Undertakings are having to adapt to additional obligations further to the adoption of a number of new pieces of interventionist legislation and regulations over the course of the last few months (the Montebourg decree extending the government’s power to control foreign investments in France, the Florange law on site closures, the rules governing part-time work and traineeships, the ALUR law reinforcing rent control, the Pinel law regulating commercial leases, the Hamon law subjecting undertakings to both pointless and costly formal requirements, the ministerial circular of 6 August 2014 purporting to require suppliers to  maintain a fixed price for a period of one year in their arrangements with distributors under the single commercial agreement etc.).

The last law to date on social economy issues of 31 July 2014 (ESS law) also presents its set of obligations. The flagship provision of the ESS law is widely known: on the pretext of promoting the sale of SMEs, in the case of a planned sale of a business (either through a share deal or an asset deal) the law requires all undertakings with fewer than 250 employees, two months before any transfer, to give the employees first refusal to purchase the business two months before the date of the transfer takes place, under penalty of the transfer being declared null and void. Not only does the ESS law contain such paradoxical measure as promoting the sales of undertakings having already found a buyer but it also includes another provision which appears to have gone largely unnoticed and which imposes a significant constraint on undertakings.

Article 93 of the ESS law obliges manufacturers, producers or distributors of products marketed in France to provide consumers with certain information (geographic origin of material used, components used in manufacturing process, quality control and audits, organization of the production chain and manufacturer’s details – name, location etc. – and those of his subcontractors and suppliers), if they request them and are aware of evidence casting doubts as to whether the goods in question have been  manufactured under conditions complying with international conventions on fundamental human rights. It is noteworthy that this provision on the transparency of working conditions had been introduced by amendment during the course of the parliamentary debates on the Hamon law of 17 March 2014. Initially adopted on its second reading by the National Assembly, it was then rejected by the Senate. At the time, it was felt (rightly) that the new obligation would only exacerbate the constraints already weighing heavily on French undertakings while the government was in the midst of a campaign to simplify procedures to increase competitiveness and such a transparency obligation was likely to create appreciable costs for undertakings in terms of human and financial resources. Further, although it was legitimate for manufacturers to impose this obligation on their subcontractors, this was not necessarily the case for distributors in respect of any sub-contractors they may have.

The provisions in question appear to have gone out through one door only to come back in through another via the ESS law without this time being subject to amendment and ultimately resulting in new Article L. 117-1 of the Consumer Code, which states:

“Manufacturers, producers or distributors of a product marketed in France shall provide to any consumer so requesting and who is aware of any serious matters challenging the fact that the product has been produced under conditions complying with international conventions on fundamental human rights, all information in his/her possession concerning the following: geographic origin of material used, components used in manufacturing process, quality control and audits, organization of the production chain and manufacturer’s name, geographic location, area of activity and those of his subcontractors and suppliers.

Where the manufacturer, producer or distributor is not in possession of the information requested, he/she shall inform the consumer having made the request thereof.

If the provision of information to the consumer, in application of the first subparagraph, is such as to seriously compromise the strategic or industrial interests of the manufacturer, producer or distributor concerned by the request, the latter may decide not the provide the information but must give the reasons for that decision.

The list of conventions referred to in the first subparagraph shall be laid down by decree.”

The reasons which caused the Senate to reject the transparency obligation in the first place are still pertinent and there are also other legal and practical arguments to consider. Firstly, and most importantly, the vagueness of the law is such that it carries a great deal of legal insecurity. How can the geographical origin of all materials and components of a product be identified? If the product contains 1000 components, how many and which of them should be provided? Is it enough to state the origin of the main components and raw materials?

The Consumer Code does not stipulate what penalties are incurred where an operator refuses to provide the information requested or the information provided is inaccurate. Is the undertaking to be regarded as guilty of unfair competition for non-compliance with the regulations? In the absence of specific sanctions, are the sanctions for breaches of the information obligation under ordinary law applicable? Are periodic penalties likely to be imposed?

Finally, Article L. 117-1, 3rd subparagraph, provides for derogation from the provision of information obligation, if the information requested by the consumer « is such as to seriously compromise the strategic or industrial interests of the manufacturer, producer or distributor concerned by the request » provided reasons are given for the refusal. In what circumstances can these justifications be used? Can the consumer challenge them? What reasons will be deemed as sufficient?

The strengthening of consumers’ rights to information and encouraging transparency is a respectable goal. It is unfortunate however that this must clash with the competitiveness of undertakings.