Abusive clauses between professionals: take action!

October 5th 2017

Many suppliers assume the burden of their commercial partners (especially when it involves central purchasing warehouses) by accepting unlawful clauses between professionals or commercial conditions which involve unreciprocal commitments or which create a significant imbalance which may result in an inextricable financial situation for a company.

Given such actions, a supplier, regardless of its size and level of dependence, should respond, as he is protected by the law.

1. What clauses may be considered unlawful?

Concerning the form, it may involve, for example, commissions, retrocessions or end-of-year rebates, which often remain unnoticed in a framework agreement, general conditions or a commercial partnership agreement.

These commercial conditions, imposed or firmly negotiated, firstly result in a lower profit margin, which shall then seriously affect the company’s cash flow, organization and financial situation.

They are generally the result of the following situations:

  • an economic dependency of the supplier or the distributor, who has no other choice than to accept such unfavorable conditions;
  • inaccuracy in the agreement set by the commercial partner which stipulates general obligations which are so general that they are, in reality, inexistent.

The French Commercial Code protects suppliers when they are confronted with such aggressive practices. It is expressly prohibited from:

Obtaining or trying to obtain a benefit which does not correspond to any commercial service actually rendered from a commercial partner, or which is clearly disproportionate with regard to the service rendered”, i.e., an unreciprocal benefit,

and

From committing or attempting to have a commercial partner commit to obligations creating a significant imbalance in the partiesrights and obligations[1].

Remunerated services should be verified to check that they are reciprocal.

2. Action to be taken against unlawful clauses between professionals?

A company which considers that it has been subject to an unreciprocal benefit or a significant imbalance from a commercial partner (or with central purchasing warehouse) must respond and take action.

It may:

  • Refer the matter to the company mediator;
  • Take court action:
    • to establish the commercial partner’s liability for these practices prohibited by the law;
    • to obtain the invalidity of the unlawful practices;
    • obtain judicial control on the prices, if they have not been freely negotiated, to decide whether or not there is a disproportion in the parties’ obligations;
    • obtain the indemnification for its prejudice.
  • Inform the Minister for the Economy who may intervene in the proceedings to support the aggrieved company’s claim and even request the payment of a civil fine in addition to the compensation of the prejudice.

Prior to initiating any action, of any kind whatsoever, agreements, relations, business practice should be analyzed, and it is in light of these elements that the action strategy may be envisaged. Depending on the partner’s economic and financial status, the negotiation or litigation must be prepared accordingly.

Valérie Nicod  et Elodie Tournier