At the heart of commercial relations, contractual negotiation is often perceived as a power game in which the freedom of the parties is paramount. However, this freedom is not absolute. The legislator has introduced a powerful regulatory tool to punish manifest abuses: the significant imbalance, set out in article L. 442-1, I, 2° of the French Commercial Code. This concept, although complex, is an essential lever for restoring a form of fairness in relations between companies. For an overview, our file on significant imbalance in french law offers a broader perspective. This article focuses specifically on its application in the context of restrictive competition practices, an area where its implications are particularly important for managers of very small businesses.
Genesis and legal framework of the significant imbalance in competition law
The concept of significant imbalance in commercial relations was introduced by the 2008 Law on the Modernisation of the Economy (LME). Its aim was clear: to make business relations more ethical, particularly in the mass retail sector, where the buying power of certain players could lead to the imposition of contractual conditions that were particularly unfavourable to suppliers. The French Constitutional Council has approved this measure on several occasions, ruling that it did not disproportionately infringe contractual freedom and that it pursued a general interest objective.
The scope of this rule is broad. Temporally, it applies to contracts entered into or renewed since its entry into force. In territorial terms, case law has established that it is a "police law". This means that article L. 442-1 of the French Commercial Code applies to disputes brought before the French courts, even if the contract is subject to foreign law, as long as its effects are felt on the French market. This qualification protects the weaker party against an attempt to evade French law.
The perpetrator of the practice is defined as "any person engaged in production, distribution or service activities". This broad definition encompasses the majority of economic players, whether commercial companies, craftsmen or manufacturers. The victim, for its part, is simply referred to as "the other party", the Order of 24 April 2019 having removed the more restrictive reference to the "commercial partner".
Finally, it is essential to distinguish this specific regime from that which exists in ordinary law. Although article 1171 of the Civil Code also punishes significant imbalance, it applies only to contracts of adhesion, and in a different way. To explore this nuance further, it is useful to understand the differences with the concept in ordinary contract law. The Commercial Code regime therefore remains an autonomous tool, tailored to the specific nature of commercial relations.
The "submission" or "attempted submission" criterion
The mere existence of an unbalanced contract is not sufficient to characterise a restrictive practice. The text requires proof of a behavioural element: the fact of having "subjugated or attempted to subjugate" the other party. The aim is not to punish poor negotiation, but rather the imposition of a power relationship.
This notion of submission must be distinguished from related concepts. It is not synonymous with violence, which vitiates consent, or with a state of economic dependence, which implies a situation where a partner has no viable alternative. Submission is more subtly characterised by the absence of the possibility of genuinely and freely negotiating the terms of the contract. It is the impossibility of exercising any influence on the content of the agreement that makes submission a reality.
In practice, this submission is often deduced from the use of standard contracts or non-negotiable general purchasing conditions. When a distributor imposes its own contract on all its suppliers without the latter being able to discuss the terms, submission is generally established. The courts analyse this situation using the "bundle of evidence" technique. Proof can be provided by demonstrating, for example, that identical clauses are found in all the contracts of a principal, or that the supplier's general terms and conditions of sale, which should be the "sole basis for negotiation" according to the law, have been systematically disregarded. A quantitative analysis of the contracts concluded by the perpetrator of the practice with its various partners is often a decisive piece of evidence.
Assessment of significant imbalance: criteria and methods
Once the submission has been established, the judge must analyse the heart of the system: the existence of a "significant" imbalance. Not all asymmetries are sanctioned. The imbalance must reach a certain level of seriousness, substantially altering the balance of rights and obligations between the parties.
To assess this, judges often draw on criteria developed in consumer law. The absence of reciprocity is a major indicator: a clause that grants a prerogative to one party without providing for an equivalent right for the other will be suspect. The same applies to clauses that unjustifiably derogate from the suppletive rules of the Civil Code, for example in relation to the transfer of risks or warranties. The vagueness of a clause, which leaves one of the parties too wide a margin for interpretation, may also be a factor in imbalance.
A fundamental difference between ordinary law and consumer law is that the courts can review whether the price is appropriate to the service provided. Whereas the other systems exclude this, article L. 442-1 of the French Commercial Code authorises judicial review of the price, provided that it has not been freely negotiated and that it reflects a clear imbalance. This is a notable exception to the principle of price freedom in commercial relations.
