Commercial relationships are based on a wide range of marketing tools and contractual documents whose regulations are constantly evolving. Between promotional techniques and contractual frameworks, professionals have to navigate a complex legal environment where authorised commercial practices coexist with those that are strictly regulated. From sales with premiums to general terms and conditions of sale, not forgetting significant imbalance, a number of legal provisions now structure relations between professionals and with consumers.
Sales with premiums: a regulated practice
Definition of the bonus (purpose, service)
The premium consists of the provision of a product or service other than that covered by the main contract. Once strictly prohibited, sales with a premium are now authorised subject to certain conditions. Article L. 121-19 of the Consumer Code states that this technique is only prohibited if it constitutes an unfair commercial practice within the meaning of article L. 121-1 of the same code.
This legislative change is the result of an adaptation of French law to European case law. The Court of Justice of the European Union ruled that a general ban on sales with premiums was contrary to European law (CJEU 9 November 2010, aff. C-540/08).
Conditions of legality (prohibition of unfair premiums)
A bonus sale is considered unfair only if it is "contrary to the requirements of professional diligence and substantially alters or is likely to alter the economic behaviour of a consumer who is reasonably well informed and reasonably observant and circumspect with regard to a good or service".
In practice, for a sale with a premium to be legal, a number of factors need to be verified:
- Transparency about the existence of the premium and the conditions for obtaining it
- No deception as to the real value of the premium
- Compliance with the principle that obtaining the premium must not result from submission to an obligation creating a significant imbalance
It should be noted that the banking sector has more restrictive specific rules, with the Monetary and Financial Code setting a ceiling on the value of bonuses offered by financial institutions.
Specific cases: samples, low-value promotional items
Some promotional items do not qualify as premiums. This is particularly true of free samples and low-value promotional items, provided that they are clearly and indelibly marked with the name of the company concerned.
Since April 2024, the distribution of samples to consumers who do not request them has been strictly prohibited by article L. 541-15-10 of the Environment Code. Consumers must now expressly request to receive a sample, which represents a significant change in traditional commercial practices.
Advertising lotteries and competitions: what are the rules?
Distinction between prohibited lotteries and legal gambling
Article L. 320-1 of the French Internal Security Code prohibits, as a matter of principle, gambling and games of chance, including lotteries. All operations offered to the public in the hope of a win which is due, even partially, to chance and for which a financial sacrifice is required are deemed to be "games of money and chance".
The fundamental distinction is based on the notion of free entry. A prize draw is legal when it is completely free of charge for the participant, with no financial consideration, even minimal. Conversely, a commercial lottery involving payment, even indirectly (such as postage costs in excess of the current postal rate), may be prohibited.
Transparency and information obligations (game rules)
To organise a compliant competition, the company must comply with a number of information obligations, in particular :
- Draw up accessible and comprehensive rules detailing the terms and conditions of participation
- Clearly specify the nature and value of the prizes up for grabs
- Provide information on the criteria used to select the winners
- Indicate the start and end dates of the game
The absence of rules or incomplete rules not only constitutes a legal risk, but can also be qualified as a misleading commercial practice, as the Court of Cassation has pointed out on several occasions.
Prohibition of misleading commercial practices
Advertising lotteries are also subject to the ban on misleading commercial practices. According to article L. 121-20 of the French Consumer Code, commercial practices in the form of promotional operations aimed at awarding a prize by drawing lots are prohibited when they are unfair.
Case law has taken a particular interest in lotteries with pre-drawing, where the consumer is informed that he has already won a prize. Where this announcement is made without highlighting the existence of a hazard, the organiser is obliged to deliver the prize announced (Cass., ch. mixte, 6 September 2002).
For more information on the authorised promotional practices in our dedicated article.
General Terms and Conditions of Sale (GTS): the cornerstone of the commercial relationship
Obligation to disclose terms and conditions of sale (Art. L. 441-1 C. com)
The General Terms and Conditions of Sale are the sole basis for commercial negotiation. Article L. 441-1 of the French Commercial Code requires all producers, service providers, wholesalers and importers to communicate their General Terms and Conditions of Sale to any buyer who requests them for a professional activity.
This communication must be spontaneous in the context of relations between professionals. It is part of the principle of transparency that underpins commercial relations and helps to avoid discriminatory practices.
Mandatory content: terms of payment, price list, discounts, etc.
The General Terms and Conditions must include :
- Terms of payment (payment terms, etc.)
- Pricing elements (unit price scale)
- Any price reductions (discounts, rebates, etc.)
To be complete, they should also set out the terms and conditions for revising prices, the conditions for applying and the rate of late payment penalties, as well as the fixed indemnity for recovery costs.
Enforceability and negotiation of GCS
The General Terms and Conditions are only enforceable if they have been effectively brought to the attention of the other party before the contract is concluded. This knowledge may be established by various means: mention on commercial documents, prior dispatch, signature, etc.
