La Revue Squire

Rédigé par Guillaume Taillandier le Vendredi 20 Janvier 2006 à 15:26

The wait is over. Well, almost. It was beginning to seem that the project to issue guidelines on the control of concentrations (the "Guidelines"), which had been announced on 13 December 2002, would remain just a proposal. The Guidelines were finally published on the DGCCRF’s website last July. Although the DGCCRF (the French Competition Authority) acknowledged that a delay of two and a half years was inexcusable, it hoped to be able to explain and present the content of these Guidelines.

Following the example of the guidelines published by the European Commission and by competition authorities in the EU Member States, the Guidelines provide above all else an insight into the manner in which the DGCCRF intends to assess a merger or acquisition coming under its remit. These Guidelines present the procedure (for notification and clearance) and reiterate the requirements upon the DGCCRF to determine the risk of the creation, or strengthening, of a dominant market position and the prevention of the distortion of competition upon the market.

The Guidelines are formidable: 162 pages in all! However, the DGCCRF has thankfully inserted at the beginning of the document a succinct 16 pages summary to the Guidelines. The relevant French legislation has also been attached as an annex.

This said, the DGCCRF has deliberately taken an academic role preferring a long document with concrete examples and analysis of decisions to that of a short and dense text (as preferred by our American cousins or certain factions of the European Commission).

In a recent presentation for the journal, “Competition”, the deputy head of the DGCCRF, Madame Caroline Montalcino, stated that two important events took place from the original announcement in December 2002 which caused the delay in publication of the Guidelines: First, far more decisions have been taken by the DGCCRF than had previously been the case (600 decisions; 300 of which were in 2002). Although the relaxing of the individual threshold has led to a reduction in notifications, there are still on average 150 notifications to the DGCCRF per annum. These decisions have had to be made without an increase in budget. Many of the problems faced in these decisions are replicated in the Guidelines. Second, the adoption of the new Merger Regulation by the European Commission (Regulation 139/2004) resulted in a change to the manner in which the European Commission and the Member States are bestowed jurisdiction to assess a merger or acquisition (and may refer issues amongst themselves). The Guidelines provide numerous references to issues referred to the DGCCRF by other EU competition authorities.

A regret: the Guidelines are sadly lacking in real information on the conditions under which a merger or acquisition can be reversed (i.e. de-merger) on the basis of Article L.430-9 of the Commercial Code which outlines the possibility for the Competition Council to ask the Minister to order the dismantling of a merger or acquisition that contributes to an abuse of a dominant market position.

That said, the Guidelines are to be commended for the useful information provided in the annexes to the Guidelines, most notably on: the treatment of capital investment transactions (Annex 1); questions relative to distribution contracts (Annex 2); agricultural co-operatives (Annex 3); and questions relevant to enterprises in difficulty (Annex 4).

So the delay in publishing the Guidelines has arisen, ironically, from the constant changes and evolution of competition conditions on the market.

Droit Commercial et Economique

Rédigé par Guillaume Taillandier le Vendredi 20 Janvier 2006 à 15:24

In a judgment of 14 October 2004, the Court of Appeal of Versailles gave an interesting application of article 442-6, I, 5 of the Commercial Code in relation to an international contract for the distribution of perfume.

Article 442-6, I, 5 of the Commercial Code states: "The following acts committed by any producer, trader, manufacturer or person listed in the trade register render the perpetrator liable and entail the obligation to redress the prejudice caused: (…) Suddenly breaking off an established business relationship, even partially, without prior written notice proportionate with the duration of the business relationship and consistent with the minimum notice period determined by the multi-sector agreements in line with standard commercial practices.(...)".

The contract, which was governed by French law, was concluded between a French supplier and a Colombian distributor for an initial period of three years. It was renewable and had a three-month notice period for termination. After sixteen years the French supplier decided to terminate the contract and gave three months notice as required by the contract.

The Colombian distributor objected that there was a “sudden breach of a contract” as set out in article 442-6, I, 5 of the Commercial Code and obtained compensation for not having received sufficient notice which the court said should have been at least one year.

The court’s decision is not new. The court stated that complying with the terms of a contract may not be enough to comply with the provisions set out in article 442-6, I, 5 of the Commercial Code.

By handing down this decision, the court effectively extended the principle set out in article 442-6, I, 5 of the Commercial Code to protect a foreign distributor. The question is whether the court states that the liability is contractual or tortious. Although we do not know for sure, the court seemed to imply that the damage was suffered in France and that it was therefore appropriate to apply French law.

Contrats - Obligations - Responsabilite

Rédigé par Antoine Adeline le Vendredi 20 Janvier 2006 à 15:10

By contrast to English law where the parties, other than in very limited circumstances, have the right to break off negotiations at any point and where there is usually no right to any indemnity, French law imposes a general obligation that the parties will negotiate in good faith.


If a party is "at fault" for the breakdown of discussions and if the other party can prove resulting loss, the party at fault may be liable to pay damages to the other.
In proving fault, the French Courts rely on the notion that the parties should conduct and, where relevant, terminate negotiations in "good faith".
In considering "good faith" the Courts will, in particular, refer to:

- The duration of negotiations and the stage at which negotiations were terminated
The breakdown in negotiations is more sensitive and must in particular be justified when there have been lengthy negotiations and when a binding agreement was very likely.

The Courts consider that a party is at fault if the negotiations have been prolonged artificially when it was clear to that party that the contract would not be concluded.

The circumstances of the breakdown

The suddenness of the breakdown and the existence of aggravating circumstances are considered by the Court to be exemplary of bad faith.

It is particularly important to note that an action for "abusive breaking off of negotiations" (rupture abusive de pourparlers) is an action in tort and may arise even where an appropriately worded letter of intent has been signed and even if this is subject to another law to that of France. Whilst of course this is not a reason to dispense with such a document, caution still needs to be exercised.

Under French law compensation for loss can include direct loss (e.g. costs linked to the negotiations, such as professional fees), indirect loss (such as loss of opportunity to contract) and possibly even intangible loss (e.g. loss of goodwill or loss of reputation).

Contrats - Obligations - Responsabilite

Rédigé par Agnès Berenger le Vendredi 20 Janvier 2006 à 11:09


Rédigé par antoine adeline le Vendredi 20 Janvier 2006 à 10:41

Restructuring and Insolvency

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