Annual commercial negotiations: is article L. 441-3 of the French Commercial Code contrary to EU law?

NEWS FLASH - MAY 2025

The formalism of the French Commercial Code

In France, the Commercial Code[1] (hereinafter, the "Commercial Code") requires suppliers and distributors of products (or service providers) to sign a written agreement (hereinafter, the "Single Agreement") before March 1st of the year in which it takes effect (hereinafter, the "Legal Deadline"), and to renew it periodically on the same date[2].

Created by the 2008 French Law on the Modernization of the Economy[3], this obligation aims to preserve the fairness and balance of commercial relations, and prevent the abuse of economic power by parties in a position of strength, historically the players in mass retailing.

The Single Agreement must therefore mention " the reciprocal obligations to which the parties have committed themselves at the end of the commercial negotiation "[4] with a view to fixing the price of the products: price reductions, commercial cooperation services and other obligations designed to promote the commercial relationship between the supplier and the distributor or service provider.

Failure to comply with this obligation may result in an administrative fine of up to €75,000 for an individual and €375,000 for a legal entity for each contract not signed by the legal deadline, with these amounts raised to €200,000 and €1,000,000 respectively for mass-market products. This ceiling is doubled if the infringement is repeated within two years of the date on which the first sanction decision became final[5].

Classification as a police act

While the material scope of these provisions of the French Commercial Code (supplier-distributor relations) was defined from the outset, the question of their spatial scope, outside the territory of the French Republic, gave rise to debate.

In 2019, the Commission d'Examen des Pratiques Commerciales (hereinafter, the "CEPC"), an advisory body which monitors the balance of relations between producers, suppliers and retailers with regard to current legislation, was asked whether the aforementioned provisions of the French Commercial Code were applicable in the presence of a foreign element[6]. Basing itself on the case law of the Court of Justice of the European Union (hereinafter the "CJEU")[7], the CEPC considered that the question fell within the scope of " administrative matters " and not civil or commercial matters, thus excluding the application of the Brussels I[8] and Rome I and II[9] regulations. In fact, when it imposes sanctions for non-compliance with the legal deadline, the public administration acts using the prerogatives of a public authority and is not in the position of a party or partner.

The CEPC adds that, in its view, the formalism of commercial relations prescribed by the French Commercial Code has the character of a loi de police, likely to be imposed on the parties " even when the latter have deliberately chosen not to apply French law to an international contract "[10]. Nevertheless, the CEPC specifies that " in the presence of a foreign element, the provisions of [article L. 441-3 of the French Commercial Code] will only apply if there is a sufficient connection with France in view of the objective pursued by the text"[11], which the CEPC considers will be the case if the place of performance of the commercial relationship is located on French territory, whatever the nationality of the supplier and/or distributor.

Despite this non-binding clarification by the CEPC, questions have continued to arise regarding the scope of application of the Single Convention in space, not least because of strategies by certain economic operators to circumvent French law. In 2020[12], the legislator introduced a new mandatory reference to the Single Convention, relating to " any service or obligation covered by an agreement concluded with a legal entity located outside French territory, with which the distributor is directly or indirectly linked ", with the aim of combating misuse of the law by relocating "service" centers outside French territory to impose substantial rate reductions not provided for in the Single Convention.

In the same spirit of combating what the French legislator considers to be " legal evasion "[13], the "Decrozailles" law[14] of 2023 specified in the French Commercial Code that the provisions of the Commercial Code relating to annual agreements (as well as those applicable to restrictive competition practices) are of public order and " apply to any agreement between a supplier and a buyer concerning products or services marketed on French territory ", and that " any dispute concerning their application falls within the exclusive jurisdiction of the French courts, subject to compliance with European Union law and international treaties ratified or approved by France, and without prejudice to recourse to arbitration "[15].

The provisions of the French Commercial Code are not contrary to fundamental freedoms or European Union law.

In 2016, the Belgian cooperative Eurelec Trading (hereafter "Eurelec Trading"), a service center, was set up jointly by several cooperatives of independent retailers grouped under the "E. Leclerc" banner, on the one hand, and the German "Rewe" group, on the other. Leclerc" on the one hand, and the German "Rewe" group on the other, with the aim of conducting the two brands' commercial negotiations at European level.

As Eurelec Trading had failed to sign a number of annual agreements by the legal deadline, the French administration ordered it to pay administrative penalties totalling 6,340,000 euros in a decision dated August 28, 2020. Following an implicit refusal by the Minister of the Economy and Finance to annul this decision, and the subsequent rejection of its appeal by the Paris Administrative Court, Eurelec Trading appealed against this decision to the Paris Administrative Court of Appeal.

In support of its appeal to the Administrative Court of Appeal, Eurelec Trading argued in particular that the obligation for suppliers and distributors to conclude an agreement before March 1 of the year in which it takes effect was contrary to Union law on several counts. In a ruling dated December 13, 2024[16], the CAA rejected all of Eurelec Trading's arguments.

