Yearly convention
Our distribution network experts present the key points to know about the Yearly Convention
The formalization of the commercial relationship between the supplier and the distributor
For the purposes of transparency – particularly in terms of pricing – and balance in their commercial relationships, suppliers and distributors are obliged to formalize the terms of their commercial relationship in writing before March, 1st of each year.
Concluded for a period of 1, 2 or 3 years, this written agreement, known as an “yearly convention”, shall formalize all the reciprocal obligations of the parties with a view to distribute the products.
The content of the yearly convention
The French Commercial Code specifies the elements that must be included in the annual convention:
- The terms applicable to the sales of products, including any price reductions and discounts the supplier may have had (such as year-end discounts and rebates);
- Commercial cooperation services that the distributor provides to the supplier in order to promote the marketing of the products (such as displaying the supplier’s products at the top of the shelf)
- “other obligations” to promote the commercial relationship between the parties.
There are also additional obligations for so-called widely-consumed product.
Thus, annual distribution agreements on such products must mention :
- The scale of unit prices or, failing that, the means of consulting this scale;
- The forecasted minimum purchase amount of products;
- The date of entry into force of commercial cooperation services designed to promote the marketing of products and other obligations to promote the commercial relationship.
Since October 18, 2021, the so-called “EGALIM” legislative arsenal, and in particular the “EGALIM 2” section, has imposed additional mandatory information that must be included in yearly conventions relating to food products and products intended for pet food.
From now on, it will be necessary to include a price renegotiation clause and an automatic price revision clause in the agreements to allow for price changes during the year, depending on index fluctuations.
Some necessary precautions in this respect
As the negotiation and regularization of yearly conventions may be complex and time-consuming, some may be tempted to skip their obligations.
However, the perspective of an inspection from the administration and the amount of the penalties should dissuade them. Indeed, any failure to comply is punishable by administrative fine of up to € 375.000 euros for legal entities.
It is therefore advisable to seek assistance in this matter throughout the entire period of commercial negotiations for greater security: a Linkea expert may assist you in this respect.
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