France: Beyond the Punisher

In summary

The French Competition Authority (FCA) has shown that it tends to sanction companies with higher fines and to apply a more deterrent policy when tackling abuses of dominance or anticompetitive agreements. Going beyond the role of punisher, the FCA has demonstrated through its recent announcements that it aims to spearhead novel implementations of competition law to achieve more politically oriented goals. Through its competition policy, the FCA’s greater purpose appears to be shaping legal operators’ minds into adopting more sustainable habits, be they more ecologically or socially friendly, in accordance with its 2021 key priorities and the climate goals from the Paris Agreement.

Discussion points

• Harsher sanctions in the FCA’s quest for effective deterrence
• The digital sector in the eye of the storm
• Broader range of enforcing tools via the ECN+ Directive
• Paving the way for incoming ‘green’ challenges further to the covid-19 crisis

Referenced in this article

• FCA press release dated 23 December 2020, ‘After a very active 2020 year, the FCA announces its priorities for 2021, which will focus on the digital economy’
• FCA Decision No. 20-D-11 dated 9 September 2020
• FCA Decision No. 20-D-04 dated 16 March 2020
• FCA Decision No. 19-D-26 dated 19 December 2019
• FCA Decision No. 20-MC-01 dated 9 April 2020
• Directive (EU) 2019/1 dated 11 December 2018
• National Law No. 2020-1508 introducing several provisions for bringing French Law into line with European Union Law on economic and financial matters

Harsher sanctions in the FCA’s quest for an effective deterrent effect

In 2019 and 2020, the French Competition Authority (FCA) significantly increased the amounts of fines to sanction undertakings for breaches of articles L 420-1 and L 420-2 of the Commercial Code (or their European equivalent, articles 101 and 102 of the Treaty on the Functioning of the European Union).

Although the early days of 2021 have not yielded similarly harsh pecuniary fines to date, major sanction decisions may yet come, in particular in light of the FCA’s avowed objective to issue several decisions relating to leading players in the digital sector. For instance, Google is facing a particularly harsh sanction for allegedly breaching its injunction to negotiate remuneration for publishers. The charts below show the increase for both anticompetitive agreements and concerted practices, and abuses of dominance.

Sanctions for anticompetitive agreements and concerted practices

Sanctions for abuses of a dominant position

There seem to be two main reasons to justify this trend.

First, the increasing amounts of the fines seem to reflect the FCA’s willingness to retain its sanctions deterrent policy. The deterrence objective of the fines, which has been affirmed several times in the past decade, has also been frequently recalled in its recent decisional practice (eg, the Meal Vouchers decision in respect of anticompetitive agreements and, more recently, the Novartis-Roche decision in respect of an abuse of a collective dominant position).

Second, the highest fines seem to mainly target digital players, in particular ‘GAFA’ players (Google, Amazon, Facebook and Apple). In recent years, the FCA has not hidden its strategy to investigate the digital sector and tackle digital players’ anticompetitive behaviour. The strategy was once again announced as one of the FCA’s priorities for 2021.^[1] It also recently asserted that competition law is a particularly effective way to maintain the competitive dynamic of the digital economy. ^[2]

Nowadays, the GAFA players clearly appear in the line of sight of the FCA. A similar trend is observed in other states, such as in the United Kingdom, where the Competition and Markets Authority (CMA) affirmed, in December 2019, that internet giants were creating competition problems and called on the British government to regulate the sector,^[3] as well as at the European level, where the European Commission has sanctioned Google three times (in 2017, 2018 and 2019) for abuses of dominance.^[4]

Among the different economic players, GAFA have faced the FCA’s heaviest fines. Apple was given the heaviest penalty ever imposed by the FCA on an economic player in 2020.^[5] Similarly, a few months earlier, Google was fined €150 million, which is the fourth-highest fine to date pronounced by the FCA in an abuse of dominance case (after the €444 million fine imposed on pharmaceutical groups Novartis Roche and Genentech in 2020,^[6] the €350 million fine against Orange in 2015^[7] and the €183 million fine against Orange and SFR in 2012).^[8] Google may face an even higher sanction in light of its alleged breach of the FCA’s injunction to negotiate remuneration for publishers.