Firstly, the CAA rejected Eurelec's argument that this obligation constituted a measure having equivalent effect to a quantitative restriction on imports, prohibited under Article 34 of the Treaty on the Functioning of the European Union (hereinafter "TFEU"). In this respect, the CAA noted that the aforementioned provisions of the French Commercial Code (i) govern only contractual relations, and not product characteristics, (ii) apply equally to all products sold on French territory, whatever their origin, and (iii) do not require the negotiation and conclusion of the Single Agreement to take place in France.

Secondly, Eurelec Trading considered that article L. 441-3 of the French Commercial Code constituted a restriction on the freedom of establishment and the freedom to provide services, guaranteed respectively by articles 49 and 56 of the TFEU. The CAA also dismissed these arguments, on the grounds that the said article applies to products marketed in France and has " neither the object nor the effect (...) of encouraging businesses to establish themselves in France or of dissuading or limiting the possibility of establishing themselves on the territory of another Member State ". Similarly, insofar as this obligation is aimed not at facilitating administrative controls, but at guaranteeing fair commercial relations and preserving the balance in supplier-distributor relations, it responds to overriding reasons of general interest, is necessary to protect suppliers and " neither constitutes discrimination nor is disproportionate ". In this respect, French law does not create an obstacle to freedom of establishment.

Finally, according to Eurelec Trading, the provisions of French law were to be assimilated to national competition law, the application of which would result in the prohibition of a practice likely to affect trade between Member States, but which does not have the effect of restricting competition, and would therefore be lawful under European competition law, is prohibited by Union law[17]. However, the CAA noted that " the obligation, laid down by the aforementioned provisions of article L. 441-3 of the French Commercial Code, to conclude a written agreement between suppliers and distributors before March 1 of the year in which it comes into effect has neither the object nor the effect of preventing or restricting the ability to set up an international purchasing group through an agreement between companies that has no effect restricting competition".

While an appeal against the CAA Paris decision is still possible, in the meantime, Eurelec Trading has once again been fined over 38 million euros[19] for failing to meet the legal deadline[18] for the year 2024.

For the time being, Article L. 441-3 of the French Commercial Code must therefore be considered compatible with EU law. In practice, central purchasing or referencing bodies, distributors and suppliers located outside France must be vigilant: as soon as the products they sell, purchase or negotiate on behalf of their members are destined for the French market, their contracts are subject to the legal March 1st cut-off date.

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[1] Articles L. 441-3 et seq. of the French Commercial Code (originally articles L. 441-7 et seq. of the French Commercial Code).

[2] The agreement may be concluded for one, two or three years.

[3] Law no. 2008-776 of August 4, 2008 on the modernization of the economy, JORF 0181 of August 5, 2008.

[4] Article L. 441-3-I of the French Commercial Code.

[5] Article L. 441-6 of the French Commercial Code.

[6] CEPC, Opinion no. 19-7 on a request for an opinion from a professional on the scope of application of article L. 441-7 of the French Commercial Code in an international context.

[7] CJEU, January 19 1994, SAT - Eurocontrol, case C-364/92; CJEU, January 16 1980, Ruffer, case C-814-79; CJEU, May 15 2003, Préservatrice foncière, case C-266/0.

[8] Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of December 12, 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJEU L 351, 20.12.2012, pp. 1-32.

[9] Regulation (EC) no. 593/2008 of the European Parliament and of the Council of June 17, 2008 on the law applicable to contractual obligations (Rome I), OJEU L 177, 4.7.2008, p. 6-16 and Regulation (EC) no. 864/2007 of the European Parliament and of the Council of July 11, 2007 on the law applicable to non-contractual obligations (Rome II) OJEU L 199, 31.7.2007, p. 40-49.

[10] CEPC, Opinion no. 19-7, p. 2.

[11] CEPC, Opinion no. 19-7, p. 5.

[12] Loi n°2020-1525 du 7 décembre 2020 d'accélération et de simplification de l'action publique (ASAP), JORF n°0296 du 8 décembre 2020.

[13] Sénat, Compte-rendu de la commission des affaires économiques sur la proposition de loi visant à sécuriser l'approvisionnement des Français en produits de grande consommation, February 8, 2023.

[14] Law no. 2023-221 of March 30, 2023 to strengthen the balance in commercial relations between suppliers and distributors, JORF no. 0077 of March 31, 2023.

[15] Article L. 444-1 A of the French Commercial Code.

[16] CAA de PARIS, 9th chamber, 13/12/2024, 22PA04574, Unédit au recueil Lebon.

[17] Article 3 of the Council Regulation of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty.

[18] As amended by law no. 2023-1041 of November 17, 2023 on emergency measures to combat inflation in consumer goods, JORF no. 0267 of November 18, 2023.

[19] https://www.economie.gouv.fr/dgccrf/amende-administrative-de-38-067-000-eu-lencontre-deurelec-trading-scrl-leclerc-pour-non