France: private practice perspective
The French competition enforcement agency
History and structure
The French competition enforcement agency, historically known as the Conseil de la concurrence (the Competition Council), was set up in 1986 by Ordinance of the same year. It was bestowed with the power to levy penalties in addition to having an advisory role. In 2008, a French law transformed the Competition Council into the Competition Authority (the Authority), endowing it with the power to review mergers in addition to antitrust matters.
The Authority has independent administrative authority status. As a result, even though it acts on the state’s behalf, and advises the government on the drafting of legislation, it is independent of the government. Its independence is guaranteed through its composition, the way it is structured and its continually increasing powers. Its decisions can be appealed only to the Court of Appeal of Paris. An example of the Authority’s continual increase in powers was the creation in 2008 of its own investigation services and the extension in 2018 of its jurisdiction to the regulation of certain legal professions.
As far as the structure of the Authority is concerned, the Authority is composed of two main bodies:
· the board – made up of 17 members comprising the current President, Isabelle de Silva, four vice-presidents and 12 non-permanent members. The board reviews the cases investigated by the investigation services; and
· the investigation services – split into 10 specialist units and led by current General Rapporteur Stanislas Martin (five antitrust units, one merger unit, one inspections unit, one regulated professions unit, one economist unit and one digital economy unit).
As far as the nomination process is concerned, the board, the President and the other members of the Authority are appointed by decree of the French President for five (renewable) years. As regards the investigation services, 110 agents are nominated by the General Rapporteur – with the latter being appointed by regulation of the Minister of the Economy.
Authority scope and powers
The Authority has full jurisdiction in competition matters. Since its inception, it has enforced the European and French provisions on cartels and abuse of dominance or unilateral conduct, and, since 2008, mergers that meet the French jurisdictional (turnover) thresholds.
The Authority does not have jurisdiction in relation to consumer protection, unfair and restrictive practices, and practices of minor, local competitive impact. The Directorate General for Competition, Consumer and Fraud Affairs (DGCCRF) is competent in the above areas. Contrary to the Authority, the DGCCRF is a department within the Ministry of the Economy. The Authority and the DGCCRF frequently cooperate with one another, however, concerning dawn raids, for example.
The Authority has the power to initiate investigations, sector inquiries and market consultations. It also enjoys significant investigative powers to conduct dawn raids (eight in 2019). More than 70 per cent of investigations initiated by the Authority were on an ex officio basis, with the remaining 30 per cent being referred from the DGCCRF.
As to its decision-making powers, the Authority has a wide range of tools at its disposal: it can impose interim measures (nine requests in 2019), fines (22 own initiative decisions, 21 decisions following complaints by companies and five decisions following a complaint by the Minister of Economy in 2019), enter into settlements or impose remedies. It can also issue non-binding opinions upon request or on its own initiative (19 opinions in 2019), issue injunctions and impose periodic penalties and commitments. The Authority can also refer a case to the criminal courts.
As to court oversight, the Authority’s decisions may be appealed exclusively to the Paris Court of Appeal. 2019 saw an appeal rate of 44 per cent. The Paris Court of Appeal can annul, amend or uphold the Authority’s decisions. Indeed, in more than 70 per cent of cases the Authority’s decisions have been upheld. The Paris Court of Appeal’s rulings are subject to review by the Supreme Court solely in relation to points of law, however.
Enforcement trends and priorities
Covid-19 only had a temporary impact on the daily functioning of the Authority. Indeed, between 25 March 2020 (the date on which a state of emergency was declared) and 24 June 2020, the statutory deadlines for the review of mergers, the execution of commitments and injunctions, were suspended. The deadlines for the submission of observations, briefs and appeals were extended.
In 2019, the Authority accorded priority to the review of practices in the digital sector. In January, it created a new digital economy unit whose function is to cooperate with other units and other regulators in all competition matters related to the digital sector. Thanks to such new competence, the Authority was able to publish, in June 2020, a market study on competition and e-commerce, highlighting the need to regulate online intermediaries and platforms.