The amounts of those fines may be viewed by companies and practitioners as unreasonable, disproportionate and unpredictable and are most of the time challenged before the Court of Appeal.

The question may be raised of how the FCA justifies such huge amounts of fines in its decisions and whether they comply with the FCA guidance for antitrust fines.

First, in answering this question, it is important to recall the methodology used by the FCA to determine the amount of pecuniary sanctions. In this respect, the FCA is required to comply with the terms of article L 464-2 of the Commercial Code, according to which ‘pecuniary sanctions are proportionate to the severity of the alleged acts, the extent of the damage caused to the economy, the situation of the sanctioned organisation or enterprise or the group to which the enterprise belongs and the possible reiteration of practices prohibited by this title’.

To increase transparency and to enable companies to know in advance the concrete way in which the FCA exercises its sanctioning power, the FCA adopted its Guidance on Antitrust Fines on 17 May 2011. The Guidance recalls the terms of article L 464-2 of the Commercial Code and specifies that the FCA may take into account mitigating or aggravating circumstances when considering decreasing or increasing the basic amount of the fine.

In particular, it provides that the FCA may adjust the fine upwards to take into account the economic power of the company or of the group to which the company concerned belongs ‘to ensure the dissuasive and proportionate nature of the financial penalty’. Since the Janssen-Cilag case of 2017,^[9] in which the FCA applied a 70 per cent add-on factor to the sanction to reflect the economic power of the group, this provision has proved to be a great tool for the FCA to significantly increase fines imposed on companies.

In Decision No. 19-D-25 dated 17 December 2019, the FCA sanctioned four issuers of meal vouchers and a trade association for engaging in an anticompetitive exchange of information and in an agreement aiming to foreclose the market. In this decision, the FCA pronounced a total fine of €415 million. The high level of the fine is mainly because the FCA applied to the basic level of the fines (corresponding to a certain proportion of the level of sales concerned during the last year of the practices) increases of 70 per cent to Sodexo and of 50 per cent to Natixis to take into account their economic power.

Similarly, in Decision No. 20-D-11 dated 9 September 2020, the FCA did not deviate from its strategy when it sanctioned three pharmaceutical groups for abusing their collective dominant position to promote the sales of age-related macular degeneration drug Lucentis to the detriment of the 30-times cheaper competing drug Avastin. In this decision, the total amount of the fine of around €444 million was greatly bolstered by the application of increases of 50 per cent to Novartis and 70 per cent to Roche and Genentech, in light of their overall economic power.

According to article L 464-2 of the Commercial Code and the Guidance on Antitrust Fines, the amount of the fine pronounced by the FCA must be proportionate not only to the economic power of the company but also to the severity of the facts and to the damage caused to the economy. However, an increase may appear particularly disproportionate especially when it is applied to an objection for which the severity and the damage caused to the economy are both considered low by the FCA.

This policy shows the willingness of the FCA to be ruthless with companies involved in anticompetitive practices whose economic power is significant. Nevertheless, when the fine is nearly twice the amount that would be suggested by the Guidance, it may be questioned whether the Guidance is still useful.

Significant fines may also result from the FCA’s choice to distance itself even more from its Guidance on Antitrust Fines. The Guidance provides that it is ‘opposable to it, except to the extent that it explains, in the statement of reasons for its decision, the particular circumstances or the reasons of public interest leading to it deviate in a given case’.^[10]

For instance, in Decision No. 19-D-26 dated 19 December 2019, the FCA decided not to apply its Guidance on Antitrust Fines when sanctioning Google for abuse of dominance in the search advertising market. The FCA considered that the operating rules of the Google Ads advertising platform (formerly known as AdWords) were opaque and difficult to understand and, in practice, were applied in an unfair and discriminatory manner. It decided to depart from its Guidance on Antitrust Fines, stating that the standard application of the Guidance would have resulted in insufficient deterrence and in a fine that would not reflect the severity of the infringement and the effects on the economy,^[11] and adopted a flat-rate amount.

The FCA does not give any indication on how it calculated the €150 million fine against Google. It affirms that it has ‘significantly increased’ the fine to take into account the power and the contributory capacity of the Google group. It is estimated that the percentage of decisions of the FCA sanctioning anticompetitive agreements and applying a flat-rate amount equates to 30 per cent in 2018 and 17 per cent in 2019.

