Doing Business in France: The Commercial Rules That Catch Foreign Companies Out

Companies from the United States, the United Kingdom and Australia arrive in France with a reasonable assumption: that a signed commercial contract, freely negotiated between two sophisticated businesses, means what it says and will be enforced on its terms. For most of the contract, that assumption holds. France is a freedom-of-contract jurisdiction, and its courts do not rewrite bargains merely because one side made a bad deal. But layered on top of that freedom is a body of mandatory business-to-business rules that has no clean equivalent in the common-law world, and that operates whether or not the parties agreed to it — indeed, often precisely because they did not.

These rules live in Title IV, Book IV of the Commercial Code, under the heading pratiques restrictives de concurrence — literally "restrictive practices of competition," though the label is misleading to English ears. They are not really antitrust rules about market power. They are fair-dealing rules about how one business may treat another: how you must end a long relationship, what one-sided clauses you may impose, what you may demand payment for, whether you can control a distributor's resale price, and whether you may sell below cost. They are backed by damages, by nullity of the offending clause, by a public authority that can act on its own initiative, and by a civil fine that reaches into the millions.

The purpose of this guide is orientation. It is the hub of a cluster of detailed articles, each devoted to one rule. Here we set out why France polices commercial dealing the way it does, walk through the six rules that most often catch foreign companies out, explain the transparency backdrop of the conditions générales de vente, address the question that matters most to an international operator — whether any of this applies when the contract chooses foreign law — and close with a practical pre-contract checklist. Each rule is summarised in plain English and then linked to its dedicated analysis, where the statutory text, the controlling case law and the numbers are set out in full.

Why is France different — and what is this "floor" of public order?

The starting point in France is the same as anywhere: parties are free to contract. Under the Civil Code, agreements lawfully formed take the place of law for those who make them, and a court will not release a business from a hard bargain simply because it turned out badly. What is distinctive is the floor beneath that freedom. Certain conduct between businesses is treated as contrary to public order (ordre public), meaning the parties cannot validly agree to it, cannot waive the protection, and cannot cure the problem by a well-drafted clause. Where a rule is of public order, the contract is the beginning of the analysis, not the end of it.

This floor is not consumer protection. The rules discussed here apply between professionals — a supplier and a distributor, a manufacturer and a buyer, a principal and an agent — and several of them are at their most aggressive precisely in dealings between large and powerful commercial parties. The animating idea is that a market functions fairly only if economically stronger operators cannot use their leverage to impose abusive terms, extract value for nothing, cut off partners without warning, or distort prices. The French legislature has decided that policing these behaviours is a matter of general economic interest, not merely a private matter for the parties to sort out between themselves.

Three consequences flow from the public-order character, and they recur throughout this guide. First, a clause that offends the rule is void, and in some cases its nullity can bring down the whole contract. Second, liability is frequently delictual — that is, it arises by operation of law rather than as a term of the contract — which changes which court hears the dispute and which law governs it. Third, a public authority can pursue the matter independently of the victim, seeking cessation of the practice, restitution and a civil fine, whether or not any private party complains. For a foreign company used to thinking of commercial disputes as private contests between the parties, this last feature is the most unfamiliar of all.

The map: six rules, at a glance

The table below is the overview. Each row names one rule, states in plain terms what it protects against, points to the dedicated article, and flags the practical risk it creates for a foreign operator. The sections that follow expand each row in turn. Read the table first; it is the fastest way to locate the rule that matters to your situation.

A seventh strand runs beneath all of these: the transparency regime of the conditions générales de vente (general terms and conditions of sale) under Article L 441-1, treated in its own section below. It is not a prohibition but a framework — the mandatory scaffolding on which French B2B pricing and negotiation are built — and it is the backdrop against which the six rules operate.

Rule one: you cannot end an established relationship abruptly

This is the rule that surprises foreign operators most consistently, and it is worth stating precisely, because it is easy to misunderstand. French law does not stop you from ending a commercial relationship. You may terminate, with or without a reason, and a fixed-term contract may simply expire. What Article L 442-1, II of the Commercial Code polices is the manner of the ending. A party that breaks off an established commercial relationship — even partially — without giving written notice proportionate to how long the relationship has lasted commits a civil wrong and must pay for the loss the missing notice caused.

Two features give the rule its bite. It attaches to the relationship, not to any contract, so it protects a stable course of dealing even where nothing was ever signed: "we had no written contract" is not a defence. And your contractual notice period is a floor, not a safe harbour — a clause giving three months' notice will not save the abrupt end of a twenty-year exclusive supply relationship if a court considers a longer notice was owed. Since a 2019 reform, granting a written notice of eighteen months puts you beyond reproach on the question of duration, but for most relationships a far shorter, proportionate notice is what the law actually requires. The damages are, in essence, the margin the terminated party would have earned over the notice it should have received but did not.

