Using an Agent or Distributor
Companies wishing to use distribution, franchising and agency arrangements need to ensure that the agreements they put into place are in accordance with European Union (EU) and Member State national laws. Council Directive 86/653/EEC establishes certain minimum standards of protection for self-employed commercial agents who sell or purchase goods on behalf of their principals. In essence, the Directive establishes the rights and obligations of the principal and its agents; the agent’s remuneration; and the conclusion and termination of an agency contract, including the notice to be given and indemnity or compensation to be paid to the agent. U.S. companies should be particularly aware that the Directive states that parties may not derogate certain requirements. Accordingly, the inclusion of a clause specifying an alternate body of law to be applied in the event of a dispute will likely be ruled invalid by European courts.
The European Commission’s Directorate General for Competition enforces legislation concerned with the effects on competition in the internal market of such "vertical agreements." Most U.S. exporters are small- and medium-sized companies (SMEs) and are therefore exempt from the Regulations because their agreements likely would qualify as "agreements of minor importance," meaning they are considered incapable of affecting competition at the EU level but useful for cooperation between SMEs. Generally speaking, companies with fewer than 250 employees and an annual turnover of less than €50 million are considered small- and medium-sized undertakings. The EU has additionally indicated that agreements that affect less than 10 percent of a particular market are generally exempted as well (Commission Notice 2001/C 368/07).
The EU also looks to combat payment delays with Directive 2000/35/EC. This covers all commercial transactions within the EU, whether in the public or private sector, primarily dealing with the consequences of late payment. Transactions with consumers, however, do not fall within the scope of this Directive. In sum, the Directive entitles a seller who does not receive payment for goods/services within 30-60 days of the payment deadline to collect interest (at a rate of 7 percent above the European Central Bank rate) as compensation. The seller may also retain the title to goods until payment is completed and may claim full compensation for all recovery costs.
Companies’ agents and distributors can take advantage of the European Ombudsman when victim of inefficient management by an EU institution or body. Complaints can be made to the European Ombudsman only by businesses and other bodies with registered offices in the EU. The Ombudsman can act upon these complaints by investigating cases in which EU institutions fail to act in accordance with the law, fail to respect the principles of good administration, or violate fundamental rights.
Considering the host of distribution options available in France, the exporter must carefully select the method best suited to his or her product. French buyers generally prefer to purchase through an intermediary, making sales directly to the end-user uncommon. However, sales of expensive, technically sophisticated goods are an exception to this rule. Intermediaries may take one of three primary forms under French law:
- Salaried Representative
A distributor (concessionnaire) is an individual or legal entity who purchases goods directly from a producer for the purpose of resale. The distributor operates independently and is only bound by the written provisions of the distribution agreement. These agreements, however, are subject to specific rules and regulations regarding exclusive distribution and price setting.
Contract termination conditions are important, and vary with the type of distribution agreement. Either party without prior notification or indemnification may terminate a distribution agreement of specified duration at the end of the contract period. If the termination takes place before the end of the contract period, the terminating party may be sued for breach of contract.
Either party may terminate a distribution agreement with an unspecified duration without indemnification after a fair notice period, usually six months. Termination by the supplier without fair notice may be grounds for damage claims by the distributor.
This category covers commercial agents and those acting as agents but not fulfilling the requisites for commercial agent status. Unlike distributors, agents do not actually purchase goods for resale; instead, they match up buyers and sellers on a commission basis. All agents exercise their activities in an independent manner, and their principals are exempt from payment of payroll taxes. Agents assume their own fiscal charges (business license tax and value-added tax) and social charges (health insurance, social security and retirement/pension benefits).
Agents with a written contract have the status of commercial agents (agents commerciaux) if they exercise their activity as a sustained independent profession and fulfill the following conditions:
- Do not have a written employment contract;
- Negotiate sales and purchases on behalf of producers, manufacturers, or dealers;
- Are registered with the Tribunal of Commerce as commercial agents.
A commercial agent is independent and free to act on the behalf of any other firm. However, in the case where the agent wishes to represent one of his or her principal's competitors, consent of the principal must first be secured.
The principal may justifiably terminate the commercial agent contract only if the agent shows substantial deficiency in carrying out his or her obligations. Otherwise, contract termination gives the agent a right to indemnification, often equal to two years' commissions, in absence of a termination date in the agreement.
Other agents: Persons who do not fulfill all the requirements for commercial agency, and who are not in a position of subordination to the company they represent, are considered agents. A notarized act or private agreement can effect authorization of an agent. Either party may terminate the agency agreement at will, but the non-terminating party has a right to indemnification of losses.
Unlike agents, salaried representatives have employment contracts. They and their employers share the burden of payroll taxes contributing to social security, unemployment compensation, and retirement/pension plans.
Persons are considered statutory representatives if they exercise their activity as a sustained, independent profession and fulfill the following conditions:
- Act as sales representative for the account of one or more employers;
- Abstain from executing commercial operations on their own behalf;
- Institute mutual commitments with employers on the nature of goods or services offered for sale, the region of activity or the category of clients, and the rate of compensation.
Statutory representatives work according to their employers’ instructions and are protected by labor law, but they have a special right to indemnification if unjustly terminated. This indemnity is based on the size and importance of the clientele they create.
Non-statutory Salaried Representatives:
Representatives who are subordinate to their employers and who do not fulfill the requisites for statutory representative status fall into a separate category and are considered regular employees.
Finding a Partner
The Department of Commerce's International Trade Administration offers several services to help the would-be exporter identify potential foreign representatives. The three primary services available from the U.S. Commercial Service in France are the Gold Key Service, the International Partner Search (IPS) and Industry Targeted Mailings.