Such deviation from the Guidance on Antitrust Fines is not new and generates a real problem with the predictability of fines. Without having to determine accurately the amount of fines that will be imposed by the FCA, companies should, at least, be able roughly to anticipate the range of fines that is likely to be pronounced and to allocate a sufficient amount in their account for the litigation provision, because this is key in terms of incentivisation.

It may be argued that deviations from standard fines constitute an attempt to adopt the adversarial principle, as it prevents companies from understanding the way the fine has been calculated and, therefore, deprives them of the possibility to adequately challenge the FCA’s reasoning.

In Decision No. 20-D-04 dated 16 March 2020, the FCA sanctioned Apple and its two wholesalers, Tech Data and Ingram Micro, with a record fine of €1.3 billion for two vertical agreements: (1) an allocation of products and customers between its two wholesalers; and (2) the imposition by Apple of price-fixing agreements on its Apple premium resellers (APRs) (ie, distributors of specialised high-end Apple products).

Apple was also sanctioned for abusing its situation of economic dependency on APRs. The total amount incorporated a very high fine increase to take into account the economic power of the three undertakings, in particular a staggering 90 per cent escalation in respect of Apple.

Needless to say, this fine increase policy tends to remove all the gain in predictability that was supposed to be brought by the issuance of the FCA’s Guidance on Antitrust Fines in 2011 and to increase the number of decisions that will be appealed before the Appeal Court of Paris. It is expected that some of the record fines recently imposed will be decreased by the Appeal Court.

Regarding cartel cases brought before the Paris Court of Appeal between November 2004 and April 2021, nearly two-thirds of the cases (roughly 63 per cent) have seen a decrease in the sanction on appeal, either because one or several objections were dropped (about 39 per cent of the total) or because the fine was reduced although the objections remained (about 24 per cent). Among the cases for which the sanction decreased, the average decrease was approximately 24 per cent.

These rather high figures are mostly fed by appeal decisions before 2015; figures for more recent years appear less favourable. For 2016 and 2018, only 40 per cent of the cartel cases that were appealed have seen a decrease by the Court of Appeal (in 2017, none of the FCA cartel decisions were appealed). Moreover, the average decreases have been quite low in the past few years: roughly 7 per cent in 2016 and 14 per cent in 2018.

The tendency has been more favourable for companies in the past few years for abuse of dominance practices. With regard to abuse of dominance cases brought before the Court of Appeal between 2017 and 2019, two-thirds have seen a decrease in the sanction (without taking into account the appeal of the Google decision dated 19 December 2019, nor the Novartis-Roche decision dated 9 September 2020, which are still pending).

Digital sector in the eye of the storm

The digital economy has been reaffirmed as one of the FCA’s top priorities for 2021. The FCA has decided to dedicate substantial resources to analyse the behaviour adopted by players in the digital sector.

The FCA launched its Digital Economy Unit in 2020, which is said to now be fully operational in providing support in cases with a significant digital dimension and which works closely with other competition authorities in Europe and other international regulators and relevant government departments. The Digital Economy Unit will also be key in the implementation of new algorithm-based tools to monitor in real time the changes in the terms and conditions for the use of digital platforms and to optimise the monitoring of public markets.

The FCA has also announced its willingness to use all its tools to prosecute and impose fines for anticompetitive behaviour by players in the digital sector as quickly as possible and its intention to focus on two particular contentious cases – one relating to online advertising and the other relating to the massive collection and processing of personal data.

Following in the footsteps of the European Commission^[12] and other national competition authorities,^[13] the FCA’s recent decisions against major digital players are clear proof of this new trend.

Fewer than five months after the FCA decision imposing a fine of €150 million on Google for abuse of dominance in the search advertising market, the FCA imposed interim measures against Google on 9 April 2020, in response to the complaint and the request for interim measures jointly lodged by press publishers and the news agency Agence France Presse. According to the FCA, Google’s behaviour following the implementation of Law No. 2019-775 of 24 July 2019 on the Creation of Neighbouring Rights for the Benefit of Press Agencies and Publishers (the Neighbouring Rights Law) was highly likely to characterise an abuse of dominance and was causing serious and immediate harm to the press sector.