A further priority pertains to ensuring the speediness of dispute resolution mechanisms. The Authority continues to promote the settlement process (five cases in 2019) and continues to encourage leniency applications in cartels and commitments in abuse of dominance or unilateral conduct cases. Sometimes, however, the need to act speedily is not a matter of choice, but results from a situation of great urgency. On this particular point, the Authority is expecting additional time gains thanks to the upcoming implementation of the ECN+ Directive, which will allow, pursuant to article 11, the Authority to act on its own initiative to order the imposition of interim measures when deemed necessary and appropriate to do so.
As far as merger review is concerned, 2019 saw a record-breaking number of merger cases (270 merger decisions representing 91 per cent of the Authority’s decisions), a high number of unconditional clearance decisions (261 of 280 filed notifications), with only 3.5 per cent of its decisions being conditional clearance decisions. Sixty-six per cent of the merger decisions in 2019 pertained to the retail sector. Finally, the Authority continues to seek to simplify merger notifications. It has done so via the adoption of new merger control guidelines in July 2020.
These guidelines allow for a greater number of mergers to benefit from a simplified review process and improves legal certainty.
The recent trend in relation to cartels and abuse of dominance or unilateral conduct cases has also shown some particularities. In this regard, 2019 was characterised by the imposition of high fines (€632 million resulting from 14 infringement decisions of a total of 45 Authority decisions). Most of the infringements occurred in the media and digital sectors, followed by the transport sector.
Recent developments – 2020
The majority of the Authority’s merger decisions were unconditional clearance decisions, often justified by the parties’ low combined market shares, the fragmentation of the market, and the presence of alternative competitors and other countervailing factors.
Some conditional clearance decisions required commitments of a rather original nature. For example, in June 2020, the proposed merger of agricultural cooperatives Dauphinoise and Terre d’Alliances was expected to lead to the disappearance of a credible alternative competitor in the gardening retail sector. To address the Authority’s concerns, the parties submitted a remedy consisting in a sunrise clause, enabling the Authority to monitor any future strategic decisions in this sector by the parties. Such proactive participation by the regulator in the remedy process reflects the Authority’s increasing interest in behavioural remedies, as was reflected in a study released in January 2020.
August 2020 was a memorable month in that the Authority issued its first ever prohibition decision. The case concerned a joint takeover by Soditroy and Leclerc (both active in the supermarket retail sector) of a hypermarket belonging to a competitor, thus leaving only one alternative competitor post-transaction. The Authority opened a Phase II in-depth examination of the transaction in October 2019. The Authority considered that the merger would have created a duopoly in a small urban area, resulting in an increase in prices because of the disappearance of a competitor, a reduction in choice, and in a risk of tacit coordination with the remaining competitor. In light of such risks, the proposed remedies consisted in the reduction of the retail surface area of the target. The proposed remedy was deemed insufficient to allay the Authority’s concerns, however. In particular, the proposed remedy would have, in the eyes of the Authority, led to an unacceptable reduction in consumer choice.
Abuse of dominance/unilateral conduct
On 16 March 2020, the Authority issued an important decision against Apple concerning resale price maintenance (RPM) and abuse of economic dependence by Apple in the downstream market, resulting in a record-breaking fine of €1.1 billion on Apple. By way of background, Apple distributes its products via a network of 200 distributors ̶ both large generalists and specialist dealers (authorised standard resellers or premium resellers offering an immersive Apple reselling experience). The Authority concluded first that these premium resellers were subject to fixed prices. Interestingly, it observed that behind Apple’s “recommended” prices, Apple monitored prices, controlled promotions and left little margin for reseller profits, thus resulting in de facto RPM. The Authority added that Apple had abused economically dependent
premium resellers in breach of a (rarely invoked) provision of the French Commercial Code. Indeed, the dependence on Apple was easily proven by the almost exclusive resale of Apple products combined with a strong consumer attachment to Apple brands. A finding of abuse was based on the fact that Apple had made the supply of goods difficult, had engaged in discriminatory practices, and made arbitrary use of unclear remuneration and discount policies, leading to the strategic weakening or even exclusion of resellers.
