Commercial operations based on advantageous pricing strategies and payment terms are effective in attracting customers, but involve numerous legal pitfalls. Between one-off promotions, liquidations and payment facilities such as credit, professionals are navigating a highly regulated environment. These commercial practices, governed by the French Commercial Code and Consumer Code, expose retailers to significant penalties in the event of non-compliance. Our firm regularly observes costly errors in the application of these regulations. Taking stock of these provisions is therefore essential for any professional wishing to boost sales without taking legal risks.
Sales with reduced prices excluding sales
Price reduction advertisements: calculation and display rules
Price reduction advertising is a powerful marketing tool, but it is subject to strict controls. Since Order no. 2021-1734 of 22 December 2021, any price reduction announcement must indicate the previous price charged by the trader. This reference price must have been applied for at least thirty days prior to the announcement of the reduction.
For successive discount announcements on the same product, the previous price must remain identical to that used before the first announcement. This rule is designed to prevent misleading practices consisting of artificially inflating reference prices in order to dramatise discounts.
Failure to comply with these rules is considered a misleading commercial practice, potentially punishable by a fine of up to 300,000 euros for an individual. The fine may even be increased to 10% of average annual sales calculated over the last three financial years.
Distinction between promotion and deceptive practices
There is sometimes a fine line between a legal promotion and a misleading commercial practice. A price reduction advertisement is only lawful if it does not constitute an unfair commercial practice within the meaning of article L. 121-1 of the French Consumer Code.
A strategy is considered unfair when it is contrary to the requirements of professional diligence and substantially alters the economic behaviour of the average consumer. For example, a retailer displaying a 50% discount on a product whose price had been artificially increased just before the promotional operation would be liable to prosecution.
Act no. 2020-105 of 10 February 2020 on the fight against waste also strengthened this framework by deeming misleading any commercial practices that give the impression that the consumer is benefiting from a reduction comparable to that of sales outside the legal periods.
Beware of resale at a loss
The price reduction must not lead to a sale at a loss, a practice prohibited by article L. 442-5 of the French Commercial Code. A price is considered to be "below cost" when it is lower than the actual purchase price.
The effective purchase price is the net unit price shown on the purchase invoice, less any financial advantages granted by the seller (discounts, rebates) plus taxes and the cost of transport.
However, there are certain exceptions which allow sales at a loss, in particular:
- Sales due to cessation or change of business activity
- Seasonal products at the end of the season
- Products that are out of fashion or technically obsolete
- Products on sale
Failure to comply with the ban on resale at a loss is punishable by a criminal fine of up to €75,000, or even half the advertising expenditure in the case of an advertisement stating a price lower than the actual purchase price.
Liquidation: an exceptional sale subject to strict conditions
Definition and legal grounds for liquidation (cessation, suspension, change of activity)
Liquidation is a special type of sale governed by article L. 310-1 of the French Commercial Code. It is defined as a sale accompanied by advertising which aims, by means of a price reduction, to quickly sell off all or part of the goods of a commercial establishment following an exceptional decision.
There are four legal grounds for liquidation:
- Permanent cessation of business (retirement, sale of business, etc.)
- Seasonal suspension of activity (effective closure for at least five months)
- Change of activity within the establishment
- Substantial change in operating conditions (transfer or conversion of premises, major works, change of sign, etc.)
These situations must be real and serious. A simple pretext for organising a promotional sale would constitute a breach of the law.
Prior declaration procedure at the town hall
Previously subject to prefectoral authorisation, liquidation now requires a simple prior declaration to the mayor of the municipality in which the operation is to take place. This declaration, which is essential, must be made by registered letter with acknowledgement of receipt or by hand delivery.
The deadline for notification is normally two months before the date on which the sale is due to begin. However, this period is reduced to five days if the reason for the closure is an unforeseeable event likely to interrupt the operation of the establishment, such as a compulsory liquidation or a serious disaster.
The declaration must specify :
- The identity of the seller
- The cause and duration of the liquidation
- A detailed inventory of the goods concerned
The mayor then issues a receipt for the declaration within a maximum of fifteen days. No liquidation can begin until this official document has been obtained.
