

  1. Legal regime of commercial cooperation

Commercial cooperation has hitherto obeyed the formal rules laid down by article

L 441-6 paragraph 6 of the French Commercial Code, requiring “a written contract in duplicate

copy held by each of the parties ”. This provision falling under

informative formalism allows the parties to better understand their commitments and

facilitates the control of the Administration (under the terms of article L 450-3 of the Code of

trade, investigators can request communication) as well as

judge’s investigations. It deserves to be integrated into the provisions

to the regime of commercial cooperation. This formalism, rightly reinforced by

of the penal provisions, must be sanctioned civilly by the nullity of the contract, this

not specified in the current provisions.

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The commercial cooperation contract is subject to the conditions of validity of

common law which must be specified and adapted:

! Conditions relating to consent and more specifically to violence

economic that one of the parties can exert here easily on the other.

! Conditions relating to the object: the services must be real and identifiable,

so as to banish false cooperation; it is up to the distributor to justify his

existence when it is in doubt. The price of the services must be

determined or determinable according to quantitative or qualitative criteria

verifiable objectives, which does not preclude applying to distinct situations

different conditions.

! Conditions relating to the cause: not only must the counterparty exist, but

the requirement of proportionality prevents one of the parties from imposing

unjustified conditions to the other; this requirement currently appearing in article L

442-6 I, 2, deserves to be integrated into the general regime of cooperation

commercial.

The rules of execution of the contract are more particularly impregnated – with regard to

a contract of a commercial nature, lasting and trusting

reciprocal – by the requirement of loyalty. The contract also obliges all

suites dictated by commercial usage.

Since the commercial cooperation contract is also a membership contract, it

is interpreted according to the civil law rules provided for this type of contract.

Finally, there is no real economic freedom without a certain transparency.

The current opacity of trade cooperation favors, on the one hand, the false

cooperation and on the other hand discrimination. But this transparency being

difficult to apply to specific conditions, especially with regard to

rating, is intended to apply only to general conditions.

Law Project

Chapter 1 of Title IV of Book IV of the Commercial Code entitled “De la

transparency ” in which the following articles are inserted is now titled: “ DE LA

LOYALTY AND TRANSPARENCY IN THE CONDITIONS OF SALE AND

COMMERCIAL COOPERATION ”.

L.441-8 . In distribution agreements, the commercial cooperation contract is a

agreement for the provision of services offered by the distributor to the supplier. It identifies

all services, specific or general, detachable from the purchase and sale transaction

necessary for the promotion and marketing of the supplier’s products [(variant)

in particular, assistance with the launch of new products, the specific positioning of

some of them, operations with advertising support and highlighting in the

stores]. Transactions directly related to the purchase and sale transaction

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[(variant) such as the terms of delivery or packaging of the product, the deadlines

and the terms of payment] appear on the other hand in the general conditions of sale

[(variant) possibly adapted by special conditions established in writing, but

not subject to the communication obligation of article L.441-6].

L.441-9. The commercial cooperation contract [(variant) appearing either in a document

single or in a set formed by a framework contract and application contracts] must

be drawn up in writing in duplicate held by each of the parties, on pain of

penal provisions of article L 441-6, paragraph 6, of the French Commercial Code.

The price of trade cooperation services must be determined or determinable at

based on objective criteria of a qualitative and / or quantitative nature. The invoiced amount assumes a

identifiable consideration, real and not manifestly disproportionate to the service provided. She

must be able to be justified at any time by the distributor.

These rules of form and substance are prescribed under penalty of nullity.

L.441-10. The contract is performed in accordance with the duty of loyalty prescribed by article 1134

paragraph 3 of the Civil Code and obliges, by virtue of the requirements of article 1135 of the same code, to

all the consequences resulting from good commercial practices. When in doubt, it is interpreted as

in favor of the supplier who has subscribed to it, in accordance with the provisions of article 1162 of

Civil Code.

It is concluded for a fixed period [(variant) and automatically renewable,

each of the parties may terminate it at the expiry date with a reasonable period of

prior notice]. It may at any time, during the current financial year, be the subject of an amendment.

negotiated by the parties under the same conditions, but without retroactive effect.

Any penalties applied by the distributor for late payment of the

commercial cooperation or for any other cause related to it must appear, under penalty of

nullity, in the contract, their conditions of application and their methods of calculation being specified.

The provisions of article L 441-6 paragraph 3, relating to the rate and payable, are

applicable.

L.441-11. Any distributor is required to communicate to the producer, supplier of

services, wholesaler or importer who so requests, the general conditions of the

business cooperation. The penal provisions of article L 441-6 are applicable.

Paragraph 5 of article L 441-6 of the French Commercial Code is repealed.

125

Bill amending the title of Title IV of Book IV of the Commercial Code as well as

the provisions of the preliminary chapter.

Explanatory memorandum.

Title IV of Book IV of the Commercial Code is currently entitled:

Transparency, restrictive competition practices and other practices

prohibited. This enumeration is at the same time not very enlightening and hardly coherent.

This title, the provisions of which have grown over the course of legislative reforms.

relating to invoicing rules, the prohibition of discrimination of certain practices

such as resale at a loss or the abusive termination of commercial relations has for

Common denominator: the requirement of loyalty in business practices.

The current title should then be replaced by the following title: Loyalty in practices

commercial.

Title IV is then broken down into several chapters, with a slight internal grooming:

– preliminary chapter: General provisions .

-chapter 1: Loyalty and transparency in the conditions of sale and

commercial cooperation [title replacing the current one: “Transparency”, too

imprecise, and making it possible to frame the commercial cooperation contract]

– second chapter: Restrictive practices of competition.

-chapter III : Other prohibited practices.

In this spirit, the preliminary chapter entitled General provisions and composed of a single

article devoted to the commercial practices examination commission (art. L 440-1) must

be supplemented by an article L 440-2 relating to the rules of unfair competition which constitute

in the French tradition, the cradle of competition law and which are intended to

apply either in the absence of practices prohibited by law, or as a substitute for these

last when these parties have chosen to place themselves in the field of civil liability.

This new provision has the advantage of harmonizing our law with that of

main European countries (Germany, Spain, Belgium, Denmark, Switzerland, Hungary,

Poland, Czech Republic, etc.) who have chosen to legislate in the field of competition

unfair.

The definition adopted reconciles the French tradition (tort basis) and the requirements

modern technologies widening the field of unfair competition to situations where the parties do not

do not compete in the same market (for example, relationship between a supplier and

a distributor). It is inspired by a three-dimensional design (protection of

competitors, protection of companies that are not in the same market segment

and consumer protection), taking into account the fields of activity invested by this

branch of law.

Finally, in a purely formal way but allowing to complete the grooming undertaken, the article

  1. 441-7 devoted to payment terms is included at the end of Article L. 443-1 which deals with

same subject.

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LAW PROJECT

Title IV of Book IV of the Commercial Code is entitled:

Loyalty in business practices .

The preliminary chapter includes a new article L. 440-2 worded as follows:

The rules of this title are intended to ensure fair market behavior.

They do not preclude an action based on articles 1382 and 1383 of the Civil Code.

intended to prevent or repair the consequences of the criminal behavior of agents

economic in the marketplace, such as disparagement, acts intended to create confusion

or disorganization, or even parasitic actions.

The first chapter is entitled:

Loyalty and transparency in the terms of sale and cooperation

commercial.

Article L 441-7 is repealed, its provisions now appearing under Article L 443-1 are

now breaking down into two parts: I (current provisions) and II (provisions

transposed).

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