Establishing an Office
Establishing a subsidiary/branch office in France is also advisable for some industries. The French government encourages the formation of new enterprises. In conjunction with the Paris Chamber of Commerce and other Chambers throughout the country, the French government offers extensive counseling and assistance in setting up an office in France. Detailed "how to" guides are available from the various chambers of commerce, and also from the Commercial Service and the numerous American consulting firms present in France.
The French franchise sector ranks first in Europe in sales, and has enjoyed 10 percent average growth over the last three years. Although very competitive, it offers many opportunities for innovative U.S. franchises. Ten percent of franchises operating in France are foreign, of which 20 percent are American. In January 2008 total franchising sales were estimated at € 61.60 billion. Potential remains for U.S. franchisers in sub-sectors yet to be fully exploited, such as personal service, i.e. household duties, school tutoring, child or senior care, renovation services, etc. However, it is important to note that over the past thirty years directly investing in a company-owned pilot operation in France (or the EU) to prove the concept before selling franchises or concentrating on a particular area of France for development have proven more successful in finding suitable franchisees than immediately seeking a traditional Master Franchisee for all of France.
There is a wide range of EU legislation that impacts the direct marketing sector. Compliance requirements are stiffest for marketing and sales to private consumers. Companies need to focus, in particular, on the clarity and completeness of the information they provide to consumers prior to purchase, and on their approaches to collecting and using customer data. The following gives a brief overview of the most important provisions flowing from EU-wide rules on distance selling and on-line commerce. It is worth noting that the EU is currently overhauling its consumer protection legislation. Companies are advised to consult the information available via the hyper-links, to check the relevant sections of national Country Commercial Guides, and to contact the Commercial Service at the U.S. Mission to the European Union for more specific guidance.
Processing Customer Data
The EU has strict laws governing the protection of personal data, including the use of such data in the context of direct marketing activities. For more information on these rules, please see the privacy section above.
Distance Selling Rules
•Distance and Door-to-Door sales
The EU’s Directive on distance selling to consumers (97/7/EC and amendments) sets out a number of obligations for companies doing business at a distance with consumers. It can read like a set of onerous "do’s" and "don’ts," but in many ways it represents nothing more than a customer relations good practice guide with legal effect. Direct marketers must provide clear information on the identity of themselves as well as their supplier, full details on prices including delivery costs, and the period for which an offer remains valid – all of this, of course, before a contract is concluded. Customers generally have the right to return goods without any required explanation within seven days, and retain the right to compensation for faulty goods thereafter. Similar in nature is the Doorstep Directive (85/577/EEC) which is designed to protect consumers from sales occurring outside of a normal business premises (e.g., door-to-door sales) and essentially assure the fairness of resulting contracts.
•Distance Selling of Financial Services
Financial services are the subject of a separate Directive that came into force in June 2002 (2002/65/EC). This piece of legislation amends three prior existing Directives and is designed to ensure that consumers are appropriately protected in respect to financial transactions taking place where the consumer and the provider are not face-to-face. In addition to prohibiting certain abusive marketing practices, the Directive establishes criteria for the presentation of contract information. Given the special nature of financial markets, specifics are also laid out for contractual withdrawal.
Direct Marketing over the Internet
The e-commerce Directive (2000/31/EC) imposes certain specific requirements connected to the direct marketing business. Promotional offers must not mislead customers and the terms that must be met to qualify for them have to be easily accessible and clear. The Directive stipulates that marketing e-mails must be identified as such to the recipient and requires that companies targeting customers on-line must regularly consult national opt-out registers where they exist. When an order is placed, the service provider must acknowledge receipt quickly and by electronic means, although the Directive does not attribute any legal effect to the placing of an order or its acknowledgment. This is a matter for national law. Vendors of electronically supplied services (such as software, which the EU considers a service and not a good) must also collect value added tax (see Electronic Commerce section below).
The French direct marketing market for consumer products and services is one of the largest in the world. It accounted for USD 30 billion (Euro 22.0 billion) in 2007, growing 20 percent. Sales through the mail have trended downward in recent years just as telephone and specifically Internet sales have rapidly expanded. Internet sales represent 72 percent of total direct marketing sales. In 2007, 73 percent of French households bought through direct marketing, and 21 million online buyers made an average purchase of USD 124 (Euro 91). Today 66 percent of Internet users have already purchased on-line, primary services and travel packages, followed by hi-tech and cultural products.Twenty-eight percent of French companies buy on-line and B-to-B e-commerce in 2007 accounted for USD 17.8 billion (Euro 13 billion). IT and office equipment represent 60 percent of sales while business travel and marketing/consulting services accounted for 26 and 14 percent respectively.
A joint venture with a French firm is one recommended approach. The French government encourages this type of investment and offers a wide range of incentives. Traditionally, a French joint venture partner strengthens the marketing activities of an American firm with its in-place distribution system. In certain industries, French manufacturers have skills that supplement those of the American partner. A joint venture with a French firm that has full French government support can be beneficial as long as manufacturing decisions can be made independently of government involvement. Recognizing the differences in each market is essential for success. It is recommended that companies interested in forming joint ventures consult with the U.S. Commercial Service at the Embassy in Paris before making any alliances.
Selling to the Government
The EU public procurement market, including EU institutions and Member States, totals around EUR 1,600 billion. This market is regulated by two Directives:
• Directive 2004/18 on Coordination of procedures for the award of public works, services and supplies contracts, and
• Directive 2004/17 on Coordination of procedures of entities operating in the Utilities sector, which covers the following sectors: water, energy, transport and postal services. Remedies directives cover legal means for companies who face discriminatory public procurement practices. These directives are implemented in the national procurement legislation of the 27 EU Member States.