Limited duration and goods concerned
Liquidation may not exceed two months, reduced to fifteen days in the case of a seasonal suspension of activity. This limited period reflects the exceptional nature of the operation.
Only goods listed in the inventory attached to the declaration may be sold. Throughout the operation, it is strictly forbidden to offer products other than those listed in the inventory. Replenishment during liquidation is therefore excluded.
This restriction reflects the very nature of a clearance sale: the aim is to sell off existing stock, not to create a disguised promotional operation. It fundamentally differentiates clearance sales from sales or simple promotions.
Compulsory display and penalties
The declaration receipt must be prominently displayed at the place of sale for the duration of the clearance sale. In addition, all advertising relating to the operation must mention :
- The date of issue of the receipt
- The nature of the goods liquidated
- Any other information required by ministerial order
Failure to comply with the rules governing liquidations is severely punished. Article L. 310-5 of the French Commercial Code provides for a fine of 15,000 euros for anyone who carries out a liquidation without making a prior declaration or in disregard of the conditions declared. Since the Act of 24 January 2023, a fixed fine may be imposed to extinguish the public prosecution, set at 200 euros for an individual and 1,000 euros for a legal entity.
False or misleading advertising relating to an undeclared liquidation is also prohibited and punishable by an administrative fine of up to 15,000 euros for an individual and 75,000 euros for a legal entity.
Credit sales: a protective framework for consumers
Scope of consumer credit
Credit sales are a commercial technique used to spread payment over time. It is strictly regulated by the French Consumer Code, particularly articles L. 312-1 et seq.
Consumer credit refers to credit transactions of between €200 and €75,000. It includes traditional loans of money, but also deferred payment purchases, hire purchase and hire purchase.
The regulations are designed to protect consumers against the risk of excessive debt while guaranteeing their freedom of choice. The professional is bound by stricter obligations, both at the pre-contractual stage and during the performance of the contract.
Pre-contractual information obligations (FIPEN)
Before signing any agreement, the lender must provide the consumer with full pre-contractual information. Article L. 312-12 of the French Consumer Code requires that a standardised European Pre-contractual Information Sheet (Fiche d'Information Précontractuelle Européenne Normalisée - FIPEN) be provided.
This form must indicate :
- The fixed or variable borrowing rate and the conditions for applying it
- The total amount of credit and how it is made available
- The duration of the contract
- The amount, number and frequency of instalments
- Annual Percentage Rate (APR) including all charges
- Total cost of credit
Article L. 312-5 of the French Consumer Code also requires an explicit warning to be included in all advertising: "Credit is a commitment and must be repaid. Check your ability to repay before committing yourself".
Failure to comply with these information obligations is punishable by an administrative fine of €3,000 for a natural person and €15,000 for a legal entity.
The withdrawal period
Consumer protection is based primarily on the right of withdrawal. Article L. 312-19 of the French Consumer Code gives consumers a period of fourteen calendar days from acceptance of the offer to withdraw from the contract, without justification or penalty.
To facilitate the exercise of this right, a detachable form must be attached to the offer of credit. Consumers may, however, use any other means to prove their wish to withdraw.
In addition, article L. 312-25 prohibits any payment from the lender to the borrower or vice versa during the first seven days following acceptance of the contract. This rule prevents premature payments and strengthens the effectiveness of the right of withdrawal.
Any professional who fails to comply with these provisions is liable to a fine of 300,000 euros, under article L. 341-12 of the French Consumer Code.
Consequences of non-compliance by the seller/lender
The penalties for non-compliance with consumer credit regulations are severe and varied:
- The contract may be declared null and void if the mandatory information or formal conditions for drawing up the offer are not met.
- The court may set aside the application of contractual interest and substitute legal interest, or even order the lender to forfeit the right to interest.
- In the event of a delay in reimbursing a consumer who has withdrawn, article L. 242-4 of the French Consumer Code provides for gradual increases in the legal interest rate of up to 50% for a delay of 60 to 90 days.
- In the case of assigned credit (financing a specific purchase), the indivisibility of the main contract and the credit agreement is strictly applied. As stipulated in article L. 312-55 of the French Consumer Code, judicial resolution of the main contract automatically entails cancellation of the credit agreement.
These rules must be complied with by both the vendor offering the finance and the partner credit institution, with case law holding that they are jointly and severally liable to the consumer.