The assessment method is twofold. Firstly, the judge carries out a clause-by-clause analysis to identify potentially problematic stipulations. Secondly, the judge must make an overall assessment of the economics of the contract. An unfavourable clause may be offset by another that is particularly advantageous. It is therefore up to the party who imposed the contract to prove that the overall balance is preserved, despite the existence of individually unbalanced clauses.
Case law and practical examples of significant imbalance
The opinions and recommendations of the Commission d'Examen des Pratiques Commerciales (CEPC) play an enlightening role for judges and businesses, even if they are not binding. They help to identify risky practices and guide the interpretation of legislation.
The abundance of case law has enabled us to define the outlines of the clauses that are frequently penalised. They include :
- Unilateral contract amendment clauses, which allow one party to change the rules of the game (prices, delivery conditions) without the agreement of the other.
- Disproportionate logistics penalty clauses, which heavily penalise minor failings on the part of the supplier (a slight delay in delivery, for example) without taking account of the circumstances.
- Clauses allowing the return of unsold goods without any real consideration, placing all the commercial risk on the supplier.
- Clauses providing for abnormal payment terms or obligations to finance services (commercial cooperation) without any proven economic justification.
Conversely, certain clauses are generally considered valid if they are justified and balanced. A post-contractual non-competition clause will be accepted if it is limited in time and space and proportionate to the interests to be protected. Similarly, a termination clause will not be deemed unfair if it is reciprocal or justified by the general scheme of the contract (for example, in a finance lease to amortise the cost of the asset). The judge's role is decisive here: he or she will carry out an analysis in concretoIn other words, by examining the specific facts of each case to determine whether, in the given context, a significant imbalance has actually been created.
Penalties: individual action and action by the Minister for the Economy
Disputes concerning significant imbalances are dealt with by specialised courts. Only eight commercial courts in France and the Paris Court of Appeal have jurisdiction to rule on these disputes, thus guaranteeing a degree of expertise on the part of judges.
Two types of action may be taken. Individual action, initiated by the victim of the practice, is mainly aimed at engaging the civil liability of the perpetrator of the imbalance. The victim may obtain damages to compensate for the loss suffered. Following a development in case law confirmed by the law, the victim may also seek the nullity of the unlawful clauses and restitution of the benefits unduly received.
However, the specificity of this type of litigation lies in the action taken by the Minister for the Economy (and the public prosecutor). Acting as the guardian of economic public order, he can take over a case without the victim having to lodge a complaint. This intervention is crucial because many companies fear commercial reprisals if they take action themselves. The Minister may request that the practices be discontinued for the future, that the clauses be declared null and void and that any sums unduly paid be refunded. Above all, he or she can request that a civil fine be imposed, the amount of which can be highly dissuasive, reaching up to €5 million, three times the undue advantages, or 5 % of sales in France.
Preventing and managing legal risks in commercial relations
For a company, whether it is in a strong or weak negotiating position, managing the risk of a significant imbalance is fundamental. Above all, prevention requires greater vigilance when drafting and negotiating contracts.
It is advisable to carry out a regular audit of your standard contracts and general terms and conditions of sale or purchase to ensure that they comply with case law. Each clause must be economically justified and, if possible, reciprocal. The traceability of negotiations is also a key element. Keeping written evidence of exchanges, proposals and counter-proposals means that, in the event of a dispute, it can be demonstrated that the contract was not simply "submitted", but actually discussed.
Anticipating a DGCCRF inspection or legal action means documenting the economic logic of each partnership. Why this discount clause? What is the consideration for this service obligation? Having clear, documented answers is the best defence. The support of a lawyer with expertise in contract law and competition law is essential if you are to secure your partnerships, balance your agreements and defend yourself effectively in the event of litigation.
To secure your commercial relations and defend yourself in the event of a dispute concerning a significant imbalance, our commercial law firm puts its expertise at your service.
Sources
- French Commercial Code, in particular Articles L. 442-1 et seq.
- Order no. 2019-359 of 24 April 2019 recasting Title IV of Book IV of the Commercial Code on transparency, restrictive competition practices and other prohibited practices
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