E.Leclerc's fight with France to test EU law on buying alliances

24 July 2019 8:04am

23 July 2019, by Arezki Yaïche and Nicholas Hirst

A fight between E.Leclerc and the French government over the supermarket chain’s buyer alliance with a German peer has breathed new life into a debate about whether such agreements are in breach of EU competition law.

The supporters of such alliances, where supermarkets team up to negotiate purchasing terms with suppliers, say they can pass on lower prices and better choice to consumers. But others, including the French government in this case, say they give the big retailers too much power over much smaller suppliers.

France’s economy ministry said it would seek a fine of 117 million euros ($131 million) against E.Leclerc for “abusive commercial practices” through Eurelec Trading, its Belgium-based buyer alliance with Germany’s REWE supermarket chain.

A few hours later, E.Leclerc said it would refer the case to the EU Court of Justice, the bloc’s highest court, given the “determination” of the French government to pursue it through investigations, raids and parliamentary inquests. That would suggest the company will ask France's Tribunal de Commerce to request a preliminary reference from the EU court.

“By reproaching E. Leclerc's centers for allying with other European distributors to ensure consumers enjoy the cheapest prices, the French authorities are breaching European rules that seek to encourage such exchanges and partnerships,” E.Leclerc said in a press release.

Deputy economy minister Agnès Pannier-Runacher dismissed that argument in an interview with French radio.

“The group claims it put pressure only on foreign large groups, but there are other mid-sized suppliers which suffered,” she said.

The number of suppliers affected by E.Leclerc's conduct had risen from 4 in 2017, to 14 in 2018 and 27 in 2019, she added. They include “French dairy producers, cheese-makers and charcuterie-makers.”

Eurelec — a portmanteau of Europe, REWE and Leclerc — was formed in 2016 to negotiate the supermarkets’ purchases in France and Germany from multinational companies. Michel-Edouard Leclerc, the French group’s boss, said the cross-border cooperation would create the “Airbus of retail.”

French law

The French government’s case is the first filed on the basis of a new law passed in October 2018, known under its French acronym Egalim, which limits supermarkets’ ability to sell food products at a loss or slash prices in promotional offers. In April, the government issued orders clarifying its sanctioning powers under the new law.

While not strictly a part of France’s competition law, some of the Egalim law’s constraints closely resemble those found in antitrust rules. And E.Leclerc’s appeal to the EU Court of Justice appears likely to draw on questions of EU competition law.

The investigation into E.Leclerc began in October 2018, the same month the Egalim law was passed. Officials from the government’s General Directorate for Competition Policy, Consumer Affairs and Fraud Control, or DGCCRF, raided offices and seized documents and messages.

Monday’s case is the seventh lawsuit lodged by the state against E.Leclerc in 14 years, Pannier-Runacher said. At least one of those cases is still open: The government is seeking a fine of around 100 million euros after a DGCCRF investigation found that E.Leclerc was forcing farmers to pay a 10 percent rebate on products they also sold to the supermarket’s low-cost German rival Lidl.

ABA 2019