Abuse of economic dependence is prohibited by the second paragraph of Article L. 420-2 of the French Commercial Code, but on one condition many businesses discover too late: the abuse must be capable of affecting the functioning or structure of competition, not merely harm the victim. This is why most viable cases today are argued under Article L. 442-1 instead, which does not require that showing and opens the door to voiding the clauses, restitution of undue advantages, and a civil fine of up to five percent of French turnover.
An equipment manufacturer generates 68% of its turnover with a single client, and has done so for eleven years. This year, the client demands a 9% discount outside any contract, imposes a new grid of logistics penalties, puts the entire contract back out to tender for the third time in eighteen months, and hints that renewal will depend on the supplier’s flexibility. The director senses being taken advantage of, but does not know whether it is unlawful, who to turn to, or what the risks of acting are. Those are the three right questions, and the answer differs depending on which legal basis is chosen.
What Article L. 420-2 actually says
The second paragraph of Article L. 420-2 of the Commercial Code prohibits, provided it is capable of affecting the functioning or structure of competition, the abusive exploitation by a business or group of businesses of the state of economic dependence in which a client or supplier business finds itself. The text cites as examples refusal to sell, tied sales, discriminatory practices covered by Articles L. 442-1 to L. 442-3, and range agreements.
Two elements must therefore be present, and they are of a different nature. First, a state of economic dependence, which is a factual situation. Second, an abusive exploitation of that situation, and that abuse must go beyond the mere harm caused to the victim and affect the market. It is this second condition, known as the effect on competition, that explains the very small number of successful rulings on this basis over the past twenty years. The Competition Authority is not there to arbitrate a bilateral balance of power, but to protect competition itself.
The four indicators of a state of dependence
Case law and legal commentary assess dependence from a set of indicators, traditionally summarised in four points: the notoriety of the brand or partner, the weight of its share in the dependent business’s turnover, its market share in the sector concerned, and above all the absence of an equivalent alternative for the dependent business. This last criterion, the only one whose central importance is undisputed, is the one that defeats most cases.
A high share of turnover is not enough on its own. If the supplier had the option to diversify its customer base and chose not to for its own business reasons, it is not in a state of dependence within the meaning of the text. Conversely, a supplier that had to make investments dedicated to the client’s request, obtained a specific approval, or had its production tool configured to specifications unique to that client, does demonstrate the absence of an alternative. The difference lies in the documents: emails demanding investment, specifications, supplier audit plans, minutes of performance reviews. These documents almost always exist, but no one archived them with this purpose in mind.
Why Article L. 442-1 is often the better route
Article L. 442-1 of the Commercial Code makes the offending party liable, with no need to show an effect on competition, in six situations: obtaining or attempting to obtain an advantage with no consideration or manifestly disproportionate to it, subjecting or attempting to subject a partner to obligations creating a significant imbalance, imposing logistics penalties that do not comply with Article L. 441-17, applying discriminatory conditions not justified by real consideration, failing to negotiate in good faith, and subjecting a partner to competitive tender or bidding procedures whose frequency or terms create a significant imbalance.
This sixth case, introduced recently, targets directly a practice that was until now difficult to sanction: permanently re-opening competition in a way that wears the supplier down without ever amounting to a formal termination. The second paragraph of section II of the same article also addresses substantial cuts in order volumes, which practice previously had to approach through the detour of partial sudden termination. These two additions change litigation strategy in industrial subcontracting and distribution relationships.
What can actually be obtained
On the basis of Article L. 442-1, Article L. 442-4 allows anyone with a legitimate interest to bring a claim before the competent civil or commercial court to stop the practice and obtain compensation. Only the victim can have unlawful clauses or contracts declared void and claim restitution of undue advantages. The minister responsible for the economy and the public prosecutor also have the power to seek a civil fine, the amount of which cannot exceed the highest of three caps: five million euros, three times the amount of the advantages wrongly obtained, or five percent of the pre-tax turnover generated in France by the offending party. The court systematically orders publication or display of its decision.
On the basis of Article L. 420-2, the route is that of referring the matter to the Competition Authority. Under Article L. 464-2, the financial penalty can reach ten percent of the highest worldwide pre-tax turnover achieved in any financial year closed since the year preceding the practices. The Authority can also impose structural or behavioural corrective measures, accept commitments, and order interim measures. But it can also reject the referral, in particular where the facts are not supported by sufficiently convincing evidence or it does not consider them a priority, under Article L. 462-8. A poorly substantiated referral costs eighteen months for nothing.
Limitation and jurisdiction: two costly mistakes
Before the Competition Authority, Article L. 462-7 bars a referral concerning facts more than five years old if no act aimed at investigating, establishing or sanctioning them has occurred. Any investigative act by the Authority, by a national authority of another member state, or by the European Commission interrupts this limitation period, as does that of the civil claim for compensation. A supplier who waits for the outcome of proceedings before the Authority before bringing a claim for compensation is therefore not necessarily out of time, but this needs to be checked with the documents in hand.
