Rebalancing of commercial relations between suppliers and distributors

Like the famous “Egalim 1” and “Egalim 2” statutes promulgated on October 30, 2018, and on October 18, 2021, respectively, the “Egalim 3” statute promulgated on March 30, 2023, aims to rebalance commercial relations between agri-food suppliers and large-scale distributors.

Thus, the “Egalim 3” statute intends, on the one hand, to correct the imbalance observed in the trade negotiations that take place each year, from December 1st to March 1st, between agri-food manufacturers and supermarket chains and, on the other hand, to define fair prices for the goods as well as the value of the orders and possible discounts.

As such, the scheme is intended to apply when the suppliers and the distributors fail to sign an agreement by, as expected, March 1st. This experimental scheme will be evaluated for the coming 3 years. In such a case, the supplier will have the choice between either refusing to supply the distributor if the price during the notice period is deemed too low, without incurring the risk of a sudden termination of the commercial relationship or applying a “classic” termination price that will have to consider the economic conditions of the market (for instance, the inflation rate). It should be remembered that currently, when there is no agreement after March 1st, suppliers must continue sell their goods to their distributors according to the conditions of the previous year even if their production costs have increased. Consequently, they may incur losses for several months pending a new agreement is signed.

In the event of a dispute over the conditions of the notice of termination, the Ombudsman for agricultural trade relations or the Ombudsman of companies will necessarily be informed to find a consensual solution. And if this mediation fails, the court will have to consider the recommendations of the mediator.

Tightening of sanctions against large-scale distributors

Another measure is introduced to put an end to the large-scale distributors’ condemnable practice of coercing their suppliers and avoiding the signature of the annual agreement by the deadline of March 1st. To get rid of these practices, public authorities have increased the administrative fines to a maximum of €1 million for legal entities and €200,000 for natural persons.

Note: These fines are doubled in case of the recidivism of the distributor.

Extension of the promotion framework and the increased threshold for resale at a loss

Two measures that had been introduced by the “Egalim 1” statute on October 30, 2018, to improve farmers’ incomes and which had been renewed until April 15, 2023, are extended.

First, the framework for discounts on food products in supermarkets, which cannot exceed 34% of their value and 25% in volume, is extended until April 15, 2026. And this measure will be extended, as of March 1st, 2024, to all consumer goods, including hygiene and cleaning products.

Secondly, compliance with the resale threshold at a loss plus 10%, imposed on distributors when selling food products, is extended until April 15, 2025. However, fresh fruit and vegetables are now excluded from the scheme.

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