Those findings led the FCA to issue interim injunctions against Google, forcing the operator to conduct ‘within three months’ negotiations ‘in good faith’ with press publishers and news agencies regarding the remuneration of their neighbouring rights for reusing their protected content.

As a way of complying with the Neighbouring Rights Law, Google decided that it would exercise its right (as provided by the law) to no longer display article extracts, photographs, infographics and videos within its various services (such as Google Search) so as not to make use of neighbouring rights, unless the publishers grant it the authorisation to use them free of charge. As a result, most of the press content owners had no choice but to enter into non-negotiated and non-remunerated licence agreements with Google for using and displaying their content, if they wanted to retain access to Google’s essential display outlets.

While the FCA seems to have some competition grounds for calling into question the way Google handled its conformity process with the Neighbouring Rights Law, the injunction it proposed to remedy their detrimental effects appears quite controversial.

The first part of the FCA’s injunction (article 1 of the decision) comprises an obligation to ‘good faith’ negotiations, although without any formal obligation to get a result or any list of concrete indications on what Google should do. The FCA has already acknowledged that Google may end up offering a ‘remuneration equal to zero’,^[14] although it may be presumed that the obligation to cover the whole period from 24 October 2019 (the date of the entry into force of the Neighbouring Rights Law) to date during the negotiations might make it compulsory for Google to at least agree on some form of payment.

In the absence of criteria to determine how the negotiation may be conducted in good faith, it may be difficult for Google to ascertain whether it has adopted the right approach and makes one wonder whether the FCA might have purposefully kept its demands as broad as possible to ensure it would have discretionary power when reviewing Google’s conformity process through monthly reports.

The third part of the FCA’s injunction (article 3 of the decision) is even more debatable, and obviously politically oriented, as it imposes on Google an obligation not to deny press owners who would want to display their content according to their own arrangements, which essentially translates into a violation of the constitutional freedom of trade and industry. The FCA may as well have publicly stated it was not afraid to support economically weak sectors by tackling major digital players and forcing them to contract with unwanted parties. This third part is very limited in time (for the duration of the negotiation only, which is three months), probably in an attempt not to make it too obviously contrary to the freedom of trade and industry.

The above-mentioned injunctions being quite imprecise and contentious, it does not come as a surprise that the FCA is now blaming Google for allegedly breaching them, following complaints from publishers in August 2020 and the dismissal of Google’s court appeal against the injunctions decision in October 2020. The case team’s report on the matter, some parts of which were disclosed in the French press,^[15] states the need for a ‘sufficiently deterrent pecuniary fine for a company such as Google’, given the ‘quite exceptional breach of the law’. It is, therefore, likely that the FCA might impose a ground-breaking fine upon Google to punish the leading digital player for a breach the FCA may well have created by imposing vague and extremely controversial injunctions.

On 16 March 2020, Apple was sanctioned for product and customer allocation between its two wholesalers as Apple had specified to the two wholesalers the quantities of the different products to be delivered to each reseller during shortages, making both wholesalers and resellers totally dependent, according to the FCA, on the stocks decided by Apple. Furthermore, Apple was penalised, again according to the FCA, for having encouraged APRs to charge the same prices as those charged in Apple stores.

In this case, the FCA has sanctioned, for the first time since 2009, an abuse of economic dependency (which is a French-specific infringement). According to the FCA, the elements of the case enable the characterisation of an abuse of economic dependency of APRs on Apple.

First, the FCA considered that Apple prevented APRs from distributing competing brands via the terms of their distribution contracts. According to the FCA, the lack of alternative solutions characterising the dependency state resulted, at least in part, from the fact that the APRs’ customers were so strongly attached to the Apple brand that stopping the distribution of Apple products would result in the total loss of value of their business. Second, the FCA considered it had identified a set of rules and conduct amounting to discriminatory treatment.

This case may show that the FCA is willing to make a broader use of the abuse of economic dependency to bring more types of behaviour under its antitrust control.

Having said that, the FCA also seems to be quite keen to show that it does not have a personal vendetta against major digital players but takes great care to issue measured decisions, after having weighted up all the pros and cons. By way of illustration, in Decision 21-D-07 dated 17 March 2021,^[16] ,the FCA ruled against implementing interim measures to suspend Apple’s iOS privacy policy update regarding targeted advertising, even acknowledging the planned changes as potentially ‘helpful’ for consumers.