On jurisdiction, claims based on Article L. 442-1 fall within a restricted list of specially designated courts, sixteen at first instance, with appeals centralised before the Paris Court of Appeal alone. Filing by reflex with the commercial court of the registered office leads to the claim being dismissed, on a basis debated between inadmissibility and lack of exclusive jurisdiction. Either way, the result is the same for the claimant: several months lost. This is one of the most frequent mistakes in cases brought without specialist advice.
Building the evidence before writing the first letter
A case of economic dependence or significant imbalance is won on the documents, and those documents are gathered during the relationship, not after termination. What needs to be assembled falls into a few categories: a figures-based timeline of the partner’s share of turnover over five financial years, investments made at its request with supporting documentation, minutes of annual negotiations and successive versions of the terms imposed, emails in which no consideration is identified for the advantage demanded, the history of tenders and repeated re-opening of competition, and finally documented attempts at diversification that came to nothing.
Where the decisive documents are held by the other party, Article 145 of the Code of Civil Procedure allows an investigative measure to be obtained before any trial, on application or in urgent proceedings, where there is a legitimate reason to preserve or establish evidence of facts on which the outcome of the dispute may depend. It is a powerful tool, but one that must be prepared carefully: an application drafted too broadly gets set aside, and having it set aside destroys the element of surprise for good.
Acting without destroying the business relationship
A director’s first fear is not legal, it is commercial: acting risks losing the client. That fear is legitimate, but it often leads to letting the situation deteriorate until the relationship is lost anyway, and limitation has already eaten into the first five years of grievances.
There are intermediate options. A legally well-constructed letter that sets out the facts and their legal characterisation without announcing a lawsuit often changes the purchasing department’s behaviour, especially since the systematic publication of decisions provided for by Article L. 442-4 is a real reputational risk. Business mediation also offers a confidential and free framework. And where termination has already been decided by the dominant party, the question is no longer preserving the relationship but obtaining notice and compensation, ground on which the balance of power shifts.
What the firm does
The work begins with a qualification audit: does the situation fall under economic dependence within the meaning of Article L. 420-2, significant imbalance under Article L. 442-1, an advantage with no consideration, partial sudden termination, or several of these grounds at once. That choice drives everything else, including which court has jurisdiction and the time limit to act. Next comes building the evidence file, calculating the loss, then the strategy: a detailed letter, referring the matter to the DGCCRF, mediation, an evidentiary measure under Article 145, a claim before the specialised court, or a referral to the Competition Authority. The firm also acts in defence, for businesses facing a claim or an investigation.
Where the dominant partner is established abroad, this ground combines with sudden termination of the relationship.
Do you depend on a client that toughens its terms year after year, or are you being accused on this basis? The firm assesses the situation and calculates the case before any step is taken. Get your situation assessed.
Further reading: Limitation of liability and penalty clauses in France: what the courts strike out or reduce; Unfair competition, disparagement and free-riding in France: proving fault and quantifying loss; Annual trade negotiations in France and significant imbalance: the rules of the game; Abuse of economic dependence: the six points that decide whether the text finally has teeth.
Frequently asked questions
Is a 70% share of turnover enough to establish economic dependence?
No. Case law requires a set of indicators: the partner’s notoriety, its share of turnover, its market share, and above all the absence of an equivalent alternative. A supplier that could have diversified its customer base and chose not to for its own business reasons is not in a state of dependence within the meaning of the second paragraph of Article L. 420-2 of the Commercial Code, whatever the percentage.
Why are there so few convictions for abuse of economic dependence?
Because the second paragraph of Article L. 420-2 of the Commercial Code only prohibits the abuse if it is capable of affecting the functioning or structure of competition. It is not enough to show that the victim suffered harm. This is why most viable cases are argued on the basis of Article L. 442-1, which does not require that showing.
Are repeated tenders and bidding rounds sanctionable?
Yes, now expressly so. Point 6 of section I of Article L. 442-1 of the Commercial Code covers subjecting a business partner to competitive tender or bidding procedures whose frequency or terms are liable to create a significant imbalance in the parties’ rights and obligations.
Which court should the claim be filed with?
Not the court of the registered office by default. Claims based on Article L. 442-1 of the Commercial Code fall within a list of sixteen specially designated courts at first instance, with appeals centralised before the Paris Court of Appeal alone. Filing with a court that is not designated leads to the claim being dismissed, on a basis whose characterisation remains debated, and loses several months.
What is the time limit to act?
Before the Competition Authority, Article L. 462-7 of the Commercial Code bars a referral concerning facts more than five years old in the absence of an interrupting act. For the civil claim for compensation, the ordinary five-year time limit applies, with a starting point that is debated depending on whether the practices are one-off or continuous. This needs to be checked with the documents in hand, since it determines the extent of what can still be claimed.
To go further: sudden termination of a commercial relationship, debt recovery and commercial litigation, practical guide on abuse of economic dependence, business law.
Written by Hervé Guyader, member of the Paris Bar, doctor of law. This content is general information and does not replace legal consultation.