On 23 January 2020, the Authority rendered a decision concerning an alleged refusal by Orange to afford access to an essential facility. In this case, an association of telecom operators claimed that Orange, the incumbent operator, had denied access to its fibre network. However, the Authority found that this fibre network was not “necessary” because of the existence of reasonable alternatives. The network thus lacked the element of necessity to constitute an essential facility. Interestingly, the Authority has since launched a preliminary investigation into the business telecoms market.
On 9 September 2020, the Authority imposed a €444 million fine on three pharmaceutical companies that were found to have abused a collective dominant position in the age-related macular degeneration (AMD) treatment market between 2003 and 2008. Specifically, the AMD market was found to be dominated by Novartis, Roche and Genentech, the last of which grants licences to Roche and Novartis for medicines manufactured by them. The first specificity of the case is that a collective dominant position was found to exist as a result of contractual ties linking Roche and Novartis to the same licensor, and from cross-shareholdings between these three companies. The second point of interest arises from two abusive practices engaged in by the pharmaceutical companies, namely (i) the making of disparaging comments by Novartis regarding the off-label use of Roche’s medicine, and (ii) the engagement, by the three pharmaceutical companies, in misleading rhetoric vis-à-vis the public authorities with the sole objective of ensuring that the price of Roche’s labelled medicine remained high. The Authority highlighted the importance of the decision in the context of the ongoing public debate on the impact that highly priced AMD treatments have on the social security budget.
On 17 December 2019, the Authority levied a €415 million fine on companies involved in a meal vouchers cartel. It furthermore issued an injunction against these companies to change the internal rules of association. By way of background, in a highly concentrated sector almost totally shared by four operators, the meal voucher issuers were found to have restricted competition among themselves between 2010 and 2015 by means of an exchange of confidential information and by agreeing to foreclose new players and to ban the launch of digital meal vouchers between 2002 and 2018. The Authority found that this cartel harmed new entrants and the final consumer and dampened digital innovation, adding that some members of the cartel were recidivists in light of a previous 2001 decision. Following this decision, the Authority launched dawn raids at the premises of companies active in this sector on 25 February 2020. Surprisingly, in March 2020, the operators in the meal vouchers cartel filed an appeal against the Authority’s decision. While we await the appeal decision on the merits, the Court of Appeal, in a rather rare move, issued an order suspending the injunction issued by the Authority on the basis that the Authority’s requirement that the meal voucher companies amend their internal rules of association was insufficiently precise. Specifically, it was not sufficiently clear, in the eyes of the Court of Appeal, which company should change the internal rules of association and how this should be achieved in practice.
On 16 July 2020, the Authority imposed a €93 million fine on 12 producers of ham that were found to have engaged in a vertical cartel aimed at coordinating prices. By way of background, some members of the cartel applied for leniency and reported two practices between 2010 and 2013 that were considered to be particularly egregious. The first practice consisted in agreeing to present a united front vis-à-vis slaughterhouses to avoid price increases and receive discounts while maintaining the appearance of acting independently and autonomously. The second practice consisted in price coordination and illegal information exchange. This cartel decision is similar to a cartel decision rendered in the fruit-compote distribution sector on 17 December 2019, which resulted in the Authority fining nine producers €58.3 million.
On 29 January 2020, the French Supreme Court laid down what constitutes a restriction by object, on the one hand, and a restriction by effect, on the other, within the meaning of article 101 TFEU. In so doing, it reversed an appellate court decision on the matter. The Authority fined a bank cartel in September 2010 for colluding on an interchange fee. The Court of Appeal upheld the Authority’s decision, emphasising that the agreements were by their very nature so harmful that they constituted a restriction by object. The Supreme Court overturned the Court of Appeal’s decision, however, recalling, in line with the CJEU’s rulings on the matter (see more recently in this regard, Case C-228/18 Gazdasági Versenyhivatal v Budapest Bank Nyrt and others ECLI:EU:C:2020:265), that the concept of a restriction by object must be interpreted restrictively. With respect to the banking case at hand, the Supreme Court considered that the impact of the interchange fees on final prices was not obvious such that the Court of Appeal should have examined its anticompetitive effects.
