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France – Germany: Part 2

Regarding commercial matters, competition law in France seems original to our European neighbors in that it often goes further than European necessity; not to mention that it is also extremely protective of our SMEs when faced with the overkill of other major economic participants.

Supervised annual commercial negotiations, the necessarily communicated general conditions of sales, the shortened payment deadline, the non-brutal breakdown of the commercial relations…. These large French players know the severe limits of their power, often with a criminal risk at stake, even if it is sufficiently discouraging facing commercial risk of breakdown much more obstructive for a SME which often risks the dereference.

The situation between the PMEs and the large groups in France is hopeless, with a weak number of ETI, that when a PME decides to act in order to put an end to commercial practices that jeopardize it, it is often too late.  The SME often has neither the culture nor the means of seeking out an amicable solution.  There is not really an intermediate solution between the pursuit of unbalanced relationships and break. Even if mediation between enterprises has recently been endorsed by a decree as of April 2010;  this system allows companies to find a solution for trying to maintain trade relations that litigation would definitely be putting at risk.

Is the German legislature called to the rescue of the PME, as in France, in order to encourage balance of practices that often compare to an economic war of illegal arm,?

In Germany, the culture and the practice of negotiation and consultation are much more widespread, as relationships between salaries or businesses show.

Because of the numbers and power of the SMEs (called, « Mittelstand » in Germany), commercial relations are less unbalanced and state intervention much less necessary than in France.  For that matter, if the proportion of Mittlestand remains very important, it is in the process of declining and provoking certain anxieties with our German neighbors who see their economy evolving towards a more French style, with a powerful climb in the large groups.

However, there is no regulation in Germany regarding the rupture of commercial relations, the supervision of payment deadlines, the obligatory written annual commercial negotiations…contractual freedom prevails.

The French-German enterprises must think about attentiveness to bring to the contracts governing their relations. First priority, the specific clause on applicable law and jurisdiction, provided that it is properly drafted in order to avoid any dispute; a rule to specify and to apply case by case and according to the geographic location of the business.

Regarding relationships between large enterprises and Mittelstand in Germany, they seem much calmer.  The Germans have the ability to work as a group, working with and towards collectivity, much like that of which we see in certain Asian countries. Like Korea for example, with whom they maintain close relationships and mutual respect. Few are unfamiliar with this German model which demonstrates the togetherness of business interests, those of which in France would be described as very differing.  Through collaboration in Germany between companies and universities for R&D, between major and smaller companies for commercial export, the French often hear that it is the large enterprises supporting the SMEs in Germany. Is this really the case?

Maybe this is what partially explains the fact that France has only 90,000 exporting enterprises when German totals more than 240,000.  However, if the major hindrance to the development of French enterprises is access to finance and the ability to gain market share in export markets, it is worth noting the majority of French SMEs who invest abroad are responsible for 2.3 of the 2.8 million jobs created in France during the last twenty years.

Germany, like the United Kingdom, has implemented a strategy of demanding reforms and adapting to the new world economic order.  Germany bet on flexibility and is opting towards globalizations.  Knowing Germans are not notorious for their flexibility; this may come as quite a surprise to many even though they have been demonstrating otherwise with their recently painful economic reforms.

 Vice versa, the French are not known for their openness to other cultures nor for their language skills…Even so, French young people are seen more and more abroad, in Shanghai for example, seeking fortune and willing to compromise greatly to earn a place in the global economy, including accepting local contracts and little protection compared to what we are used to in France.  There is also a good amount of French with impressive levels of English.  And finally, they are found in all of the top tourist destinations, discovering new cultures.

Does this mean that overall, it is French companies, as opposed to individuals, suffering from chronic doubts about globalization and export capabilities?  In any case, if the French create more and more tourism and seek out a first professional experience abroad, it is safe to bet that French enterprises of tomorrow will not have any export complex left and will no longer need lessons in globalization.

Studies show that foreigners like the flexibility and the small arrangements with reality of the French.  Understood, it would not be as easy in Germany. The intercultural dimension, which is strongly linked to stereotypes of the way we work, is far from negligible.  Could it not be an advantage for the French in comparison with foreign investors?

Written by Cecile Dekeuwer (c.dekeuwer@lexinit.com )

Translated by Marisa Delchert

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