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07 April 2015
The National Assembly recently adopted a new bill on growth and business, known as the 'Macron Bill' after the minister of economy. The law – which has been the subject of heated debate in recent months over issues such as Sunday trading and the deregulation of certain legal professions – is a long, catch-all piece of legislation. As is often the case in the French parliamentary process, this kind of text often presents last-minute surprises as some members of Parliament (MPs) attempt to use the opportunity of a general text to incorporate new provisions, which may have little to do with the government's original intention and may have a serious impact on businesses.
In regard to the Macron Bill, one such surprise related to distribution networks. An MP from the ruling Socialist Party put forward an amendment in the bill adopted by the National Assembly which, if included in the final act, may materially affect relationships between franchisors and franchisees.
The scope of the amendment relates to non-integrated retail shops operating under a third-party brand where the head of the distribution network requires exclusivity or quasi-exclusivity. Although franchising is not specifically mentioned in the bill, there is no doubt that it is covered.
The main provisions introduced by the amendment are as follows:
The parliamentary amendment follows on from an important Competition Authority decision of December 7 2010 concerning food retail distribution. In France, this sector is highly concentrated as the six major retail brands (Carrefour, Auchan, Casino, Leclerc, Intermarché and Système U) account for 85% of the market. It is evenly split between two models:
Due to the structure of the market, the Competition Authority highlighted the need to strengthen competition between retail brands by removing certain restrictions on the owners of independent sale outlets (operating as franchisees or licensees) preventing them from leaving a network. This particularly applied to:
The Competition Authority concluded that such restrictions had the effect of unduly locking the franchisees for a long time into a particular brand and prevented the entry of new actors on the food retail distribution market.
The parliamentary amendment, which received strong support from franchisees' organisations and other types of independent merchant, is causing both irritation and uncertainty for the heads of distribution networks.
The arguments put forward by the cooperative trade associations revolve around the deterring effect that the Macron Bill could have on common investments; they argue that if there is no longer any guarantee of durability between the cooperative and its members, there will be no interest in making long-term investments, such as the creation of logistics centres for the benefit of members and, ultimately, consumers. Leclerc and its cooperative colleagues also point out that eventually they will lose significant market shares to the integrated brands, such as Carrefour and Auchan, which will have less difficulty in obtaining third-party financing.
The Franchising Federation has stated that a complete ban on post-contractual non-compete clauses contradicts the rationale of becoming a franchisee. Non-compete clauses are there to protect the know-how developed by the franchisor and used by the franchisees. If a party can use a franchisor's know-how even after it has ceased being a franchisee, what is the point of remaining a franchisee, and why should the franchisor update its know-how?
Whatever their background, most critics argue that the special features identified by the Competition Authority in the food retail sector are not applicable in other markets. Further, a de minimis test should apply even in some concentrated sectors. The minister of economy recently said that a turnover threshold of €50 million could be contemplated for the application of such new provisions.
Before becoming law, the Macron Bill must still be approved by the Senate before returning to the National Assembly, which has the final say. In the meantime, it is likely that the bill's opponents will exert pressure on the government to remove such provisions, or at least significantly reduce their scope.
For further information on this topic please contact Raphael Mellerio at Aramis Law Firm by telephone (+33 1 53 30 7700) or email (email@example.com). The Aramis Law Firm website can be accessed at www.aramis-law.com.
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