The US and the EU are signatories of the World Trade Organization’s (WTO) Government Procurement Agreement (GPA), which grants access to most public supplies and some services and works contracts published by national procuring authorities of the countries that are parties to the Agreement. In practice, this means that U.S.-based companies are eligible to bid on supplies and services contracts from European public contracting authorities above the agreed thresholds. The revision of this agreement should be finalized in 2009.
However, there are restrictions for U.S. suppliers in the EU utilities sector both in the EU Utilities Directive and in the EU coverage of the Government Procurement Agreement (GPA). The Utilities Directive allows EU contracting authorities in these sectors to either reject non-EU bids where the proportion of goods originating in non-EU countries exceeds 50% of the total value of the goods constituting the tender, or is entitled to apply a 3% price difference to non-EU bids in order to give preference to the EU bid. These restrictions are applied when no reciprocal access for EU companies in the U.S. market is offered. Those restrictions however were waived for the electricity sector.
The French Government generally follows EU procurement regulations, which call for non-discrimination against foreign firms. In France, procurement regulations do not usually present barriers to entry for foreign firms. However, local political pressure and administrative procedures are often said to favor French companies.
French Government procurement comes under the jurisdiction of the Ministry of the Economy and Finance. The "Commission Centrale des Marchés" (CCM), or Central Procurement Board, has overall responsibility for monitoring compliance with procurement regulations.
France is obliged to follow EU public works regulations requiring government purchasing entities to publish tender notices for all public works projects valued at over Euro 5.270 million, or approximately USD 6.535 million. Tender notices exceeding this must be published in the Official Journal of the European Union, as well as in the French “Bulletin Officiel des Annonces des Marchés Publics.” In telecommunications, however, a European Union Utilities Directive requires France to give EU bidders a three percent price preference and gives France the option to reject bids with over 50 percent non-EU content. Certain defense-related industries are also excluded from regular procurement rules. In addition, public projects must conform to the following requirements:
- A minimum of 52 days is required for bid submissions after an offer is announced.
- The reason for a bid's rejection must be provided upon request.
- The amount of the winning bids must be publicly disclosed.
Distribution and Sales Channels
The Retail Network: France possesses a diverse and comprehensive retail network, which increasingly resembles that of the U.S. From the largest department store chains to the smallest individual proprietorships, French distribution channels are demonstrating some significant new trends that could affect how products are sold in France.
Small-and medium-sized family-owned firms, which traditionally accounted for a majority of French wholesale and retail trade, are rapidly losing ground to hypermarkets - large retail outlets carrying a wide variety of products at discounted prices. At the same time, direct marketing and in particular Internet sales, and specialized chain stores have shown strong growth.
The Retail Food Distribution:
France’s retail distribution network is diverse and sophisticated. The food retail sector is generally defined by six types of establishments: Hypermarkets; supermarkets; hard discounters; convenience; gourmet centers in department stores; and traditional outlets. In 2008, sales within the first five categories represented 75 percent of the country’s retail food market, and the sixth, which includes neighborhood and specialized food stores, represented 25 percent of the market. Hyper and supermarkets were the leading retailers in 2008, with 66 percent total food sales in the sector. Food price increases and consumer concerns relative to their decrease in purchasing power saw hard discounters gain ground against the hyper/supermarkets during the last quarter of 2008.
Developments in recent years impacted the country’s retail food distribution system. Since 2006, French legislation limiting the number of new hyper/supermarket openings has prompted large stores to expand their existing surface area. However, a modification of the French legislation in 2008 may result in new openings of small size stores. Also, mergers and alliances among major hyper/supermarkets have allied the country’s five largest retailers with seven central buying offices.
Hotels/Restaurants/Institutions/Food Service Sector: In 2008, France’s Hotel, restaurant and institution (HRI) food sector served approximately 10.5 billion meals worth approximately USD $125 billion.
The French HRI/food service sector is open, highly competitive market. Entry through this sector must be carefully planned. Successful products or food systems are innovative and price competitive. For those wishing to enter this market sector, it is recommended to contact the U.S. Department of Agriculture/Foreign Agricultural Service trade and marketing specialists for advice.
Primary Retail Channels:
- Hypermarkets (Hypermarchés)
- Supermarkets (Supermarchés)
- City-Center Stores & Department Stores (Grands magasins)
- Convenience Stores (Magasins populaires)
- Hard Discounters (Magasins Discount)
- Large Specialized Stores (Grandes surfaces spécialisées)
- Multi-Channel Retail Groups (Groupes de distribution multicanaux)
- Traditional outlets (Magasins de détail traditionnels)
- Gas-Marts (Boutiques de stations d’essence)
- Central Buying Offices (Centrales d'achats)
- Hypermarkets (Hypermarchés): Hypermarkets are defined as stores with a minimum selling area of 2,500 square meters. French hypermarkets offer 25,000-40,000 products for sale at competitive prices, of which 3000-5000 food items and 20,000-35,000 non-food articles. Generally located in suburbs, they cover a total sales area of 7.3 million square meters. As of September 1, 2008, there were 1594 hypermarkets, employing over 298,000 people. The top five hypermarket companies are Leclerc, Carrefour, System U, Intermarché and Auchan.
- Supermarkets (Supermarchés): Supermarkets are smaller versions of hypermarkets, with a selling area between 400 and 2,500 square meters. They usually carry 3,000-5,000 items, of which 500-1500 are non-food products, and cover a total sales area of 6.7 million square meters. As of September 1, 2008, there were 5,478 supermarkets, employing over 158,000 people. The top four supermarket companies are Intermarché, Champion, Casino and Super U.