The mirror image matters just as much. Foreign companies that have been cut off by a French supplier or customer routinely assume they must simply absorb the loss. Frequently they need not: if the relationship was established and was severed without sufficient notice, they have a claim — and, as explained further below, they can often bring it in France even under a foreign-law contract.

Rule two: one-sided contract terms can be struck down

Common-law lawyers are accustomed to the idea that, between two businesses, a clause is a clause: if both sides signed, both sides are bound, and a court will not rescue a party from a term it agreed. France contains a general control of unfair terms between businesses that cuts across this assumption. Under Article L 442-1, I, 2° of the Commercial Code, a party that "submits or attempts to submit" a commercial partner to obligations creating a significant imbalance (déséquilibre significatif) in the parties' rights and obligations incurs liability, and the offending clause may be annulled.

Two conditions must both be met. There must be a submission — shown, above all, by the absence of any real ability to negotiate the term, so that it was in practice imposed rather than agreed. And there must be a significant imbalance — an obligation that is markedly one-sided, without a counterweight elsewhere in the contract. Clauses that recur in the case law include those that bind one party while leaving the other free, that allocate all risk to the weaker side, or that reserve unilateral rights of variation or termination without reciprocity. The concept is borrowed from consumer law, but between professionals it reaches further, extending in principle even to review of the price itself — a point the Constitutional Council has confirmed the provision is precise enough to sustain (Cons. const., 13 Jan. 2011, no. 2010-85 QPC).

The practical trap is obvious once stated. The party imposing its standard terms — often the stronger foreign supplier or platform — may find, sometimes years later, that a clause it drafted and the other side signed is declared void and that it is exposed to damages and a civil fine for having imposed it. The party asked to sign has a corresponding lever it may not realise it holds.

Rule three: you cannot be made to pay for nothing

The third rule is closely related to the second but is, in an important sense, stronger. Under Article L 442-1, I, 1° of the Commercial Code, a party that obtains — or merely tries to obtain — from its commercial partner an avantage that corresponds to no real contrepartie (consideration), or that is manifestly disproportionate to the value of the consideration actually provided, incurs liability. Unlike the significant-imbalance rule, this prohibition requires no proof of submission. Obtaining the advantage is enough. That single difference makes it a formidable tool, because the claimant need not show that anything was imposed — only that money changed hands for little or nothing in return.

The demands most often caught are familiar features of hard commercial negotiation, especially in retail supply: listing fees paid simply to be referenced by a buyer, charges for "commercial cooperation" services that were never really performed, rebates with no identifiable justification, retroactive discounts, and one-sided demands to protect the buyer's margin. In each case the question is the same: what did the paying party actually receive for its money, and was it worth anything like what it paid? Where the answer is "nothing," or "far less," the advantage is unlawful. The consequences are serious: the sums can be clawed back, damages awarded, and the same civil fine imposed as for the other Article L 442-1 wrongs.

For a foreign supplier selling into France, the lesson is that payments treated as ordinary trading terms in other markets — slotting allowances, marketing contributions, "partnership" fees — may be recoverable here if the buyer cannot point to a genuine, proportionate service behind them. For a buyer, the lesson is that aggressive demands for value without a matching counterpart are not merely bad manners; they are actionable.

Rule four: your supplier cannot dictate your resale price

A French supplier may recommend a resale price. It may not impose one. French law prohibits, in itself, imposing a minimum character — directly or indirectly — on the price at which a product is resold, on the price of a service, or on a commercial margin. What makes this rule unusually sharp is that it bites on two independent levels at once. It is a criminal contravention under Article L 442-6 of the Commercial Code (the former Article L 442-5), sanctioned whatever the actual effect on competition. And it is a restrictive agreement — an entente — under French and EU competition law, a "hardcore" vertical restraint that loses the shelter of the block exemption. An imposed-price clause is void; the practice can draw a criminal fine and, where the market is affected, competition sanctions on top.

The difficulty in practice is the line between a genuine, non-binding recommendation, which is lawful, and a recommendation that has become an imposed price, which is not. A "recommended" price policed by threats, audits, delisting, withheld rebates or the refusal to supply those who undercut it is, in substance, an imposed price, and the label the supplier attaches to it is irrelevant. Maximum resale prices and genuinely optional recommendations occupy a narrow lawful zone; minimum and fixed resale prices sit firmly outside it. There are a few specific carve-outs — the fixed price of books is the classic example — but they are exceptions that prove the rule.