However, it is still investigating the case on the merits, in particular to check whether the controversial changes, which would force all applications to ask for a user’s permission to track their behaviour, may or may not be regarded as a form of discrimination or self-preferencing.

Broader range of enforcing tools once ECN+ Directive transposed into law

The ECN+ Directive,^[17] which aims at harmonising operating rules between national competition authorities in the European Union and should be implemented by the French government before 4 June 2021 via an order,^[18] will further strengthen the FCA’s enforcement powers in the coming years.

First, the FCA shall be entitled to reject formal complaints when they do not constitute enforcement priorities. This new discretionary prosecution principle breaks with the current French model, in which the FCA may only reject formal complaints on legally limited grounds (under article L 462-8 of the Commercial Code), mainly for lack of sufficient items of evidence.

Whereas it currently needs a prior formal complaint to implement interim measures proceedings, the FCA would be granted the right to act on its own initiative to impose interim measures. According to the president of the FCA, this new ability may be key in the FCA’s stated strategy to pre-emptively address anticompetitive behaviour by major digital players.

By exception and anticipation, this possibility was recently introduced into French law for the specific case of procurement agencies of large-scale retailers, with several investigations launched ex-officio on this basis. In 2020, two of these investigations resulted in commitment decisions issued by the FCA. In both commitment decisions,^[19] the involved large-scale retailers offered commitments mainly comprising reducing the scope of their joint purchasing.

The ECN+ Directive should also give the FCA broader sanction powers regarding both structural injunctions and fines, extending beyond its current sanction guidelines of 2011.

The FCA has already announced, as part of its 2021 priorities, that it would rely on those boosted enforcement powers in the digital sector, given the hard to reverse effects of some anticompetitive practices on ever changing digital markets.

The harmonisation of the maximum amount of the fines at 10 per cent of the total global turnover with the ECN+ Directive will also give the FCA the opportunity to revise its guidelines of 2011 and to sanction trade associations and unions more effectively. At the time, those associations are still not acknowledged as formal enterprises under article L 464-2 of the Commercial Code and cannot be fined more than a maximum of €3 million.

Following the transposition of the Directive, the fines should be capped at 10 per cent of the sum of the turnover of their members, which constitutes a huge change. The chair of the FCA has noted in this respect that there has recently been a series of cases of infringements within the framework of professional associations: the flooring cartel^[20] and the washing machine and household appliances cartel,^[21] for example, have led the FCA to have a particular focus on trade associations’ compliance with competition law.^[22]

In addition to strengthening the FCA’s powers, the transposition of the ECN+ Directive into French law may shorten the proceedings before the FCA, in a way that may play against the adversarial principle and the rights of defence.

Included in the significant changes that the coming order from the French government should bring to light is a more general use of the simplified procedure of the FCA, with the aim of speeding up proceedings before it. As in proceedings before the European Commission, the idea is to have one sole round of discussion between the investigation services and the defendant before the hearing (ie, reply to the statement of objections issued by the FCA) instead of the current double round discussion (ie, reply to the report by the FCA’s investigation services following the reply to the statement of objections).

The general case handler of the FCA should decide, when issuing the statement of objections to the parties, whether the case will be assessed by the FCA without the establishment of a report. As an exception, having received the observations of the parties to the statement of objections, the general case handler could decide to hold a second round of discussion and send a report to the parties.

Disregarding the fact that the general case handler’s decision may appear all the more discretionary, as this decision cannot be appealed and will be taken in the absence of known criteria, such a change in procedure, which is presented as a way to speed up the proceedings, is likely to harm both the adversarial principle and the defence rights of defendants and to have various adverse effects.

The report stage of the proceedings has often been found to be of particular value, notably in complex cases, as this second step allows both the investigation services and the parties to go deeper in the exchange of arguments and into the detail of the analysis. This step also makes it possible to focus on the substantive elements that must be discussed at the hearing, setting aside the points with less impact, even sometimes making it possible, before the hearing takes place, to withdraw some objections that appear not to be sufficiently grounded. For the time being, it suffices to note how the ‘reports’ often significantly differ from the statements of objections, to understand how this change will significantly affect the due process and the decisions themselves.