- City-Center Stores & Department Stores (Grands magasins):
Defined as high-quality supermarkets and dating back to the turn of the century, these are smaller than regular supermarkets, are usually located in town centers and offer a wide selection of food and non-food products. They total over 270 and tend to be grouped under major leading companies such as Monoprix/Prisunic. City-center stores seem to be declining: their numbers have dropped 20 percent in the last five years. Currently, the 100 department stores employ over 25,000 people. Paris has the most department stores of any French city; six of the ten top-selling stores are there.
Department stores have lost some market share in all areas except in the medium-to-high price range. A unique feature of the French department store is that many non-food products are sold by the manufacturers’ own sales staff, which can account for up to 20 percent of the store's total sales force. Some department stores in Paris such as Galeries Lafayette, Au Printemps, and Le Bon Marché have gourmet food sections. Although they do not account significantly for total food sales in France, they set the quality standard for product presentation.
- Convenience Stores (Magasins de proximité): Convenience stores are generally located in city centers of small-to-medium size towns. They are self-service stores run by one or two independent operators, i.e., individuals not paid by the distribution group. These stores number approximately 1,500 outlets representing no more than three percent of total food sales.
- Hard Discounters (Magasins Discount): Compared to hyper/supermarkets, hard discount stores offer a smaller range of goods for lower prices. As of September 1, 2008, there were 4,350 hard discount stores in France. These stores represent about 12 percent of total food sales and usually sell generic products or their own private-label items. The top five hard-discount companies are Lidl, Ed, Aldi, Leader Price and Netto.
- Large Specialized Stores (Grandes surfaces spécialisées): Large specialized stores offer an extensive choice of goods in a specific category at a competitive price and with an emphasis on customer service. This dynamic sector included over 12,900 stores in 2008, including such store categories as toys, health and beauty, gardening, and media/books/music. Textiles are the most numerous (3088), followed by Do-it-yourself equipment stores (2,376) and beauty/heath products (2,150).
- Multi-Channel Retail Groups (Groupes de distribution multicanaux): The distinctions made above between hypermarket chains, supermarket chains, etc. are becoming blurred. In recent years, major multi-channel retail groups owning chains of different types of stores have emerged. Pinault-Printemps and Nouvelles Galeries Réunies fall into this category, because they own chains of specialty and convenience stores.
- Traditional retail food outlets (Magasins de détail traditionnels): Traditional outlets include a broad array of establishments, from corner grocery stores, bakeries, and neighborhood butcher shops to open air markets to frozen and gourmet food stores. The aggressive expansion of mass distribution outlets threaten these traditional outlets, which account for 17 percent of the country’s total retail food distribution and represent a total of about 50,000 stores. To survive, these outlets must have flexible store hours, product variety, and special services such as home delivery. Small neighborhood store chains offer U.S. suppliers entry into the French market.
- Gas Station-Marts (Boutiques de stations d’essence): Gasoline companies, having lost about 60 percent of their gas sales to hypermarkets, have equipped their gas stations with small, self-service food stores. These outlets are frequently used for stop-gap purchases and accounted for about one percent of French food sales in 2008.
Selling your product or service in France is similar to the U.S. Buying decisions are made on the basis of quality, price and after-sales service. The principal difference in France is, in fact, the language. Since August 1994, the "Loi Toubon" requires that all advertising, labeling, instructions and promotional programs be in French, so we strongly recommend close contact with the Commercial and Agricultural sections in the Embassy, as well as arranging for local legal representation.
In July 2003, the EU started applying Value Added Tax (VAT) to sales by non-EU based companies of Electronically Supplied Services (ESS) to EU based non-business customers. U.S. companies that are covered by the rule must collect and submit VAT to EU tax authorities. European Council Directive 2002/38/EC further developed the EU rules for charging Value Added Tax. These rules are currently set to expire at the end of 2009.
U.S. businesses mainly affected by the 2003 rule change are those that are U.S. based and selling ESS to EU based, non-business customers or those businesses that are EU based and selling ESS to customers outside the EU who no longer need to charge VAT on these transactions. There are a number of compliance options for businesses. The Directive created a special scheme that simplifies registering with each Member State. The Directive allows companies to register with a single VAT authority of their choice. Companies have to charge different rates of VAT according to where their customers are based but VAT reports and returns are submitted to just one authority. The VAT authority responsible for providing the single point of registration service is then responsible for reallocating the collected revenue among the other EU VAT authorities.
-Electronic-commerce of consumer goods and services:
Electronic-commerce is booming in France. Product and services sales, as well as the number of web sites on the Internet, have increased dramatically in recent years. Retail online sales estimates (Business-to-Consumer) in 2007 were USD 22 billion (16 Billion Euro) and accounted for 72 percent of total direct marketing sales. The categories of products reporting the best market shares in 2007 are consumer electronics; computers, cameras, mobile phones (57 percent); and cultural products; books, CDs, DVD’s (51 percent). Internet sales increased by 34 percent in 2007. The number of Internet users in France has increased dramatically and in 2007 over 21 million people bought online.
- Electronic-commerce of food products and beverages:
Internet sales of food and non-food products are progressing at a rate of 30 percent yearly. Worldwide total e-commerce sales in 2008 reached approximately $9 billion, (versus $6.8 billion in 2006) of which food and beverage sales accounted for $400 million and 4 percent of e-commerce sales.