For a foreign brand that controls resale prices at home through manufacturer's suggested pricing backed by commercial pressure, this is a genuine restructuring problem, not a drafting nuance. The mechanisms that maintain price discipline elsewhere are, in France, evidence of an unlawful imposed price.

Rule five: reselling below cost is a criminal offence

In France, reselling a product in the state in which it was bought, at a price below its effective purchase price, is not a commercial tactic — it is a criminal offence. The prohibition on revente à perte, codified at Article L 442-5 of the Commercial Code (the former Article L 442-2), makes the classic loss-leader promotion unlawful for retailers and distributors. That surprises operators from the United States, the United Kingdom and Australia, where below-cost selling is policed, if at all, only through predatory-pricing rules that require market power and an intention to eliminate competitors. France requires neither. The offence turns simply on whether the resale price fell below a defined floor.

That floor is the seuil de revente à perte (SRP), calculated from the purchase invoice: broadly, the net unit invoice price, reduced by the financial advantages the seller granted and increased by turnover taxes, any specific taxes on the resale and the cost of transport. Sell below that number and the offence is made out, regardless of intent or market effect. The penalty is a criminal fine — of the order of €75,000 for an individual, with the maximum raisable where a below-cost price is advertised, doubled on repeat offending, and multiplied for legal persons. There is a closed list of statutory exceptions — perishable goods threatened with spoilage, seasonal end-of-line sales, alignment on a competitor's lawful lower price, and certain others — but they are narrow and precisely conditioned, not a general licence to discount.

The rule reshapes launch and clearance strategy. A promotional plan that opens a market by selling flagship products at a loss to build traffic, entirely lawful in much of the world, exposes a French reseller to prosecution. The floor, and its handful of exceptions, must be built into pricing from the outset.

The backdrop: France's transparency regime and the CGV

Before the prohibitions, there is a framework — and understanding it makes the prohibitions easier to read. French B2B commerce is built on a mandatory transparency regime centred on the conditions générales de vente, or CGV: a supplier's general terms and conditions of sale. Under Article L 441-1 of the Commercial Code, the CGV are not boilerplate to be buried in a footer. They are, in law, the sole basis of commercial negotiation. A supplier that has established CGV must communicate them to any professional buyer who requests them; they must set out the price schedule, the discounts and rebates, and the payment terms; and the payment periods they may stipulate are capped by mandatory law.

This regime does two things at once. It forces price and terms into the open, so that a buyer knows the basis on which it is dealing and cannot later be surprised. And it supplies the reference point against which the prohibitions are measured. The significant-imbalance rule asks whether a term departs unfairly from a balanced allocation; the advantage-without-consideration rule asks whether a payment is matched by a real service; the pricing rules ask what the supplier may and may not control. In each case the CGV, and the negotiation around them, are the documentary spine of the analysis. A foreign company that treats its French terms of sale as an afterthought is not merely being untidy — it is discarding the single most important document in a future dispute.

Rule six: how it is all enforced — and why that changes the stakes

What most sharply distinguishes these rules from ordinary contract law is not their content but their enforcement. A foreign company tends to picture a commercial dispute as a private contest: the aggrieved party sues, the other defends, and if no one sues nothing happens. That picture is incomplete in France, because the fair-dealing rules are enforced on three tracks at once.

The first track is private: the victim sues for damages, for restitution of sums unduly paid, and for a declaration that the offending clause or contract is void. The second is administrative: the DGCCRF — the Directorate-General for Competition, Consumer Affairs and Fraud Prevention, France's fair-trading enforcement agency — can investigate, and after an adversarial procedure can order a business to bring itself into compliance, to stop an unlawful practice or to delete an unlawful clause, and can impose administrative penalties (drawing on Articles L 470-1 and L 444-6 of the Commercial Code). The third, and most striking to foreign eyes, is the autonomous public action under Article L 442-4: the Minister for the Economy (and the public prosecutor) may bring proceedings in their own right, seeking cessation of the practice, restitution, nullity and — above all — a civil fine. Because the Minister acts to protect the functioning of the market rather than any private interest, this action does not depend on the consent, or even the participation, of the victims; and the contract's jurisdiction, choice-of-law and arbitration clauses are unenforceable against a public authority that is not a party to it.