Removing such an important stage of the proceedings (the report stage) is likely to jeopardise the parties’ rights of defence and to affect the length of the overall proceedings. One might wonder whether the time that may be gained from simplified proceedings may be lost in appeals.

Paving the way for incoming ‘green’ challenges further to the covid-19 pandemic

In the context of the covid-19 pandemic, the FCA has temporarily softened its antitrust enforcement doctrine to alleviate economic and health concerns.^[23] In accordance with the communication from the European Competition Network, the FCA stated that it would not actively seek to investigate temporary cooperation initiatives between companies, with the aim of ensuring the supply and fair distribution of essential products to all consumers, and that it would be ready to assess and assist these initiatives with informal guidance.

In this context, despite its objective of sanctioning professional associations more harshly, on 22 April 2020, the FCA provided some comfort with a concerted initiative supported by a professional organisation representing opticians. The initiative consisted of the organisation sending a letter to lessors renting commercial premises to its optician members to request an adjustment of their rents on their behalf. Seemingly driven by the goal to prevent business failure resulting from closures of various sales outlets, the FCA confirmed that this behaviour did not appear to infringe competition law and remained within the scope of the professional organisation’s missions.^[24]

In addition to developing an advisory role in times of duress, the FCA has adapted its enforcement action to keep it efficient and focused on goals. It has, therefore, been able to keep up with its own procedural deadlines and has continued its investigations despite the pandemic, issuing 23 decisions in respect of antitrust cases, leading to pecuniary sanctions amounting to €1.8 billion in 2020.

The FCA has, most importantly, demonstrated it is seemingly ready to introduce sweeping and lasting changes into its antitrust enforcement doctrine and consider new criteria as part of its analysis beyond that of the immediate risks to competition.

In the coming years, the FCA will target more closely competition law concerns that also call into question environmental protection. It announced at the end of 2020 that it had reasserted sustainable development as one of its key priorities for action during 2021. It also indicated that it would issue several decisions in 2021, sanctioning anticompetitive practices that may have had detrimental effects on the environment.

As a first step in developing this priority, on 5 May 2020, the FCA, with seven other independent French administrative authorities, published a working paper presenting their roles and tools in addressing climate change issues.

Although the mandate given to the FCA by the legislator is to protect competition and not, per se, to protect the environment, in this working paper, the FCA states that it can:

• sanction anticompetitive behaviour, even if it is presented as having the purpose of ensuring better protection of the environment; and
• act in favour of environmental protection by sanctioning anticompetitive agreements that have led companies to neutralise a differentiation factor based on better environmental protection or by taking into account, under merger control, the preservation of consumer welfare, which is also characterised by its environmental dimension.

The FCA has a resolve to take on an enforcement role that not only involves punishing anticompetitive behaviour but also guides economic operators towards more sustainable ways of doing business. This specific role is in line with the constitutional provisions of the EU treaties that also require consideration of sustainability and environmental protection when implementing EU policies and is not totally new.

Pursuant to the decision-making practice, the FCA has already applied environmental considerations in its antitrust competition assessments in some decisions. For instance, in Decision No. 17-D-20 of 18 October 2017, relating to concerted practices in the floor coverings sector, the FCA took environmental requirements into account when assessing the anticompetitive object of the practices. Despite the involved undertakings professing they had wanted to prevent ‘dangerous greenwashing’ by following a uniformly agreed communication policy, the FCA sanctioned them up to €302 million for having deliberately refrained from promoting environmental performance that went beyond a certain industry ‘average standard’. The FCA noted that by reducing competition in this area, undertakings had harmed the interests of consumers, as the latter regarded environmental performance as a key selection criterion.^[25]

Apart from its harsher sanctioning when sustainable development is at stake, the FCA has also demonstrated in Decision No. 17-D-16 of 21 March 201 (Engie)^[26] and Decision. No. 14-D-09 of 4 September 2014 (Nespresso)^[27] that it would accept environmentally minded commitments and soften its approach to abusive behaviour accordingly.

The FCA has also announced that it will spearhead international and European discussions on the matter of promoting sustainable development, particularly in the context of the Green Deal initiative launched by the European Commission in December 2019; therefore, whereas the FCA’s competition assessment is becoming more politically minded, we can expect to see the development of new theories of harm and of similar policies across the world.

Notes