Commercial negotiations 2025 in France: on your marks, get set, go!

published on 28 October 2024 | reading time approx. 6 minutes

After an emotional summer with the Olympic and Paralympic Games, the time has come to kick off trade negotiations in industry-trade relations. To help you prepare for these negotiations, we would like to take a look at the applicable legal rules, which everyone agrees are too complex. Below our first answers to the most frequently asked questions.

Which agreement should I sign with my customer? »
I have heard about the EGAlim law. What are the criteria for its application? »
What are the main obligations under the EGAlim law? »
When and when do I need an independent third party? Who is this third party? »
Are there any penalties for non-compliance with the rules applicable to commercial negotiations? »
I sell private label products: am I affected by the timetable for trade negotiations? And by the EGAlim law? »

Which agreement should I sign with my customer?

The law applicable to commercial negotiations enshrines the obligation to conclude a single agreement before 1 March for a period of one, two or three years, to formalize commercial negotiations relating to products marketed by the supplier.

This contract may take the form of a single document or a framework agreement, with additional application contracts. In practice, these contracts are called “single agreements” or “summary agreements”.

For the marketing of products under the supplier's own brand (as opposed to products sold under private label), the content of the agreement to be concluded will depend on the goods or services concerned, and must follow the formalism of one of the following agreements:

a basic summary contract between a supplier and a distributor or service provider
a summary contract specific to fast-moving consumer goods (produits de grande consummation) (FMCG), between a supplier of FMCG (excluding food products) and a distributor or service provider
a summary contract specific to relations with a wholesaler
a summary contract specific to food products, between a supplier of food products and products intended for pet food, and a distributor or buyer

For future negotiations in 2025, suppliers will have to communicate their General Terms and Conditions (GTC), which will form the sole basis for commercial negotiations:

before 1 December 2024, if it markets FMCG products
within a reasonable timeframe before 1 March, if it markets products that are not FMCG products

These negotiations will have to be concluded with the signing of an agreement before the deadline of 1 March 2025 (a return to the classic system that existed prior to the law of 17 November 2023, which brought forward the deadline in the hope that consumers would benefit as soon as possible from lower prices following deflation in certain agricultural raw materials).

I have heard about the EGAlim law. What are the criteria for its application?

The so-called "EGAlim" law, enhanced by the "EGAlim 1" law of 30 October 2018, the "EGAlim 2" law of 18 October 2021 and the "EGAlim 3" law of 30 March 2023, covers the entire production and marketing chain, from the "upstream" relations between the producer and his first buyer to the "downstream" relations, between the supplier and the buyers or distributors of agricultural and food products or products intended for pet food.

The EGAlim law created specific obligations for suppliers of agricultural and food products, with the aim of protecting farmers' remuneration and improving the balance of commercial relations in the agricultural and food sector.

In principle, the EGAlim law is applicable whenever a supplier markets agricultural or food products on French territory, but beyond this 'territorial' criterion, suppliers of agricultural or food products in France will have to examine more closely whether certain specific obligations under the EGAlim law apply to them, such as the obligation to disclose the price of agricultural raw materials.

What are the main obligations under the EGAlim law?

If the EGAlim law is applied to a commercial relationship in question, the supplier of food products or products intended for pet food will be subject to the following obligations in particular and will have to adapt its GTC accordingly:

Transparency obligation for the price of the agricultural raw material (matière première agricole), under certain conditions and in particular if the product concerned is not excluded by decree, the supplier will have to present one of the following three transparency options in its GTC: (i) presentation of the share of each agricultural raw material, (ii) presentation of the aggregate share of agricultural raw materials or (iii) in the event of changes in the supplier's price compared with the previous year, recourse to an independent third party. It is this transparency requirement that ensures the non-negotiability (or sanctuarisation) of the proportion of the supplier's price corresponding to the cost of the agricultural raw materials contained in the food product concerned.
Obligation to mention the indicators relating to the agricultural raw materials taken into account in determining the price of the product.
Obligation to include an automatic price revision clause based on changes in the cost of the agricultural raw materials used in the composition of food products.
Obligation to provide for a price renegotiation clause, if the product concerned has not been excluded from the scheme by decree, in order to take account of fluctuations, whether upwards or downwards, in the prices of agricultural raw materials, energy, transport and materials used in the composition of packaging, which would significantly affect the price of the products. However, prior verification of the application of this obligation to the products concerned will be necessary, as certain agricultural and food products were last excluded from the scheme by an order dated 15 February 2024.

