The European Antitrust Review 2014 • Section 3: Country chapters
France: Merger Control
The French merger control regime is governed by the provisions of Book IV of the French Commercial Code (article L430-1 and following), as amended by the Law on the Modernization of the Economy (LME) enacted on 4 August 2008, and the Government’s Order No. 2008-1161, dated 14 November 2008.
Presentation of the French Competition Authority
The Competition Authority is an independent administrative
authority. It was created in 2009 from the transformation of the former Competition Council.
As far as antitrust is concerned, the Competition Authority, whose assignment is to regulate market competition, is in charge of the application of both national (Book IV of the French Commercial Code) and European legislation (articles 101 and 102 TFEU, ex articles 81 and 82 ECT).
The Competition Authority enforces antitrust and has the power to engage actions for anti-competitive practices on its own or at the request of a plaintiff. The Competition Authority also plays an advisory role by issuing opinions on its own initiative or at the request of corporations representing the collective interests: government, parliament, local authorities, professional organisations or organisations acting for the consumers’ interests’ defence.
The Competition Authority is a collegial institution (17 members), appointed for five years, by an order taken on the report of the Ministry of the Economy. The decisions of the Competition Authority are made collectively, except in cases where the president or vice president may act alone.
The investigations are conducted by rapporteurs from different professional bodies (ie, judges, economists, lawyers, engineers, etc) under the direction of the general rapporteur and the deputy general rapporteurs.
The LME also created the position of ‘hearing officer’, who reports to the president and proposes solutions to ensure the compliance of the proceeding with the parties’ rights. The role of the hearing officer is of great importance as regards the parties’ rights of defense. In Notice No. 09-A-41, dated 1 July 2009 related to the proposal of nomination of the hearing officer, the Competition Authority made it clear that the role of the hearing officer shall be that of a procedural expert separate from other members who is the only one able to take a decision.
As far as merger control is concerned, a specific team dedicated to merger control was created. This department is now a part of the Competition Authority’s investigation services and is in charge of the definition of the Competition Authority’s policy in merger control. The investigation services also include a team of economists in charge of conducting economic analyses in order to appreciate the impact of the concentrations on the market.
Merger control, which was previously within the exclusive competence of the Ministry of the Economy, was transferred by the LME to the Competition Authority. The latter assesses the competition effects of the mergers by taking into account any possible efficiency gains. The executive power, through the Ministry of Economy, may nonetheless have the last word in situations where France’s fundamental interests are at stake.
If the operation does not raise any particular competition issue or if the commitments made by the parties are sufficient to remedy to competition difficulties, the operation is scrutinised and a decision is made within 25 business days (except in case of commitments, a maximum of a 15 business days’ time period can be added) from the filing of a complete notification form (Phase I). Another 15-day time period can be added if the parties request to suspend the procedure. Taking into account this ‘stop the clock’ time period, the duration of the examination under Phase I is a maximum of 55 days.
The president of the Competition Authority is the only one authorised to rule on merger transactions that do not imply competition issues (Phase I). If necessary, the president can discuss commitments with the undertakings concerned.
If serious doubts of anti-competitive effects persist at the end of this phase, the Authority will take the decision to open a Phase II investigation, during which the Authority will conduct a thorough examination of the contemplated merger by launching a market test and by an economic analysis of the impact of the transaction on the market. The Phase II examination lasts 65 business days except if commitments are presented within the last 20 days of the 65 days’ time period. In such a case, the examination time period will be extended with 20 business days starting from the date of reception of the commitments. Another 20-day time period can be added if the parties or the Competition Authority request to suspend the procedure. Taking into account this ‘stop the clock’ time period, the duration of the examination under Phase II is a maximum of 105 days.
Within 25 business days after the Competition Authority has adopted its decision, the Ministry of the Economy can decide to evoke a merger that would imply issues of fundamental interest other than competition. The fundamental interests that may be in question are related to industrial development, the competitiveness of the undertakings concerned as regards the international competition and the employment sustainment. However, the Ministry of Economy has thus far not used this right of evocation since the LME was adopted in 2008.
Where a merger raises significant anti-competitive effects that cannot be counterbalanced by economic efficiency gains and where the failing firm defence is not relevant, it may be necessary for the parties to undertake some commitments that will remedy or compensate for the anti-competitive effects.
According to the Authority Merger Control Guidelines published on 2009, several cases can allow the submission of a simplified notification. For instance, where the undertakings concerned are not active on the same markets or in vertically related or neighbouring markets they can submit a less detailed form than usual. Moreover, for companies running a significant number of concentrations subject to review in a year, such as investment funds or major actors in the retail trade sector, can, after the closing of their annual financial statements, provide the merger control department of the Authority with a core summary, preferably in electronic format, that contains the general information that is likely to be repeated in all of the notifications throughout the year to come. Then, they can limit the content of their notification to the information being specific to the operation.
