Restrictive competition practices

The concept of significant imbalance was introduced into the Commercial Code by the Law on the Modernization of the Economy of 4 August 2008, known as the LME Law.

Article L. 442-1 I 2° of the Commercial Code provides that commits ” the liability of its author and obliges him to make good the damage caused by the fact, in the context of commercial negotiation, the conclusion or performance of a contract, by any person carrying out production, distribution or service activities: […] to subject or attempt to subject the other party to obligations creating a significant imbalance in the rights and obligations of the parties ; ».

This article is intended to apply to any type of contract, production, distribution or service, as long as it has been concluded between business partners: franchise agreements, selective distribution, conditions of sale, single agreements are for example concerned.

The significant imbalance is assessed in a global manner, with regard to all the obligations of the parties.

In the event of litigation, it will be up to the author of the imbalance to demonstrate that one or more clauses rebalance the contract or that negotiations have taken place, or could have taken place and that the consent of each party was given freely, without any constraint or pressure.

The case law considers that it does not matter whether the disputed clauses have been applied or not, the only attempt being reprehensible.

An analysis of the contracts in the light of this risk is necessary in order to analyse the risks of a significant imbalance in the rights and obligations of the parties. Similarly, any drafting of a deed must now take this into account.

Article L. 442-1, II of the Commercial Code prohibits ” to abruptly terminate, even partially, an established commercial relationship, in the absence of a written notice that takes into account in particular the duration of the commercial relationship, with reference to commercial practices or interprofessional agreements, and, for the determination of the price applicable during its duration, the economic conditions of the market in which the parties operate. ».

All types of commercial relationship established between two professionals are concerned, regardless of whether the contract has been formalized in writing or not. It also aims at both the total and partial termination of commercial relations, such as a significant decrease in orders or a partial de-referencing of products.

In addition to force majeure, only the non-performance by the other party of its obligations, the breach must however be of a sufficiently serious nature to justify the termination of commercial relations without notice allows the termination in advance.

Termination brutality is characterized in the absence of notice or in the event of insufficient notice. Notice must be given in writing.

In the absence of non-performance by the other party of its obligations, a reasonable period of notice must be respected.

As the purpose of the notice period is to allow the victim companies to remedy the disorganization resulting from the termination, it is assessed in the light of the nature and age of the commercial relationship, the reputation of the products taken into consideration, the degree of dependence on the supplier, the ability to find equivalent partners, and to amortize the investments legitimately committed to meet the specific needs of the co-contractor, author of the termination.

In the event of a dispute between the parties over the duration of the notice period, the author of the breach cannot be held liable for an insufficient period of time once he has complied with an eighteen-month notice period.

The party responsible for the breach, in the event of non-compliance with the notice period, is ordered to pay damages in principle equivalent to the gross trademark that the contractor was unable to collect during the period of the unfulfilled notice period.

Any termination of commercial relations must be anticipated and managed with caution, under penalty of having to compensate the damage suffered by the victim of the offence by awarding damages that may be significant.