Lastly, the EGAlim law provided a framework for the system of logistics penalties imposed by a distributor on a supplier, which was last strengthened by the EGAlim 3 Act. We refer our readers to our previous article for more information on the main contributions of the EGAlim 3 law on the above-mentioned subjects.

When and when do I need an independent third party? Who is this third party?

Under transparency option No. 3, recourse to an independent third party is only possible in the event of a change in the supplier's tariff compared with the previous year, so this option should be excluded if this is a first commercial negotiation. Where applicable, the GTC provide for the intervention, at the supplier's expense, of an independent third party responsible for certifying (i) upstream of the negotiation to attest to the proportion of the change in the supplier's tariff that results from the change in the price of agricultural raw materials and (ii) downstream of the negotiation to attest that the negotiation did not relate to the proportion of the change in the supplier's tariff that results from the change in the price of agricultural raw material.

The independent third party could be a statutory auditor, as indicated in the technical opinion of the Compagnie Nationale des Commissaires aux Comptes (CNCC) on this subject, relaying the indications of the Ministry of Agriculture, or a chartered accountant.

Are there any penalties for non-compliance with the rules applicable to commercial negotiations?

The Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes (DGCCRF) (an administrative authority with the power to impose administrative fines) and the Minister for the Economy scrupulously monitor compliance with the regulations applicable to commercial negotiations, and have no hesitation in imposing high administrative penalties or taking legal action against companies that fail to comply with these regulations.

This summer, the DGCCRF imposed an administrative fine of 38,067,000 euros on Eurelec Trading SCRL, the Belgium-based international purchasing group of which E.Leclerc is a member, for failing to meet the deadline for signing contracts with 62 suppliers based in France.

I sell private label products: am I affected by the timetable for trade negotiations? And by the EGAlim law?

A specific agreement must be signed between a supplier and a distributor covering the design and production of food products in a way that meets the specific needs of the buyer and is sold under a private label, regardless of the nature of the product (food or non-food).

This agreement must comply with certain specific rules. However, it is not subject to the commercial negotiation timetable applicable to summary agreements (so the deadline of 1er March does not apply). On the other hand, the private label summary agreement is subject to a number of obligations arising from the EGAlim law, in particular the application of the principle of non-negotiability of the agricultural raw materials of the private label products concerned, the obligation to mention the indicators relating to the agricultural raw materials and the obligation to include a clause for the automatic revision of prices according to the variation in the cost of the agricultural raw materials.

While some readers may find the EGAlim laws, and more generally the law applicable to trade negotiations, difficult to understand, it should also be remembered that this law pursues an ambitious objective, namely to improve the balance of trade relations between farmers, manufacturers and distributors, which are often undermined by the buying power of certain economic operators.

This is why the regulations applicable to commercial negotiations are being reformed in fits and starts (EGAlim 1, 2, 3) and why a government mission was entrusted in February 2024 to former MPs Anne-Laure Babault and Alexis Izard, resulting in the submission of a report containing 27 proposals on 10 October last. These proposals include introducing an upstream deadline (so that upstream contracts are concluded before downstream contracts), introducing a rolling deadline three months after the supplier sends its GTC, and requiring suppliers to indicate to professional buyers whether or not the agricultural raw materials is of French origin.

It remains to be seen how this report will be used and whether it will have an impact on future trade negotiations.

In this context, anticipation is the key to success, which requires:

identifying the legal framework applicable to your products,
and, if necessary, reviewing your general terms and conditions of sale so that you can communicate them to your customers within the legal deadlines.