France’s finance ministry has asked a court to fine retailer Carrefour over contracts with franchisee stores that it claims were unbalanced in the retailer’s favour.
The ministry recommended the ‘record’ fine on Tuesday, in a move that the group denounced.
The ministry’s General Directorate for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF) noted in a statement that its investigations had found several companies in the group engaging in practices contrary to the French Commercial Code.
The watchdog asked the Commercial Court in Rennes to declare several clauses of the contracts binding the franchisees and Carrefour null and void.
It will also impose a financial penalty on the group, the watchdog stated.
Carrefour And Franchisees
Carrefour contested the ministry’s ‘grievances’ and stated that it was intervening in a dispute that began several months ago, without providing new information.
The group noted that it had ‘full confidence’ in its ability to demonstrate the validity of its contracts, and called the amount of the fine ‘unfounded’.
The ministry’s complaint is part of the proceedings brought by nearly 170 franchisees at the end of 2023, the DGCCRF noted.
French daily La Lettre published a legal complaint from the ministry, which claimed that Carrefour’s contracts with franchisee stores contained ‘a significant imbalance’.
The document recommended a €200 million penalty, which, the newsletter noted, was a ‘record civil fine’.
Clauses
Shares in Carrefour went down by 9%, to €13.24 per share, at 11.00 GMT, after dropping by as much as 9.6% earlier.
Analysts from Bernstein said that investors’ reactions to the report were exaggerated.
The firm noted, ‘We think this court case pertains to a very small number of franchisees and only 200 members of the more than 2,000 franchisees.’
The legal document demands that the company immediately amend around ten clauses in the franchise contracts.
It notes that the retailer could face a penalty of €50,000 per day if it fails to take action.
The offending clauses cover areas such as excessive recommended resale prices and a requirement to source almost exclusively from Carrefour.
The chief executive of Carrefour, Alexandre Bompard, has said that the retailer aims to make half its revenue in France from franchised stores.
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