Trade Promotion and Advertising
Laws against misleading advertisements differ widely from Member State to Member State within the EU. To respond to this imperfection in the Internal Market, the Commission adopted a Directive, in force since October 1986, to establish minimum and objective criteria regarding truth in advertising. The Directive was amended in October 1997 to include comparative advertising. Under the Directive, misleading advertising is defined as any "advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behavior or which for those reasons, injures or is likely to injure a competitor." Member States can authorize even more extensive protection under their national laws.
Comparative advertising, subject to certain conditions, is defined as "advertising which explicitly or by implication identifies a competitor or goods or services by a competitor." Member States can, and in some cases have, restricted misleading or comparative advertising.
The EU’s Audiovisual Media Services Directive lays down legislation on broadcasting activities allowed within the EU. From 2009 the rules will allow for US-style product placement on television and the three-hour/day maximum of advertising will be lifted. However, a 12-minute/hour maximum will remain. Child programming will be subject to a code of conduct that will include a limit of junk food advertising to children.
Following the adoption of the 1999 Council Directive on the Sale of Consumer Goods and Associated Guarantees, product specifications, as laid down in advertising, are now considered as legally binding on the seller.
The EU adopted Directive 2005/29/EC concerning fair business practices in a further attempt to tighten up consumer protection rules. These new rules will outlaw several aggressive or deceptive marketing practices such as pyramid schemes, "liquidation sales" when a shop is not closing down, and artificially high prices as the basis for discounts in addition to other potentially misleading advertising practices. Certain rules on advertising to children are also set out.
The advertising of medicinal products for human use is regulated by Council Directive 2001/83/EC. Generally speaking, the advertising of medicinal products is forbidden if market authorization has not yet been granted or if the product in question is a prescription drug. Mentioning therapeutic indications where self-medication is not suitable is not permitted, nor is the distribution of free samples to the general public. The text of the advertisement should be compatible with the characteristics listed on the product label, and should encourage rational use of the product. The advertising of medicinal products destined for professionals should contain essential characteristics of the product as well as its classification. Inducements to prescribe or supply a particular medicinal product are prohibited and the supply of free samples is restricted.
The Commission plans to present a new framework for information to patients on medicines in 2008. The framework would allow industry to produce non-promotional information about their medicines while complying with strictly defined rules and would be subject to an effective system of control and quality assurance.
On July 1, 2007, a new regulation on nutrition and health claims entered into force. Regulation 1924/2006 sets EU-wide conditions for the use of nutrition claims such as “low fat” or “high in vitamin C” and health claims such as “helps lower cholesterol”. The regulation applies to any food or drink product produced for human consumption that is marketed on the EU market. Only foods that fit a certain nutrient profile (below certain salt, sugar and/or fat levels) will be allowed to carry claims. Nutrition and health claims will only be allowed on food labels if they are included in one of the EU positive lists. Food products carrying claims must comply with the provisions of nutritional labeling directive 90/496/EC.
Nutrient profiles will be developed by January 2009, based on scientific evaluations by the European Food Safety Authority (EFSA). Once they have been set, there will be another two-year period before the nutrient profiles begin to apply to allow food operators time to comply with the new rules. Nutrition claims can fail one criterion, i.e. if only one nutrient (salt, sugar or fat) exceeds the limit of the profile, a claim can still be made provided the high level of that particular nutrient is clearly marked on the label.
For example, a yogurt can make a low-fat claim even if it has high sugar content but only if the label clearly states “high sugar content”. Health claims cannot fail any criteria.New products on the EU market must respect the conditions for using nutrition claims set out in detail in the Annex of Regulation 1924/2006. Products already labeled or on the market before January 2007 may remain on the market with the old labels until January 2010. From 2010, only nutrition claims included in the Annex will be allowed.A list of well-established health function claims such as “calcium is good for your bones” will be established by January 2010, based on Member States’ lists of health claims already approved at national level. Disease risk reduction claims and claims referring to the health and development of children will require an authorization on a case-by-case basis, following the submission of a scientific dossier to EFSA. A simplified authorization procedure has been established for health claims based on new scientific data.
Food SupplementsRegulation 1925/2006, applicable as of July 1, 2007, harmonizes rules on the addition of vitamins and minerals to foods. The regulation lists the vitamins and minerals that may be added to foods and sets criteria for establishing minimum and maximum levels.
The EU Tobacco Advertising Directive bans tobacco advertising in printed media, radio, and internet as well as the sponsorship of cross-border events or activities. Advertising in cinemas and on billboards or merchandising is allowed though these are banned in many Member States. Tobacco advertising on television has been banned in the EU since the early 1990s and is governed by the TV without Frontiers Directive.
Key link: http://ec.europa.eu/health/ph_determinants/life_style/Tobacco/tobacco_en.htm
Advertising can also be done through many different media, including TV, radio, Internet, or newspapers and magazines. There are far too many newspapers, magazines and technical journals to list. Please check the following website for media lists, under “audiovisuel” for TV and radio, and under “presse écrite” for newspapers and magazines: http://mediasig.premier-ministre.gouv.fr
It should be noted that newspapers do not carry nearly the volume of advertising to which Americans are accustomed. In addition, mass media advertising (press, TV, radio, billboards) represents 35 percent of total promotional spending while direct marketing, promotion, event advertising, public relations, guides and catalogs represent 65 percent of the total French market for advertising services.
