Pricing: avoiding the pitfalls of resale at a loss and fixed prices

By Yasmine EDDAM4 April 2025

In France, the principle is that of price freedom. In theory, every company is free to set its prices as it sees fit, in accordance with article L.410-2 of the French Commercial Code. This is a pillar of our market economy and of the free competition. However, this freedom is not absolute. To preserve fair competition and protect both consumers and the companies themselves (particularly the smallest), the law prohibits certain pricing practices deemed destabilising or abusive.

Among the best-known and most closely monitored bans are the resale at a loss and theimposition of minimum prices. These two practices, although distinct, have a direct bearing on the pricing strategy of companies, particularly in the distribution sector. Ignoring or misinterpreting them can result in significant criminal and civil penalties. This article aims to clarify these two major prohibitions to help you set your prices legally.

Resale at a loss: a strict ban, but with exceptions

Resale at a loss is probably one of the most widely publicised and controlled commercial practices. But what exactly is it?

What is resale at a loss?

Defined in article L.442-5 of the French Commercial Code, resale at a loss means that a retailer (typically a distributor, whether wholesaler or retailer) will reselling a product "as is - i.e. without any substantial transformation - at a price lower than its effective purchase price.

Please note that this ban only applies to resale of products purchased. A manufacturer that sells products it has produced itself, or a service provider, is not subject to this specific prohibition (although it may be affected by other rules, as we shall see briefly).

How do you calculate the "effective purchase price"?

This is the key and sometimes complex point. The "threshold for resale at a loss" (SRP) is not simply the price shown on the purchase invoice. Article L.442-5 tells us that we must take :

Le net unit price shown on the purchase invoice.
Minoré of the amount of theall other financial benefits granted by the seller, expressed as a percentage of the net unit price. This includes not only standard discounts and rebates, but also remuneration for commercial cooperation services or other benefits that reduce the actual cost of acquisition for the distributor (this is sometimes referred to as the "triple net" calculation).
Major from sales taxes (VAT) specific taxes (excise duties, eco-contributions, etc.) and the cost of the transport price.

This calculation is intended to reflect the cost real for the reseller.

The higher threshold for food products (EGalim scheme)

In an attempt to better distribute value within the food chain and support farm incomes, the EGalim laws introduced an experimental measure (currently extended until 15 April 2025 by the EGalim 3 law): for foodstuffs and products intended for pet food resold as such to consumersthe resale at a loss threshold is multiplied by a coefficient of 1.10. In other words, the minimum authorised resale price is 10% higher than the effective purchase price calculated as above.

The aim of this measure is to limit the "price war" on mass-market food products, which are often used as loss leaders, and to generate additional margins for distributors, which are supposed to be passed on in part upstream to suppliers and farmers. It should be noted that certain alcoholic beverages are excluded from this mark-up.

When is resale at a loss legally permitted?

Article L.442-5 of the French Commercial Code lists a number of exceptions to the ban in principle, allowing resale below the threshold in very specific circumstances:

Alignment with the competition : Only for food products in shops of less than 300 m² and non-food products in stores of less than 1000 m². The price must be in line with that of legally practised by a competitor in the same area of activity. The conditions are very restrictive.
Cessation or change of business activity : Voluntary or forced sales in the event of liquidation.
Seasonal products : Only during the terminal the sales season (for example, selling toys at a loss in early December is generally not allowed) or between two seasons.
Old-fashioned or out-of-date products : Products that no longer meet general demand due to technical developments or fashion.
Lower replenishment : If the retailer replenishes supplies of an identical product at a lower price, he can align his selling price with this new lower effective purchase price.
Perishable products threatened by rapid deterioration : For products listed as such (fruit, vegetables, fresh meat, etc.), BUT on condition that the reduced-price offer is not subject tono advertising or announcements outside the point of sale.
Products on sale : During legal sales periods.

Apart from these limited cases, resale at a loss is prohibited.

What are the penalties?

Resale at a loss is a criminal offence. Reselling or advertising the resale of a product in its unaltered state at a price lower than its actual purchase price is punishable by a fine of up to 75 000 € for an individual (and potentially much more for a legal entity, via the multiplier mechanism). If the resale at a loss has been advertised, the fine may even be increased to half the advertising costs.

Publication of the conviction may also be ordered. In addition, competitors or suppliers who believe they have been harmed by a practice of resale at a loss may bring a civil liability action to obtain damages.

The aim of this ban is severalfold: to protect small retailers from competition deemed to be aggressive on the part of larger structures, to prevent products from being devalued by artificially low prices, and to prevent excessive pressure on suppliers.

