The recent French Consumer Affairs Act, commonly called “Loi Hamon“, has been published in the Official Journal on March 18th after the French Constitutional Council (Conseil Constitutionnel) issued its final opinion.

This law creates stricter obligations for companies in both Business to Business (B2B) and Business to Consumers (B2C) relations. Also, and for the first time in France, it has implemented a “group action” procedure (action de groupe) which will enable consumer associations to seek compensation.

Here’s a quick overview of the new obligations for foreign companies doing business in France:

1-    Regarding B2B Relations:

–        The new law imposes stricter delays for company’s payment period: a single period of a maximum of 45 days as from the date of issuance of the invoice (≠ until now, it was 45 days from the end of the month or 60 days from the date of issuance of the invoice).

–        The Act has modified the “annual negotiations system” between distributors and suppliers :

  • The General Terms and Conditions of Sale of the distributor (GTC’s) shall constitute the “sole basis” for the negotiations;
  • There is now new mandatory statements in the “sole convention” to make it more transparent and to reveal imbalances if any;
  • Distributors shall disclose their GTC’s no later than 3 months before March 1st or two months before the start of the marketing period;
  • Distributors have the obligation to reply to all written and reasoned requests of the supplier about the implementation of the convention within a period of 2 months, under penalty of reporting to the administrative authority;
  • It is now mandatory to sign new agency agreements (Nouveaux Instruments Promotionnels) clearly defining each promotional advantages which the supplier undertakes to grant consumers during the year;
  • There is a clear prohibition on any additional requests seeking to unfairly maintain or increase margins or profitability;
  • For all companies certifying their annual financial statements by a statutory auditor, it is now mandatory to publish information about their suppliers and consumers’ payment period.

–        The Act has also modified the list of “restrictive practices” detailed in Article 442-6 of the French commercial code, adding :

  • margin guarantee;
  • Invoicing an order for products or services at a different price from the price agreed.

–        Finally, the law has modified subcontracting relations:

The signature of a written binding convention is required for all purchases of manufactured products made at the request of the buyer and to be integrated into its own production when the amount is above a threshold set by decree.

2-    Concerning B2C Relations:

–        For the first time in a French Act, the “Loi Hamon” introduces a definition of the  “consumer” as any individual acting for any purposes which do not fall within the scope of his trade, business, hand-made or self-employed activity.

–        The new law has also imposed stricter obligations of information upon goods sellers and services providers: pre-contractual information, delivery conditions and deadlines, reimbursement conditions…

–        It has almost entirely redefined on-line trade regulations :

  • Stricter pre-contractual and post-payment information;
  • New rules concerning the right of withdrawal (from 7 to 14 days, new conditions to send back the goods…);
  • New delivery deadlines;
  • New rules concerning customer’s reimbursement.

–        It has imposed new mandatory statements in the GTC on goods sellers or services providers:

  • Legal guarantee of compliance;
  • Legal guarantee of hidden defects;
  • Sellers’ conventional guarantee, if any.

–        Lastly,  the legislator has reinforced sanctions concerning unfair terms:

  • The judge must automatically dismiss an unfair term;
  • The judge can extend its ruling to all conventions concluded by the same professional with consumers.

 

3-    The New “Group Action” Procedure:

This new “group action” is quite restricted and cannot be compared to US class action. Indeed, this type of action can only be brought by consumers’ associations for the harm suffered by consumers and anti-competitive practices.

However, companies should seriously consider it as it could constitute an easy way for consumers (and even competitors) to challenge them and make them abide with their statutory or contractual obligations.

 

Now, and given the fact that this new regulation imposes stricter rules for companies doing business in France, we would advise you to start reorganising your legal documents and trade practices as soon as possible and no later than July 1st 2014 as prescribed by the Act.

Benoît LAFOURCADE

Co-Founder, Partner & Solicitor -
International Corporate Law & Litigation

Benoît, Delcade’s co-founder, is a Paris Bar lawyer and UK Solicitor (London).

Advisor for various embassies, working closely with the firm's team, Benoît offers his services to French and foreign companies requiring cross-cutting strategic and legal support in business law.

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