Tying and joint offers: what is permitted
The principle of prohibiting tied sales and its exceptions
Tying (or subordinate selling) involves obliging a consumer who wishes to purchase a product or service to simultaneously purchase another product or service, or a fixed quantity.
Article L. 121-11 of the Consumer Code prohibits these practices when they constitute an unfair commercial practice within the meaning of article L. 121-1. That is to say, when they are "contrary to the requirements of professional diligence" and when they "substantially alter or are likely to alter the economic behaviour of the consumer".
The Court of Justice of the European Union has ruled that a general and absolute ban on tying would be contrary to European law (CJEU 23 April 2009). Tying is therefore only prohibited if it is unfair.
Certain exceptions are explicitly provided for, notably for insurance services. Article L. 121-11, paragraph 3, states that it is prohibited to make the sale of a good or the provision of a service conditional on the conclusion of an ancillary insurance contract without allowing the consumer to purchase the good or obtain the service separately.
Distinction from joint bids (lots)
Joint offers or batch sales differ from tied sales in that they offer several products or services together, but are not binding. The consumer generally retains the option of buying the items separately.
Long regulated, sales by lot now benefit from a more flexible regime. They are authorised when they :
- Result from constant commercial use
- In the interest of the consumer
- Do not substantially alter its economic behaviour
For a sale by lots to be legal, the professional must clearly display :
- The price and composition of the lot
- The price of each product in the batch, if available individually
This transparency enables the consumer to effectively compare the price of the package with that of the items purchased separately, thus avoiding any confusion.
Case law also distinguishes between a sales pack (products forming a coherent and indivisible whole) and a promotional pack (a temporary combination of products usually sold separately).
Securing price-based commercial transactions
Audit of promotional practices
To avoid the legal risks associated with price-based commercial transactions, a prior audit of promotional practices is essential. This preventive approach makes it possible to identify and correct non-compliance before it is penalised.
The audit must cover :
- Compliance of the reference prices used (justification of the previous price)
- Compliance with legal periods for certain transactions (sales, clearance sales)
- Accuracy and clarity of discount advertisements
- Checking resale at a loss thresholds
- Compliance of credit offers
The examination of advertising media and the practical arrangements for their implementation is also a crucial point. It is important to ensure that promotional messages do not run the risk of being described as misleading commercial practices.
In the case of credit sales, particular attention must be paid to compliance with pre-contractual obligations and the correct implementation of the consumer's right of withdrawal.
Drafting clear legal notices
Clear, comprehensive legal notices are another way of ensuring the legal certainty of commercial transactions. These notices must appear on all promotional and contractual materials.
For price reductions, the details must specify :
- The nature and amount of the reduction (percentage or absolute value)
- The exact period of validity of the offer
- The products or services concerned
- Any applicable conditions or restrictions
In the case of clearance sales, advertising materials must indicate the date of the declaration receipt and the nature of the goods being cleared.
Consumer credit offers require standardised and regulated information, including :
- The words "Credit is binding on you and must be repaid".
- Fixed or variable borrowing rate
- The total amount of the loan
- APR (Annual Percentage Rate)
- The duration of the contract
- The amount of the monthly instalments
These details, far from being mere formalities, are decisive factors in assessing the fairness of the commercial practice and can make all the difference in the event of a dispute.
Price-based commercial transactions represent a strategic challenge for companies, but their implementation requires a detailed and up-to-date knowledge of the regulations. The risks incurred in the event of non-compliance fully justify personalised legal support. Our firm can analyse your promotional projects and advise you on how to secure them. If you have any questions about your commercial strategies, or would like a overview of regulated salesDon't hesitate to contact us.
Sources
- French Commercial Code: articles L. 310-1 to L. 310-7 (liquidations), L. 442-5 (resale at a loss)
- Consumer Code: articles L. 121-1 et seq (unfair commercial practices), L. 121-11 (tied sales), L. 312-1 to L. 312-94 (consumer credit)
- Order no. 2021-1734 of 22 December 2021 on price reduction announcements
- Law no. 2020-105 of 10 February 2020 on the fight against waste and the circular economy
- Order of 11 March 2015 on price reduction advertising to consumers
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