On January 11, 2023, the French Cour de cassation partly quashed a decision of the Paris Court of Appeals. The French Cour de cassation considered that the Paris Court of Appeals had rightly held that the provisions of the French Commercial Code on practices restricting competition apply in the context of subcontracting relations, but erred in its application of these provisions.
The case involved OC résidences, a company active in the construction and sale of individual houses, and one of its subcontractors, 3J. In 2013, 3J challenged the application of a systematic 2% reduction on the price it charged to OC résidences, which was allegedly based on a French tax credit for competitiveness and employment (the “2% price decrease”). In 2017, the French Minister for the Economy intervened in support of 3J and argued that both the 2% price decrease and a 3% discount that OC résidences granted itself on 3J invoices that it paid late (the “3% discount”) infringed the provisions of Article L. 442-6, I, 1° of the French Commercial Code as applicable until March 19, 2014.
Article L. 442-6, I, 1° of the French Commercial Code prohibited companies from obtaining or attempting to obtain from a commercial partner any advantages that would not correspond to commercial services actually provided, or that would be clearly disproportionate to the value of such services.
On November 4, 2020, the Paris Court of Appeal found that the provisions of Article L. 442-6, I, 1° of the French Commercial Code were applicable to the business relations between a company and its subcontractors. However, it rejected any claim that OC résidences had breached these provisions in the case at hand, whether through the application of the 2% price decrease or the application of the 3% discount.
Appeal to the French Cour de cassation
Both the French Minister for the Economy and OC résidences appealed to the French Cour de cassation. OC résidences challenged the finding that Article L. 442-6, I, 1° of the French Commercial Code applied to subcontracting relations. It argued that the French Commercial Code provisions on practices restricting competition were not applicable on the grounds that more specific provisions already applied to subcontracting agreements to protect the “weaker” party (in practice, the French Construction and Housing Code establishes a special regime protecting construction subcontractors). The French Minister for the Economy, on the other hand, challenged the Court of Appeals’ decision in that it rejected its claims that the 2% price decrease and 3% discount infringed Article L. 442-6, I, 1° of the French Commercial Code.
Ruling of the French Cour de cassation
In its ruling, the French Cour de cassation partially quashed the decision of the Paris Court of Appeals. First the French Cour de cassation rejected OC résidences’ appeal and confirmed the Court of Appeals’ conclusion that Article L. 442-6, I, 1° of the French Commercial Code applied to the relations between OC résidences and 3J. The Court found that because this Article was not contrary to the provisions in the French Construction and Housing Code, it was applicable to relations between an undertaking and its subcontractors. This means that the law governing practices restricting competition does apply to subcontracting relations insofar as it does not contradict more specific applicable legal provisions.
Second, the French Cour de cassation annulled the part of the Court of Appeals’ decision on the interpretation of former Article L. 442-6, I, 1° of the French Commercial Code. It held that, given that the price had not been freely negotiated, the Court of Appeals had erred in law by finding such provisions could not apply in the absence of significant imbalance in the parties’ obligation. According to the French Cour de cassation, Article L. 442-6, I, 1° only required that one of the parties had obtained or attempted to obtain an advantage which did not correspond to a service effectively rendered or that was disproportionally high. The nature of such advantage was irrelevant, and therefore Article L. 442-6, I, 1° was applicable to the 2% price increase.
As regards the 3% discount, the French Cour de cassation found that the Court of Appeals had breached its procedural obligation to provide reasons for its decision because it had failed to assess the relevant evidence submitted by the French Minister for the Economy. Accordingly, the case was remanded to the Paris Court of Appeals.
 This provision was amended by a law of March 17, 2014 and subsequent laws and no longer exists.