Price reductions: the regulation of sales

a) The legal definition of balances

Balances are defined by Article L. 310-3 of the Commercial Code as “sales that are accompanied or preceded by advertising and are advertised as tending, by a price reduction, to the accelerated disposal of goods in stock“.

Two conditions are necessary for a sales transaction to qualify as a “sale”.

On the one hand, the transaction must be accompanied by an advertisement, whether it is subsequent or concomitant with the sale of sold products.

On the other hand, the sale at reduced prices must aim, for the trader, at an accelerated disposal of his stocks.

Thus, a promotional operation can be, depending on the conditions and motivations under which it is exercised, reclassified as a sale. For example, a promotional operation presented by an advertisement as an operation to “finish” (Paris, March 22, 2002) or an occasional operation which grants significant discounts and which testifies, through the posters presented, the desire to dispose of stocks (Riom, 14 April 1993) may be reclassified as sale operation.

A requalification as a sale operation can also occur if the operation is hidden behind vouchers or loyalty programs but tends to grant reduced prices offered to consumers in order to quickly sell off the trader’s stocks.

b) Price reductions: The display of the sale price

Price reductions, especially during sales periods, follow a specific regime.

Balanced products may be resold at a loss, in accordance with the exception provided for by Article L. 442-5 II 7° of the Commercial Code.

In addition, the price reduction indicated must comply with the provisions of Article L. 112-1-1 of the Consumer Code regarding the display of the previous price and the new reduced price.

c) Price reductions: The terms of sales on sale

To be lawful, sales must meet a temporality criterion but also a criterion for products offered at reduced prices.

Regarding the temporality of balance transactions, the latter may only take place twice a calendar year, each of the two periods being not less than three weeks and more than six weeks, and the start dates and times of which are set by the decree of 27 May 2019. These periods may be different for certain geographical areas due to the seasonality of sales, such as Guadeloupe, or cross-border commercial operations, such as the Moselle.

Regarding products, professionals may only offer as sale products those that have been paid for and offered for sale for at least one month before the start of the sale operation concerned. Any resupply of products during this period is therefore prohibited. The professional must, to prove compliance with this obligation, make available to the control officers “the documents justifying that the goods sold on sale had been offered for sale, and where the seller is neither the producer nor its agent that their purchase price had been paid, for at least one month on the start date of the sales period in question “.

However, the notion of replenishment during the sales period is assessed according to whether the entity that issues new products is legally distinct from the entity that acquires them.

If the legal entity that sells or delivers new products is separate, then illicit replenishment will be characterized. In particular, case law has held that a commission agent who replenishes its supplies from its principal supplier, a separate legal entity, violates the provisions of Article L. 310-3 of the Commercial Code (Cass. Crim. 22 February 2022, No.21-83.226).

Conversely, if the replenishment takes place between closely related legal entities, said replenishment is lawful as judged by case law in the case where a subsidiary, operating several points of sale could replenish from its parent company which manufactures and stores the products of the group brand, provided that this parent company has offered for sale and paid for the goods concerned at least one month before the start of the sales period in question (ECPC, Opinion No.21-11 of 23 September 2021).

d) Price reductions: The use of the term “balance(s)”

Apart from the aforementioned conditions, the use of the term “sale” or “balance” is strictly prohibited both in the advertising of the professional and in the name of a sign, a company name or a trade name.

In addition, Article R. 310-17 of the French Commercial Code requires that the trader’s advertisement relating to a sale transaction mention the start date of the operation and, if the balances do not concern all the products offered for sale in the establishment, the goods to which the sales relate.

Finally, products offered or available for retail sale, in any way whatsoever, in the form of sales must be indicated by a statement indicating that they are “sales” by a perfectly legible indication (Articles A 310-7 et seq. of the Commercial Code).