The civil fine is deliberately severe. It is capped at the highest of three figures: five million euros; three times the amount of the advantages unduly obtained; or 5% of the pre-tax turnover realised in France by the author of the practice (Art. L 442-4). Cases are heard, moreover, not by the ordinary commercial courts at large but by a small number of specially designated courts at first instance, with the Paris Court of Appeal exclusively competent on appeal (Art. D 442-3) — a concentration designed to produce a consistent, expert body of case law. Seising the wrong court is not a mere technicality to be cured; it can bar the action.

"But my contract says US or Australian law governs" — does that help?

This is the question that decides whether the rest of this guide matters to you, and the honest answer is: often, no, a foreign choice-of-law clause does not switch these rules off. This is the single most important cross-cutting point for international operators, and it is where confident assumptions most often go wrong.

The reason is a doctrine called the loi de police — an overriding mandatory provision. Some rules are considered so important to the organisation of the French economy that a French court will apply them regardless of the law the parties chose to govern their contract, provided the situation is sufficiently connected to France. Several of the fair-dealing rules are treated this way. The prohibition on abrupt termination, in particular, has been expressly characterised as a loi de police by the Paris Court of Appeal (CA Paris, 9 Jan. 2019, no. 18/09522), so that a clause choosing New York or English law cannot be assumed to neutralise it where the relationship is connected to France. And no choice-of-law clause binds the Minister exercising the autonomous public action, because the Minister is not a party to the contract.

Jurisdiction — which country's courts hear the dispute — is a separate question from applicable law, and it too can favour a French-connected party more than expected. Within the EU, a claim arising from a long-standing commercial relationship may be treated as contractual for jurisdiction purposes even where the relationship was never reduced to a formal contract, following the Court of Justice's ruling in Granarolo (CJEU, 14 July 2016, C-196/15). The upshot for a foreign company is sobering: structuring the contract under home law, and even providing for home-court jurisdiction, does not reliably remove either the French forum or the French mandatory standard where the commercial relationship has a real French footprint.

What surprises foreign companies most

Across years of advising US, UK and Australian operators, the same handful of reactions recur. Collecting them here is useful, because the surprise itself is the risk: a rule you do not expect is a rule you do not plan around.

• "We had no written contract, so there is nothing to sue on." Wrong for the termination rule, which protects a stable course of dealing evidenced by orders and invoices, with no contract required at all.
• "They signed it, so they are bound." Not where the clause creates a significant imbalance and was imposed rather than negotiated — signature does not immunise an abusive term.
• "We gave the contractual notice, so we are clear." The contractual notice is a floor; the law may require a longer, proportionate notice, and the difference is paid in damages.
• "Below-cost promotions are just aggressive marketing." In France they are a criminal offence for a reseller, independent of any predatory intent or market power.
• "We control resale prices at home; we can do it here." Imposing a minimum resale price is both a criminal contravention and a hardcore antitrust restraint in France.
• "No customer has complained, so there is no exposure." A public authority can act on its own initiative, without any victim, for a fine reaching millions.
• "Our contract chooses our own law, so French rules do not apply." Several of these rules are overriding mandatory provisions that apply despite a foreign governing-law clause.

None of these is exotic or rare. Each is an ordinary commercial instinct, sound in the operator's home market, that misfires in France because the French floor of public order sits exactly where the instinct expects open ground.

A pre-contract checklist for foreign companies

The rules in this guide are, for the most part, manageable in advance and painful in arrears. The following sequence captures the questions worth answering before you sign, or before you begin trading, into France.

None of these steps is onerous at the drafting stage. Each becomes far more costly, and far less within your control, once a dispute has crystallised and a public authority or a well-advised counterpart is looking at the file.

How the firm helps

Petroff Avocats advises international companies — principally from the United States, the United Kingdom and Australia — on the commercial rules examined in this guide, in English, at both the planning and the dispute stage. On the planning side, that means reviewing and drafting French-compliant general terms of sale, auditing standard contracts for significant-imbalance and advantage-without-consideration exposure, structuring pricing and distribution so that resale-price and below-cost rules are respected, and designing exit and notice arrangements that will withstand the abrupt-termination rule.

On the dispute side, it means acting for the operator that has been cut off by a French counterpart and needs to establish what it is owed, for the company facing a claim or a DGCCRF investigation, and for the party negotiating its way out of a relationship without triggering avoidable liability. Because these matters are concentrated in specialised courts and turn heavily on the documentary record, early advice — before a waiver is signed, a notice is given, or a clause is imposed — is consistently the most valuable.

The detailed articles linked throughout this guide go deeper on each rule. Where a specific situation is in play, a short review of the facts is the reliable next step.