In the field of mergers, the Authority is looking into the viability of remedies in the context of joint purchasing agreements in the food retail sector by purchasing offices Casino, Auchan, Metro and Schiever. It market-tested these remedies on 25 June 2020. In light of the risks that suppliers would be weakened, and that inter-brand competition would be reduced, the purchasing offices proposed a reduction in the scope of the purchase agreements with a view to lessening their competitive impact. The case is a reflection of the Authority’s ongoing concerns about the tendency in the retail sector to participate in omni-channel cooperatives.
Concerning unilateral conduct, on 30 July 2020, the Authority market tested commitments proposed by Lego to address the regulator’s concerns in the toy retail sector concerning potential discriminatory discount policies disadvantaging online retailers. The commitments consisted in amendments to and the clarification of rebate requirements.
On 9 April 2020, the Authority ordered interim measures against Google at the request of publishers and editors. In the context of a July 2019 law on related rights and fair negotiations between platforms and publishers, Google has been accused of abusing its dominant position despite claiming that it was merely acting in compliance with the 2019 law. Specifically, Google unilaterally extended the scope of an option to grant a number of free licences to all of the contents on its platforms. The Authority, which has not yet taken a final position on the matter, is of the view that Google may have imposed unfair transaction conditions on counterparties, enabling it to discriminate, bypass negotiations and avoid making payments. Such conduct would constitute an abuse of Google’s dominant position as Google has a 90 per cent market share in
the general search services market. Because the Authority feared a serious and immediate harm to the press sector, it ordered Google to negotiate in good faith with respect to the reuse, display and remuneration of the victims’ related rights until a decision on the merits is pronounced.
A recurrent concern also relates to the higher courts’ oversight of the Authority’s dawn raids. By law, the carrying out of a dawn raid requires close collaboration between the Authority and the court authorising the dawn raid. An appeal may be brought against a court’s authorisation of a dawn raid or against the conditions under which a dawn raid was carried out. In the Whirlpool case of 8 July 2020, which concerned a 2014 cartel in the domestic appliance market, the Court of Appeal held that the appellant’s rights of defence were violated by the investigators who forbade the appellant from contacting its lawyers at the outset of the investigation. Similarly, in the General Import case of 29 January 2020, the Supreme Court held that the protection of business secrets prevailed over the Court of Appeal’s determination to establish a breach of the law. The case concerned exclusive distribution agreements for consumer goods. The Court of Appeal sought to lift the protection of business secrets afforded by French law without substantiating such measure. However, the Supreme Court required that there be specific and properly substantiated reasons to justify the lifting of such protection.
Reference is also made to the strong stance taken by the Authority when it comes to attempts to obstruct a dawn raid. In this context, in the Akka case (judgment of the Court of Appeal of 26 May 2020), certain employees were found to have tampered with evidence by altering the mailbox algorithms and by breaking seals, thus triggering overall company liability. As a result, and despite the defendant’s claim that it acted only negligently, the Court adopted a broad definition of obstruction and confirmed the €0.9 million fine imposed by the Authority.
The year ahead
The Authority will continue to focus its enforcement activities on the retail and digital sectors, and continue to pay particular attention to competition in France’s overseas territories. This is because France’s overseas territories are considered particularly vulnerable to price increases. The Authority will be particularly vigilant with regard to the impact of digitalisation in the finance sector, testimony of which is borne by the recent sector inquiry into Fintechs launched in May 2020. The Authority will also pay particular attention to the functioning of competition on the island of Corsica, which will be subject to a governmental opinion regarding the degree of concentration in this island’s local economy.
New priorities will also be set. A main priority concerns the promotion of better compliance by trade associations and unions with the competition rules. The Authority’s focus on this priority is illustrated by two decisions of the Court of Appeal in upholding the Authority’s decision to conduct dawn raids in the notaries sector (11 December 2019), followed by the appellate court’s decision to uphold the penalties order issued by the Authority against the Chamber of Architects (22 January 2020). The beginning of 2020 also saw the issuance of an opinion on methods for regulating pricing by regulated legal professions in view of new legislation applicable from January 2021. In addition, the ECN+ Directive is expected to be implemented, which will grant the Authority the possibility to impose fines of up to 10 per cent of the members’ global turnover compared to the current low €3 million cap on fines for associations of undertakings.