Finally, it is worth mentioning that on 22 February 2013, the French Competition Authority published a revised draft of its Guidelines on merger control. This project does not change the current Guidelines significantly but complements them, incorporating the first four years’ Authority merger control practice.
The revised draft guidelines outline the importance of the informal ‘pre-notification’ phase, giving the companies the opportunity for a preliminary discussion with the Authority about any difficulties related to the review of the transaction or the specific nature of companies or markets.
The revised draft guidelines also specify eligibility criteria for simplified examination procedures.
Taking into account its experience due to the many notifications filed in the past four years, the Competition Authority develops its approach in particular in relation to the definition of relevant markets and the competitive assessment, insisting on the use of filters and economic analysis.
The project also emphasises the importance of compliance with the commitments taken by companies. For structural remedies, the Authority, taking inspiration from models developed by the European Commission and other competition Authorities, proposes two model forms for transfer of assets and the trustee mandate in the revised draft guidelines.
The final version of the Guidelines on merger control should be adopted at the beginning of the second semester of 2013.
Panorama of key decisions of the year 2012/2013
The Competition Authority sanctions companies for non-compliance with French mergers provisions
Lack of notification of a merger
According to article L.430-3 of the French Commercial Code, a merger must be notified to the Competition Authority prior to its implementation if the thresholds, referred to in article L.430-2, are met. In the event of a failure to notify, either intentionally or negligently, the French Competition Authority may impose fines up to 5 per cent of the aggregate turnover of the undertaking concerned. The Authority may also impose periodic penalty payments on the concerned undertakings to compel them to notify a merger.
This decision was also an opportunity to rule on the statute of limitation of practices mentioned in articles L.430-8 I of the French Commercial Code, which is from now on indicated as limitated to five years. Almost one year later, the Authority sanctioned the lack of notification in its decision of 31 January 2013 (decision 13-D-01) and imposed a fine of €400,000.
In this case, Réunica and Arpège, two social protection groups, signed a partnership agreement in September 2006 in order to create a single group called Réunica Group. The French Competition Authority first established the effective achievement date of the merger (1 January 2010), then carried out the analysis of the operation to decide whether the merger between Réunica and Arpège constituted a concentration pursuant to article L. 430-1 of the French Commercial Code. The Competition Authority found that the operation was a concentration and that the thresholds were met. Therefore, a notification should have been made regarding this merger, prior to its implementation.
When determining the appropriate fine, the Authority noted that, due to their status of social protection groups, neither Réunica nor Arpège directly achieved turnover. However, in order to maintain the effectiveness of the obligation to notify and its related sanction in case of failure of notification, the Authority indicated that the economic reality of the entities covered by the obligation to notify should be taken into account. Therefore, the turnover of all entities, now controlled by Réunica, was refered to for the purpose of calculating the maximum fine to be imposed on this group.
The Authority took into account the fact that Réunica had spontaneously contacted it following the implementation of the merger. The Authority also noted the short period between the effective achievement of the transaction and the date on which Réunica had contacted the merger division of the Authority. However, the Authority found aggravating factors pointing to the fact that Réunica had already notified with regards to two mergers in the last five years and therefore could not be unaware that this transaction should be notified in the same way.
Failure to meet commitments
In its decision of 9 July 2012 (decision 12-D-15), the French Competition Authority imposed a fine of €1 million to Bigard Group for non-compliance of one of its commitments requiring the signing of a brand-licensing agreement made during its February 2009 takeover of Scopa Viandes. This decision is of interest because it shows that circumventing a commitment is a serious practice and it highlights the essential role of the trustee responsible for monitoring the implementation of the commitments.
It is worth noting that on 17 February 2009, the minister for economic affairs approved the planned acquisition of sole control of Socopa Viandes by the Bigard Group. This authorisation was subject to compliance with several commitments, in particular the transfer of five slaughterhouses or processing plants, the prohibition of ‘ranges’ discounts and the signing of a brand-licensing agreement for the well-known Valtéro brand, which was owned by Socopa.
However, in order to circumvent this last commitment, the Authority noted that Bigard Group marketed Valtéro products under the Socopa brand using Valtéro product graphic design and packaging. Moreover, Bigard Group informed consumers about the rebranding of Valtéro through the media and a poster campaign. These practices caused confusion between both brands and transferred awareness of the Valtéro brand onto Socopa brand. Therefore, the Authority stated that the Bigard Group has failed to comply with this commitment.
