What is the motivation for legally forcing sellers to determine the minimum price of food by multiplying it by 1.1?

Question

A radio advertisement for a food distributor said that they sell their food to fight the current crisis at "prix coutant" (cost price). However, it was followed by a very speedy text saying that, according to the law, the actual cost price was actually 1.1 times the real cost price.

This seems confirmed by this governmental source, saying:

À compter du 1er février 2019 et jusqu’au 15 avril 2023, le prix d’achat effectif est affecté d’un coefficient de 1,10 pour les denrées alimentaires et les produits destinés à l’alimentation des animaux.

From February 1 2019 until April 15 2023, the effective purchase price is multiplied by a coefficient of 1.10 for foodstuffs and animal feed.

I think I am misunderstanding something here, but what I understand is:

• I am a food seller, I buy some food at 1€
• I want to make an advertisement and want to sell the food at cost price
• I cannot do so; I am actually forced by law to sell it at 1.1€ (so I am still making a profit)

Is that correct? What is the motivation behind this?

Answer 1

The law against revente à perte (resale at a loss) is an anti-dumping law intended to prevent predatory pricing.

As explained in the Wikipedia article for the case of Keck and Mithouard:

The aim of this law was to prevent retailers engaging in 'cut-throat competition' by dumping excess produce onto the market, and forcing competitors out of business.

Answer 2

This is actually not that unusual. In many places, a retailer will sell some products as a "loss leader" to get people in the store to then, hopefully, buy other products where they can make a profit. But that can be controversial at times, and some places have laws to prevent this. A big concern is that a large company might sell at a loss to pull customers away from the competition. Once the competition is out of business due to low sales (or due to losing money because they match the price), the large company has a monopoly and raises prices to make excess profit. An example of this is with gasoline pricing. The Sheetz company had a special gas promotion but couldn't run it in certain states due to legal restrictions.

Answer 3

Note that as the food seller in your example you do have additional costs on top of the 1€ for the food item. You need to pay your employees (or yourself) and presumably also need some space where the food item is stored and the sale to end customers takes place. These costs are the motivation for the extra 10%.

I have no idea whether 10% is a reasonable amount for a food seller but if you were to sell the items at the 1€ you paid yourself you certainly would lose money which the law is trying to prevent as an anti-dumping measure as explained in sjy's answer.

Answer 4

On one hand, the law does defines "prix d'achat effectif" (effective purchase price), which is the cost on the invoice, minus any sort discount obtained outside, plus various taxes and costs. In spirit, it's the price at which the seller would break even all things considered, though obviously the reality might vary on a case by case basis.

Code de commerce, Article L442-5:

Le prix d'achat effectif est le prix unitaire net figurant sur la facture d'achat, minoré du montant de l'ensemble des autres avantages financiers consentis par le vendeur exprimé en pourcentage du prix unitaire net du produit et majoré des taxes sur le chiffre d'affaires, des taxes spécifiques afférentes à cette revente et du prix du transport.

It should be noted that it forbids not only the sale below that price, but also explicitly forbids the advertisement of such sale:

Le fait, pour tout commerçant, de revendre ou d'annoncer la revente d'un produit en l'état à un prix inférieur à son prix d'achat effectif

The motivation behind this is that it's an anti-dumping and consumer protection measure. Larger companies could afford to sell stuff at a loss and drive smaller companies out of business, creating a monopoly where they could then raise prices at will, at the consumer's expense. More generally, French and European law aims to forbid unfair competition, monopolies, and other cartels.

The law 2020-1525 "Accélération et simplification de l'action publique" adds to the effective purchase price definition, which is where the extra 10% comes in, minus some costs and taxes still.

Loi n° 2020-1525, Article 125:

le prix d'achat effectif défini au deuxième alinéa du I de l'article L. 442-5 du code de commerce est majoré d'un montant égal au produit d'un coefficient 0,1 par une valeur P, égale au prix d'achat effectif défini au même deuxième alinéa minoré du montant des droits de consommation mentionnés au I de l'article 403 du code général des impôts et du montant des cotisations prévues à l'article L. 245-7 du code de la sécurité sociale.

This is defined under title IV of the law, called "Diverses dispositions de simplification", but I can't really tell if this was the simplification of an existing rule (as the name of the title would suggest) or not.

Regarding your question, the general idea is that your minimum resale price is buying price +10%-ish, but the 1€ and 1.1€ figures would be modified by a variety of costs, discounts, and other taxes.

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On the other hand, "prix coutant" doesn't have a legal definition, or none that I could find at least. It clears the requirement that it wouldn't reasonably be understood as selling at a loss (doing or advertising so would be illegal anyways).

However it maintains an ambiguity on whether it means "the lowest price we can legally sell at", or "the lowest price we can afford to sell at", which may or may not be the same price. So it can be argued to be technically correct advertisement either way.