Fixed prices: when the supplier dictates the resale price

Another major limitation on pricing freedom is the prohibition on a supplier (or any other person) imposing a minimum resale price on its distributors.

Prohibition on imposing a minimum resale price

Article L.442-6 of the French Commercial Code is very clear: it is prohibited to "impose, directly or indirectly, a minimum price on the resale price of a product or good, on the price of a service or on a trading margin".

This means that a supplier cannot dictate to its reseller the floor price at which it must sell the product to the end consumer. Distributors must remain free to set their own margins and selling prices, taking into account their own costs, commercial strategy and local competition. This prohibition applies to both products and services.

Indirect pricing methods

The ban does not just apply to the direct imposition of a price ("You must sell this product for at least €10"). It also covers all methods of indirect which lead to the same result:

Packaging financial benefits (rebates, discounts, commercial cooperation budgets) to the respect of a resale price level.
Exercising pressure or threats on distributors judged to be "too low" on price: threats to withdraw benefits, slow down deliveries, refuse to sell, or even terminate the contract.
Setting up contractual clauses which penalise distributors if they do not comply with a certain pricing policy (for example, penalty clauses linked to "call prices" interpreted extensively by the supplier).
Use the pre-labelling products with a recommended retail price, combined with monitoring and pressure to apply this price as a minimum.
Demand a prior approval of advertisements of the distributor mentioning the prices, and to refuse those which display prices judged too low.

Case law is full of examples where such practices have been penalised. The real challenge for you as a distributor is to retain your pricing autonomy.

What is still allowed: recommended prices and maximum prices

It is essential to distinguish between (prohibited) minimum prices and two other concepts:

Recommended (or guide) prices: A supplier has the right to suggest a selling price to its distributors. This practice is lawful provided that the price is genuinely indicative and that the distributor remains totally free to follow it or not, without being subject to pressure or reprisals if he chooses to charge a lower price. If the "advice" becomes a disguised requirement, we fall back into the prohibition on fixed prices.
Maximum prices : Setting a selling price ceiling On the other hand, under French law (and under certain conditions under European Union law), it is generally permitted to sell to distributors. The aim may be to guarantee an affordable price for the consumer or to ensure a consistent image for the brand.

The difference is fundamental: the price minimum imposed restricts price competition downwards, while the price maximum imposed the limit upwards.

Possible cumulative penalties

The imposition of a minimum price, like resale at a loss, is a criminal offencewhich is punishable by a fine of 15 000 € for an individual (article L.442-6 of the French Commercial Code).

But that's not all. If this practice is part of a wider framework, it can also be described as :

D'anti-competitive agreement (a vertical agreement between a supplier and its distributors to fix prices), punishable by the French Competition Authority under Article L.420-1 of the French Commercial Code (with potentially much higher fines).
D'abuse of a dominant positionif the supplier holds a dominant position on the market concerned (article L.420-2 of the French Commercial Code).

Criminal sanctions and administrative sanctions (those imposed by the Competition Authority) may be combined for the same acts.

Beyond resale at a loss and fixed prices: other prohibited pricing practices

To get the full picture, you need to know that other forms of low pricing can be punished, not under the specific offences we have just seen, but under the law on anti-competitive practices:

Predatory pricing : This involves a company (often in a dominant position) setting its prices at a very low level (generally below its variable costs) with the deliberate aim of eliminating a competitor from the market, even if this means incurring losses in the short term and then raising its prices once the competitor has been ousted. This practice is typically sanctioned as a abuse of a dominant position (Article L.420-2 of the French Commercial Code), based in particular on European case law (judgment in the Akzo).
Offering consumers unfairly low prices: Specifically targeting direct sales by producers, processors or service providers (i.e. not resale as is), article L.420-5 of the French Commercial Code prohibits abusively low prices in relation to production, processing and marketing costs, if this has the object or effect of eliminating a competitor or preventing it from entering the market.

These concepts are more complex and require in-depth economic analysis, but it is useful to know that they exist and complement the system for combating unfair pricing.

Defining a competitive pricing policy while respecting the legal framework is a delicate exercise. The prohibitions on resale at a loss and resale price maintenance are clear limits, but their practical application can raise complex issues, particularly concerning the calculation of the threshold or the identification of indirect practices. Our firm can help you validate the compliance of your pricing strategies, draft protective contractual clauses and defend you in the event of an inspection or litigation relating to these practices. Ensure the legal security of your pricing policy: contact us for a personalised diagnosis.