Under French law, in case of non-fulfilment of a commitment, the Competition Authority may, pursuant to article L. 430-8, either withdraw the clearance decision so that the parties are compelled to notify the operation again or impose fines not exceeding 5 per cent of the aggregate turnover of the undertaking concerned.
Regarding the role of the trustee, the decision explains that for complex cases a trustee may be appointed to monitor the proper execution of the commitments and report to the Authority. If the trustee’s reports contribute to the analysis of the Authority, it is not linked by the appraisal of the trustee.
In this case, the trustee acted a number of times and issued warnings to Bigard Group regarding the Valtéro brand and the relevant practice. Bigard Group did not follow his recommendations. As a consequence, the Authority sees this as an aggravating factor for the purpose of establishing a fine.
A transaction cleared subject to several injunctions
In its decision of 23 July 2012, the French Competition Authority cleared the acquisition of TPS and CanalSatellite by Vivendi Universal and the Canal Plus Group subject to compliance with 11 injunctions (decision 12-DCC-100). It is the second time the Authority has had to examine this transaction.
The case started in 2006 when the Minister for Economic Affairs authorised Canal Plus and Vivendi to take over TPS and CanalSat, subject to 59 commitments. In 2011, establishing the failure of the acquirers to comply with these commitments, the French Competition Authority withdrew its clearance decision according to article L.430-8 of the French Commercial Code and fined Canal Plus Group €30 million (decision 11-D-12). As a consequence, both companies again notified the Competition Authority regarding the transaction.
Following a first instruction, the Authority started an in-depth investigation based on a market test and opinions from the Audiovisual Council and the Electronic Communications and Posts Regulatory Authority. Having examined the market since 2006, the Authority noted that competition was significantly weakened on several paying television markets: the acquisition of broadcast rights; the broadcast of channels; the commercialisation of special-interest channels; and the distribution of service. Five years after the merger, the Canal Plus Group has a virtual monopoly on those markets.
As Canal Plus offered insufficient commitments, the French Competition Authority decided to impose measures designed to restore conditions of effective competition on paying-television markets in accordance with the provisions of article L.430-7 III of the French Commercial Code. These injunctions imposed duty, particularly regarding the acquisition of movie rights; the signing of separate contracts for different rights; and the clarification of the rules for the access of independent channels to distribution services on CanalSatellite. They must be respected for five years and a trustee is responsible for monitoring their proper implementation.
By these injunctions, the purpose of the Authority was first to restore a diversity of paying-television providers that can compete with the Canal Plus Group and can offer a less expensive service to customer. Moreover, the Authority wanted to avoid the pre-emption by the Canal Plus Group of new ways for consumers to access content such as subscription or non-subscription to video on demand. Therefore, the competitive future of these markets may be preserved. Finally, these injunctions were given to preserve the system of financing for the French movie industry.
The acquirers challenged this decision before the Conseil d’Etat (the French Administrative Supreme Court), seeking its annulment. On 21 December 2012, the Conseil d’Etat upheld the Authority’s decision.
The French Competition Authority adopt a more favourable approach than the Competition Commission
In a decision dated 7 November 2012 (decision 12-DCC-154), the French Competition Authority cleared, subject to commitments, the acquisition of several assets of Sea France by Eurotunnel Group.
This acquisition is part of the liquidation procedure of Sea France by which the Commercial Court of Paris decided to sell assets of Sea France, in particular three vessels (the Nord-Pas-de-Calais, the Berlioz and the Rodin). In a decision dated 11 June 2012, the Court appointed Eurotunnel as investor. Following the transaction, Eurotunnel launched ferry services between Calais and Dover on 20 August 2012 under the MyFerryLink brand.
It should be noted that in this case, Eurotunnel obtained derogation from the suspensive effect of merger control to purchase Sea France’s assets. This derogation, subject to conditions provided in article L. 430-4 of the French Commercial Code, allows companies to proceed with a transaction before the French Competition Authority clears it. Eurotunnel could therefore incorporate assets and revive economic activity stopped by the liquidation.
In the light of its analysis, the French Competition Authority found that this transaction may raise competition concerns that consist of a risk in freight transport of coupling rail transport and shipping offers as well as a risk of discrimination between customers. However, in order to address the risks for competition, Eurotunnel proposed commitments. Eurotunnel undertook not to grant freight customers discounts based on buying bundled Eurotunnel and SeaFrance ferry services for five years. Moreover, Eurotunnel committed not to treat customers who do not use MyFerryLink in cross-Channel shipping in a discriminatory manner.
