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Use of the civil fine to punish the abrupt termination of a long-standing business relationship

07/07/2017

In October 2016, following a judicial saga comprising no fewer than six judgements, two companies in the Carrefour group were ordered to pay a civil fine of €100,000 for partial termination of an established business relationship with a service provider (Cass. com., 18 October 2016, no. 15-13.834).

In this case, a commercial relationship between the two companies and one of their service providers had lasted 17 years, and Carrefour had announced its intention to end it in October 2005, giving 15 months’ notice.

The Paris Commercial Court found the notice period to be invalid since the partial termination of relationship between the Carrefour companies and their service provider in reality dated from January 2005, when the turnover generated by Carrefour with its service provider began to fall sharply. Consequently, the Carrefour companies were ordered to compensate their co-contracting party on the basis of article L.442-6 I 5° of the French Commercial Code. Nothing new so far!

The interesting point about this judicial saga lies in the involvement in the proceedings of the Minister of the Economy, Finance and Industry, who asked that the Carrefour companies be ordered to pay a civil fine for abrupt termination of a long-standing business relationship.

After much to-ing and fro-ing, the Court of Cassation approved the judgement by the Paris Court of Appeal, which had found that, despite the moderate seriousness and limited impact of the unlawful practice in question, the amount of the civil fine pronounced against Carrefour needed to take account of the high level of turnover of the Carrefour companies and the knock-on effect which the behaviour of companies of a similar size and with similar renown could have on other economic players.

This case is unprecedented in revealing our Government's desire to reinforce, by means of civil fines, penalties against large companies found to have breached economic laws contained in the French Commercial Code (on this point, see our article "Confirmation of the judgement against a mass distribution operator for significant imbalance in contracts concluded with suppliers" in this newsletter). The increase from €2 million to €5 million—implemented by the "Sapin II" law of 9 December 2016—in the cap on civil fines which can be handed down in cases of abrupt termination of a long-standing business relationship is also part of this approach (for more on this see our Competition newsflash: "Sapin II law - Business relationship aspects").

Authors

Picture of Aliénor Fèvre
Aliénor Fevre
Associate
Paris
Stéphanie de Giovanni