The U.S. exporter can usually determine the export price of his/her manufactured product using 70 percent of the domestic price (after deduction of all local marketing costs). This allows the French importer to price imports from the U.S. on the same price level as an American counterpart. A simple way to compare U.S. and French retail prices consists of taking the net U.S. retail price and comparing it with the French retail price without the Value Added Tax (V.A.T.), currently 19.6 percent. The French consumer is generally willing to pay a maximum of 10-15 percent over the American retail price. When determining the export price, it is important to consider that if prices are FOB, the French importer will have to pay for transportation, insurance, customs duties, value-added tax and fixed fees per shipment.
Terms of Payment:
For U.S. exporters, what is called "the financing of export sales" is not basically different from financing domestic sales. The fundamental concern in both cases is that one be paid in a timely manner for the goods and/or services delivered. France's modern banking system offers a full range of payment means, the most significant of which are: - Commercial letters of credit - Sight and time drafts (documentary collections) - Bank transfers - Certified checks Although bank transfers and certified checks are fairly self-explanatory methods of payment, commercial letters of credit and sight and time drafts may be less familiar to the would-be exporter but are potentially attractive terms of payment.
Sales Service/Customer Support
Conscious of the discrepancies among Member States in product labeling, language use, legal guarantee, and liability, the redress of which inevitably frustrates consumers in cross-border shopping, the EU institutions have launched a number of initiatives aimed at harmonizing national legislation. Suppliers within and outside the EU should be aware of existing and upcoming legislation affecting sales, service, and customer support.
Under the 1985 Directive on liability of defective products, amended in 1999, the producer is liable for damage caused by a defect in his product. The victim must prove the existence of the defect and a causal link between defect and injury (bodily as well as material). A reduction of liability of the manufacturer is granted in cases of negligence on the part of the victim. Key link: http://ec.europa.eu/enterprise/regulation/goods/liability_en.htm
The 1992 General Product Safety Directive introduces a general safety requirement at the EU level to ensure that manufacturers only place safe products on the market. It was revised in 2001 to include an obligation on the producer and distributor to notify the Commission in case of a problem with a given product, provisions for its recall, the creation of a European Product Safety Network, and a ban on exports of products to third countries that are not deemed safe in the EU. Key link: http://ec.europa.eu/consumers/safety/prod_legis/index_en.htm
Legal Warranties and After-sales Service
Under the 1999 Directive on the Sale of Consumer Goods and Associated Guarantees, professional sellers are required to provide a minimum two-year warranty on all consumer goods sold to consumers (natural persons acting for purposes outside their trade, businesses or professions), as defined by the Directive. The remedies available to consumers in case of non-compliance are:
- Repair of the good(s);
- Replacement of the good(s);
- A price reduction; or
- Rescission of the sales contract. Key link: http://ec.europa.eu/comm/consumers/cons_int/safe_shop/guarantees/index_en.htm
Other issues pertaining to consumers’ rights and protection, such as the New Approach Directives, CE marking, quality control and data protection are dealt with in Chapter 5 of this report.
Although less developed than in the U.S., French businesses also provide all kinds of services such as after-sales service, home delivery, maintenance contracts, warehousing facilities, hotlines, or toll free numbers for any technical assistance. For some products such as electrical appliances, e.g. TV, replacement service is available.
Companies wishing to develop long-term marketing and sales capabilities in France should pay close attention to securing proper distribution and storage facilities close to major airports and seaports. Many logistics firms, including American ones, operate in France and should be considered when firms develop significant market opportunities and sales channels in France. (See Chapter 9, Country Contacts - Logistics.)
Protecting Your Intellectual Property
The EU’s legislative framework for copyright protection consists of a series of Directives covering areas such as the legal protection of computer programs, the duration of protection of authors’ rights and neighboring rights, and the legal protection of databases. Almost all Member States have fully implemented the rules into national law; and the Commission is now focusing on ensuring that the framework is enforced accurately and consistently across the EU. Key Link: http://ec.europa.eu/internal_market/copyright/documents/documents_en.htm
The on-line copyright Directive (2001/29/EC) addresses the problem of protecting rights holders in the online environment while protecting the interests of users, ISPs and hardware manufacturers. It guarantees authors’ exclusive reproduction rights with a single mandatory exception for technical copies (to allow caching), and an exhaustive list of other exceptions that individual Member States can select and include in national legislation. This list is meant to reflect different cultural and legal traditions, and includes private copying "on condition right holders receive fair compensation." Key Link: http://eur-lex.europa.eu/pri/en/oj/dat/2001/l_167/l_16720010622en00100019.pdf
EU countries have a "first to file" approach to patent applications, as compared to the "first to invent" system currently followed in the United States. This makes early filing a top priority for innovative companies. Unfortunately, it is not yet possible to file for a single EU-wide patent that would be administered and enforced like the Community Trademark (see below). For the moment, the most effective way for a company to secure a patent across a range of EU national markets is to use the services of the European Patent Office (EPO) in Munich. It offers a one-stop-shop that enables rights holders to get a bundle of national patents using a single application. However, these national patents have to be validated, maintained and litigated separately in each Member State. Key Links: http://ec.europa.eu/internal_market/indprop/index_en.htm http://www.european-patent-office.org
The EU-wide Community Trademark (CTM) can be obtained via a single language application to the Office of Harmonization in the Internal Market (OHIM) in Alicante, Spain. It lasts ten years and is renewable indefinitely. For companies looking to protect trademarks in three or more EU countries the CTM is a more cost effective option than registering separate national trademarks.