It is worth noting that the analysis of the French Competition Authority is more favourable than the one given by the Competition Commission on 6 June 2013. The Competition Commission considered that if Eurotunnel was allowed to operate the ferries, it would increase its market share and prices would rise on the Dover to Calais route. As a consequence, the Competition Commission prohibits Eurotunnel from operating ferry services at the port of Dover for two years with any vessel and for 10 years with its two largest vessels, the Berlioz and the Rodin. As an alternative to the 10-year prohibition, Eurotunnel may sell the Berlioz and the Rodin. Eurotunnel said it would appeal the decision.
The analysis of the French Competition Authority of a change from joint to sole control
Among the decisions of the French Competition Authority, it is worth noting a decision of 5 September 2012 (decision 12-DCC-129) approving the change from joint control to sole control by SNCF over the Keolis Group. This authorisation is given provided that SNCF maintains the commitments made in 2010 and undertakes to continue their implementation.
Indeed, on 10 January 2010, the French Authority cleared, with commitments, the joint control by SNCF and Caisse de Dépôt et Placement du Québec (CDPQ) over Keolis and Effia. In order to address the potential distortion of competition, the notifying parties made several commitments preventing, in particular, any more favourable treatment of Keolis by SNCF at the expense of its competitors.
In 2012, SNCF intended to increase its share to 70 per cent, passing from a joint control to a sole control over the Keolis Group. The European thresholds being met, this transaction should have been examined by the European Commission. However, the Commission referred the acquisition of sole control of the Keolis Group to the French competition Authority at the request of SNCF on the grounds of article 4(4) of the Regulation 139/2004 (decision COMP/M.5556).
In its analysis, the French Competition Authority noted that in a great number of cases a change from joint control to sole control is not likely to affect competition in a significant way. However, the fact that the acquirer already has joint control does not mean that the operation at stake would not raise any competition concerns and therefore a thorough analysis has to be carried out anyway.
In this regard, the European Commission, in its referral decision, considers that the loss of joint control by CDPQ over Keolis could call into question the 2010 commitments and strengthen the conglomerate effects of the transaction.
The French Competition Authority concluded that, in light of these elements, the competition analysis should take into account the risk identified by the European Commission and the recent evolutions of the relevant markets.
In its decision of 5 September 2012, the French Authority considered that urban and rail transport market conditions have not changed since 2010, and that the risk of a distortion of competition is still present. In contrast with the Commission’s decision, the Authority stated that the change of control does not undermine the 2010 commitments. Moreover, as the change of control does not worsen the conglomerate effects, it evaluates the commitments as sufficient.
The French Competition Authority raises digital publishing issues for the first time
In its decision of 30 August 2012, the French Competition Authority cleared the acquisition of the Flammarion group by the Gallimard group (decision 12-DCC-126).
This decision is of interest as regards analysis of the horizontal effect in the acquisition of the intellectual property rights market. In order to assess the parties’ position, the Authority takes into account ‘the amount of any advances paid to the authors of the 100 best-selling books in France for each range segment’.
This method was followed before by the European Commission in Lagardère/Natexis/VUP of 7 January 2004 (decision COMP/M.2978). The Commission explained that ‘publishing houses do not compete for the acquisition of the publishing rights on the basis of the volume sold but of the price offered to the authors in order to purchase such rights, ie, on the advances (and the proportional remuneration) which are offered to them by the publishing houses.’ In this decision, the Commission indicated that an advance is a firm and final payment by the publisher to the author before a manuscript is delivered. Once the book is published, the author only receives royalties exceeding the amount of the advance.
Through the acquisition of Flammarion, Gallimard group will substantially strengthen its position, becoming the third major player in the publishing industry. However, the decision indicates that the transaction does not raise any competition issues since market shares will rarely exceed 30 per cent of the market involved and the new entity will face competition from equivalent players.
An example of a transaction cleared in Phase II by the French Competition Authority
Under French merger control, decisions following an in-depth examination are quite rare. Therefore, it is worth mentioning the French Competition Authority decision of 2 July 2012 approving, without imposing any remedies, the acquisition by Castel Frères SAS, subsidiary of Castel, of six companies belonging to Patriarche, active in the production of still and sparkling wines after an in-depth examination.
Castel was already a major private label producer of wine with no geographical indication. The Authority therefore opened an in-depth investigative phase since the transaction would bring together several brands of this type of wine.
The Competition Authority considers that the transaction is not likely to affect competition in the market of wines sold for everyday consumption. The Authority namely observed that the sector of wines without any geographical indication had been in decline for several years and that, more generally, the new entity would face competition from other operators active on the market of wines sold for everyday consumption.
This is the first decision rendered by the Competition Authority that takes into account a quantitative analysis founded on the upward pricing pressure (UPP) test. The aim of this analysis, developed by American antitrust economists Joseph Farrell and Carl Shapiro, is to evaluate the incentives of a new entity to raise prices following the concentration.
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