Although the General Terms and Conditions of Sale may be negotiated, the principle of non-discrimination in pricing means that a seller may not grant buyers in comparable situations different terms and conditions without objective justification.
Penalties for non-compliance
Failure to communicate the GST constitutes a breach of the rules on pricing transparency, punishable by an administrative fine of up to €15,000 for an individual and €75,000 for a legal entity (article L. 441-1 of the French Commercial Code).
These penalties have been considerably increased in recent years, reflecting the importance attached by the legislator to transparency in commercial relations.
A regular audit of your contractual documents is therefore essential. Our firm can help you to have your terms and conditions audited and prevent any legal risks.
Significant imbalance in commercial contracts (Art. L. 442-1 C. com)
Definition and scope (supplier/distributor relations, etc.)
Significant imbalance is one of the restrictive practices prohibited by Article L. 442-1, I, 2° of the French Commercial Code. This article prohibits "subjecting or attempting to subject the other party to obligations that create a significant imbalance in the rights and obligations of the parties".
This concept was introduced to rebalance commercial relations, particularly between suppliers and distributors. It applies to all commercial relationships, not just the distribution sector.
Unlike consumer law, the Commercial Code does not provide an indicative list of unfair terms, leaving it to the courts to assess the existence of a significant imbalance on a case-by-case basis.
Examples of clauses considered to create an imbalance
Case law has identified several types of clause likely to create a significant imbalance:
- Clauses imposing penalties on the supplier without reciprocity
- Unilateral price revision clauses
- Clauses allowing a party to unilaterally terminate the contract without sufficient notice
- Clauses limiting the liability of one party while maintaining that of the other
- Clauses imposing excessive payment terms
It should be noted that the Court of Cassation has specified that the existence of a significant imbalance may result from an isolated clause or from a set of clauses which, taken individually, would not necessarily be unfair.
The role of submission or attempted submission
To establish the offence of significant imbalance, it is not enough to establish the existence of an imbalanced clause. It must also be established that the clause has been "subjugated" or that one party has "attempted to subjugate" the other.
Submission implies the absence of genuine negotiation and may result from an imbalance of power between the parties. The courts take various factors into account when assessing this: economic dependence, lack of a credible alternative, coercion, etc.
Penalties (nullity of the clause, civil fine)
The penalties incurred in the event of a significant imbalance are particularly dissuasive:
- Invalidity of the clause concerned
- Liability of the perpetrator of the practice
- Repetition of undue payments
- A civil fine of up to €5 million, or 5% of sales in France
These sanctions may be imposed at the request of the injured party or the public prosecutor, and since the Act of 17 March 2014, at the request of the Minister for the Economy.
The importance of auditing and contract drafting
Drafting compliant and protective General Terms and Conditions of Sale
Drafting compliant and protective terms and conditions requires constant legal monitoring. As well as complying with the legal requirements, these terms and conditions need to be adapted to the specific features of each business and the risks inherent in each sector.
Particular attention should be paid to the drafting of clauses relating to liability, force majeure, intellectual property and applicable law. These clauses are often sticking points in the event of a dispute.
For a complete overview of the various regulations applicable, please consult our summary of business rules.
Negotiating contracts to avoid unfair/unbalanced clauses
The negotiation of commercial contracts requires particular vigilance to avoid the inclusion of clauses that create a significant imbalance. This vigilance is necessary both to protect against clauses imposed by a partner in a position of strength and to avoid imposing clauses that could subsequently be penalised.
The contractual balance must be assessed globally, taking into account all the rights and obligations of the parties. Negotiations must therefore cover all aspects of the contract, not just the pricing conditions.
It is also essential to keep a record of the negotiations (email exchanges, successive versions, etc.) so that, in the event of a dispute, you can prove that the clauses were not imposed unilaterally but were the subject of genuine discussion.
The complexity of the rules governingconsumer information and commercial relations often justifies the use of specialist legal advice.
Commercial relationships involve a delicate balance between marketing strategies, regulatory compliance and protecting your interests. Our firm can help you secure your commercial practices and draft contractual documents tailored to your business. Please do not hesitate to contact us to establish a tailor-made legal strategy together.
Sources
- Consumer Code: articles L. 121-1 et seq (unfair commercial practices), L. 121-19 (sales with premiums)
- French Commercial Code: articles L. 441-1 (general terms and conditions of sale), L. 442-1 (significant imbalance)
- Internal Security Code: article L. 320-1 (prohibition of gambling and games of chance)
- Environment Code: article L. 541-15-10 (distribution of samples)
- Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair commercial practices
- Law no. 2019-486 of 22 May 2019 on the growth and transformation of businesses (PACTE)
- Case law CJEU 9 November 2010, aff. C-540/08 (sales with premiums)
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