On October 1, 2004, the European Commission (EC) acceded to the World Intellectual Property Organization (WIPO) Madrid Protocol. The accession of the EC to the Madrid Protocol establishes a link between the Madrid Protocol system, administered by WIPO, and the Community Trademark system, administered by OHIM. As of October 1, 2004, Community Trademark applicants and holders are allowed to apply for international protection of their trademarks through the filing of an international application under the Madrid Protocol. Conversely, holders of international registrations under the Madrid Protocol will be entitled to apply for protection of their trademarks under the Community Trademark system. Key Links: http://oami.europa.eu/ http://www.wipo.int/madrid/en
The EU adopted a Regulation introducing a single Community system for the protection of designs in December 2001. The Regulation provides for two types of design protection, directly applicable in each EU Member State: the registered Community design and the unregistered Community design. Under the registered Community design system, holders of eligible designs can use an inexpensive procedure to register them with the EU’s Office for Harmonization in the Internal Market (OHIM), based in Alicante, Spain. They will then be granted exclusive rights to use the designs anywhere in the EU for up to twenty-five years. Unregistered Community designs that meet the Regulation’s requirements are automatically protected for three years from the date of disclosure of the design to the public. Key Link: http://oami.europa.eu/
Within the EU, the rights conferred on trademark holders are subject to the principle of "exhaustion." Exhaustion means that once trademark holders have placed their product on the market in one Member State, they lose the right to prevent the resale of that product in another EU country. This has led to an increase in the practice of so called "parallel importing" whereby goods bought in one Member State are sold in another by third parties unaffiliated to the manufacturer. Parallel trade is particularly problematic for the research-based pharmaceutical industry where drug prices vary from country to country due to national price Regulation.
Community wide exhaustion is spelled out in the Directive on harmonizing trademark laws. In a paper published in 2003, the Commission indicated that it had no plans to propose changes to existing legal provisions. Key Link: http://ec.europa.eu/internal_market/indprop/tm/index_en.htm
Under the French intellectual property rights regime, patents, trademarks, and designs and models protect industrial property, while literary/artistic property is protected by copyrights. By virtue of the Paris Convention and the Washington Treaty regarding industrial property, U.S. nationals are entitled to receive the same protection of industrial property rights in France as French nationals. In addition, U.S. nationals have a "right of priority period" after filing a U.S. patent, trademark, design or model, in which to file a corresponding application in France. This period is twelve months for patents and six months for trademarks, designs and models.
There are two types of patents: patents of invention (Brevets d'Invention) and certificates of utility (Certificats d'Utilité). Patents of invention cover all inventions. Certificates of utility cover all inventions except those of a pharmaceutical nature, which are covered by complementary certificates (Certificats Complémentaires de Protection).
In order to qualify for patent protection, the invention must:
•Have an industrial or agricultural application
•Imply a non-obvious procedure, and
•Have absolute novelty.
Duration: Patents for inventions have a twenty-year life span, after which they become part of the public domain. Certificates of utility have a six-year, non-renewable life span. Patent Registration: Applications for patent registration must be filed with the French National Institute for Industrial Property, the Institut National de la Propriete Industrielle (INPI), before the invention is publicly disclosed. INPI receives applications, examines their validity, and registers the patents. After the application for a patent is filed, INPI conducts a check for comparable inventions. Upon approval and registration, a patented invention may be manufactured, operated, used or sold only with the authorization of the patent's owner. The owner can transfer, or sell the patent, or grant a license for others to use it. A patent must be used to be retained. Applicants can consult INPI's library to check for the existence of similar inventions prior to filing.
INPI Division des Brevets
Tel: (33) 1.71.08.71.63 Fax: (33) 1.53.04.45.23
Web Site: http://www.inpi.fr
Patent protection in France may also be obtained through ownership of a European Patent, which is filed through the European Patent office in Munich:
European Patent Office Erhardtstrasse 27 80298 Munich, Germany
Tel: (49 89) 23 99 46 36
Web Site: http://www.european-patent-office.org/
Patent registration in France requires a French address, which may be obtained through a legal representative in France. A list of patent advisors who can act as legal representatives can be obtained from the French Association of Patent Advisors, Compagnie Nationale des Conseils en Propriété Industrielle: CNCPI Tel: (33) 22.214.171.124.89 Web Site: http://www.cncpi.fr Certificate of Utility Registration Certificates of Utility are also granted by INPI (see above). However, in this case, INPI does not conduct a check for comparable inventions.
Trademark protection can apply to both goods and services. In a general sense, trademarks recognize and protect indicators, which serve to distinguish one product or service from similar products or services. In the French regime, trademarks:
- Can be written or designed trademarks.
- Can be sonorous trademarks, such as musical tunes, jingles, words, slogans.
- Must not be deceptive as to the nature or origin of the goods. - Must be recognizable by sight or sound.
- Must have novelty for the specified product line. Duration: A trademark has a ten-year life span and is renewable every ten years. Trademark Registration: Applications must be filed with INPI, which receives applications, examines their validity, and registers trademarks. After registering the trademark, it must be publicly and unequivocally used five consecutive years, or all trademark rights are forfeited. It may be sold totally or partially, by product or service category.
INPI Division des Marques
Tel: (33) 1.71.08.71.63 Fax: (33) 1.53.04.45.23
Web Site: http://www.inpi.fr
Registration of trademarks, as in the case of patents, requires a French address, which may be obtained through a legal representative in France. A list of trademark advisors who can act as legal representatives can be obtained from CNCPI, whose address is listed above.
Designs and Models
Designs and models have the following characteristics:
- Designs are an assembly of traits or colors on the surface of an object. They constitute an original two-dimensional decoration.
- Models are all creations (ornaments).
- They must have absolute novelty.
Although some designs and models can be protected under patent or copyright procedures, others fall into a category that requires special treatment. Designs or models having an industrial function follow patent procedures, while designs or models having a purely ornamental function follow copyright procedures. Those designs or models which have both a practical and an ornamental function are subject to the following:
Duration: Infringement protection has a 25 year life span, and is renewable for another 25 years. Registration: Exclusive proprietary rights to the design or model are acquired through the act of creation itself. Registration merely serves as proof of that creation. Designs and models are to be registered with the INPI:
INPI-Designs and Models Section
Tel: (33) 1.71.08.71.63 Fax: (33) 1.53.04.45.23
To prove the date of creation of a design or model without formal registration, a designer may wish to use a special envelope (enveloppe spéciale). The date of creation begins when the envelope is received by the INPI.
Copyrights cover artistic works, literary works and software. In the French IPR regime, in order to qualify for a copyright, the language used to express the idea must be original, not the idea itself.
Duration: Copyrights are valid for 50 years after the death of the author, with two major exceptions: music copyrights are valid for seventy years after the death of the composer, and software copyrights are valid for 25 years after creation. Contrary to other copyrights, software designed by a salaried employee belongs to the employer.
Registration: Artistic and literary works are automatically protected once created and fixed in tangible form. Therefore, registration is not required, but nonetheless recommended. For musical works, including songs, instruments, poems, sketches less than 20 minutes, monologues, and other musical audiovisual productions, applications must be filed with the French Society for Musical Authors, Composers and Editors:
Société des Auteurs, Compositeurs et Editeurs de Musique (SACEM)
Tel: (33) 126.96.36.199.15 Fax: (33) 188.8.131.52.16
Web Site: http://www.sacem.fr
Membership acceptances are restricted to reputable applicants who are already known for the quality of their works. If not qualified for SACEM, applications must be filed with the National Association of Musical Authors and Composers:
Syndicat National des Auteurs et Compositeurs de Musique (SNACM)
Tel: (33) 184.108.40.206.30; Fax: (33) 220.127.116.11.21
Web Site: http://www.snac.fr
For theatrical works, including plays, operas, operettas, musical comedies, films and theatrical scripts, applications must be filed with the Society for Theatrical Authors and Composers:
Société des Auteurs et Compositeurs Dramatiques (SACD)
Tel: (33) 18.104.22.168.44; Fax: (33) 22.214.171.124.28
Web Site: http://www.sacd.fr/
For literary works and software, applications must be filed with the French Literary Society:
Société des Gens de Lettres (SGDL)
Tel: (33) 126.96.36.199.00; Fax: (33) 188.8.131.52.12
Web Site: http://www.sgdl.org
For documentary and educational works, applications must be filed with the Civil Society for Multimedia Authors: Société Civile des Auteurs Multimédia (SCAM)
Tel: (33) 184.108.40.206.58; Fax: (33) 220.127.116.11.59
Web Site: http://www.scam.fr/
Once a U.S. company has identified several potential representatives, it should contact them directly in writing. Just as the U.S. firm is seeking information on the French representative, the representative is interested in corporate and product information on the U.S. firm. The U.S. firm should provide full information on its history, resources, personnel, the product line, previous export activity, and all other pertinent matters. At the same time the firm is providing information on itself, it should also engage in a thorough investigation of the potential representative. Following is a list of important facts the firm should endeavor to find out:
- Current status and history, including background on principal officers
- Personnel and other resources
- Sales territory covered
- Current sales volume
- Typical customer profiles
- Methods of introducing new products into the sales territory
- Names and nature of U.S. firms currently represented
- Trade and bank references
- Assessment of whether U.S. firm's special requirements can be met
- View of in-country market potential for the U.S. firm’s products
Exporters have the right to explore the qualifications of those who propose to represent them overseas. Therefore, the U.S. firm should not hesitate to ask the potential representative(s) or distributor(s) detailed questions.
In addition, the U.S. firm is advised to obtain at least two businesses and credit reports to ensure that the distributor or representative is reputable.
The US Commercial Service in France provides comprehensive financial reports: Search made through local credit information database provider.
For more information see: http://www.buyusa.gov/france/en/14.html - _section18.
Local Professional Services
A wide variety of service providers is available to support U.S. companies doing business in the European Union (EU), from the largest global firms to small niche players. The U.S. Commercial Service EU website (see below) lists various professional service providers and additional information is available upon request. Key link: http://www.buyusa.gov/europeanunion/services.html
Also, see EU Member State Country Commercial Guides which can be found at the following website:http://www.buyusainfo.net/adsearch.cfm?search_type=int&loadnav=no A lawyer with experience in France should be retained as soon as the establishment of a French business entity is contemplated. The American Embassy in Paris maintains a list of American lawyers practicing in France, which is available upon request. More detailed information about professional backgrounds can be obtained from the Martindale-Hubbell Law Directory and from the Bar Register of Pre-eminent Lawyers. Lawyers and bankers in the United States also will normally have means of recommending lawyers in France.
France has two major categories of legal practitioners:
Avocats: An "avocat" must be a lawyer. "Avocats" may render legal advice on all matters, draft agreements and contracts, handle commercial disputes and collection cases, and plead and defend civil and criminal cases before the French courts to which they are admitted. See contacts at: http://www.amb-usa.fr/consul/acs/guide/Attorneys.pdf
A French "notaire" is a public official appointed by the Ministry of Justice. He is not the equivalent of a public notary in the United States. The number of "notaires" in each jurisdiction is limited, and their fees fixed by law. Their functions include the preparation and recording of notarial acts (e.g., wills, deeds, acts of incorporation, marriage, and contracts), the administration and settlements of estates excluding litigation in court) and serving as the repository of wills. They are not lawyers, but very specialized members of the legal profession. They may not litigate in courts.