France: Private Antitrust Litigation – a Practical Guide

In summary

This article provides an overview of the principles, rules and procedure applicable to private antitrust litigation in France and provides an update of the recent developments and decisions of note. This article aims to provide readers with a high-level description and practical analysis of the state of private enforcement in France. It also aims to provide an objective yet critical point of view of the latest evolutions and decisions in this still nascent but quickly growing and increasingly important facet of competition law.

Discussion points

• Recent developments in private antitrust litigation in France
• Overview of the procedure: competent courts, access to evidence and alternative dispute resolution mechanisms
• Conditions of liability: fault, causal link and damage, and liability of parent companies.
• Calculation of damages: overcharges and passing-on defence.

Referenced in this article

• Provera, Paris Commercial Court, Ruling No. 2017021571
• Doux Aliments, Paris Court of Appeal, Ruling No. 17/04101
• Digicel, Paris Court of Appeal, Ruling No. 17/23041
• JJSBF, Paris Court of Appeal, Ruling No. 19/19448
• Franche Comté signaux, Court of Cassation, Ruling No. 18-16.279
• Doux Aliments, Court of Cassation, Ruling No. 19-14.877
• SNCF Mobilités, Paris Administrative Court of Appeal, Ruling No. 14PA02419
• SNCF Mobilités, State Council, Ruling No. 432981

Overview

Private antitrust litigation is a vast area of law that encompasses a wide range of damages claims, including those based on contractual liability (article 1231 et seq of the Civil Code), both follow-on and stand-alone actions based on general tort law provisions (article 1240 et seq of the Civil Code), as well as collective actions, which allow consumers to collectively seek damages from the same professional for the harm suffered as a result of a competition law infringement (article L 623-1 et seq of the Consumer Code).

While collective redress mechanisms are not developed in France, despite the introduction in 2014 of a new regime that aimed at simplifying the conditions for approved consumers’ associations to initiate proceedings on behalf of a group of consumers, by contrast follow-on damages claims, based on a finding of infringement by the European Commission (the Commission) or the French Competition Authority (FCA), are rapidly expanding, in particular between companies that carry out activities at a different level of the value chain, with one of them often alleging that it is a direct victim of the anticompetitive practices implemented by its co-contractor (eg, between a distributor and its suppliers).

This rapid growth of follow-on actions follows the adoption, at the European level, on 26 November 2014, of the Damages Directive^[1] and its implementation into French law by the Ordinance of 9 March 2017 (the Ordinance).

The rules applicable to damages claims based on an infringement of competition law are now consolidated in article L 481-1 et seq of the Commercial Code. Although the new rules establish several presumptions that aim to facilitate redress for victims of competition law, in practice they are not yet applicable, pursuant to the principle of non-retroactivity of laws enshrined in article 2 of the Civil Code and recalled in article 12 of the Ordinance.

As most damages claims are currently based on anticompetitive practices that occurred prior to the entry into force of the Ordinance, victims cannot benefit from the above-mentioned presumptions. Their claims, thus, continue to be dealt with under the old general regime, with for the moment a certain reluctance of French courts to depart from previous case law.

This situation is at the origin of intense legal debates raised by victims of competition law infringements before the French courts regarding, in particular, the possibility for the judges to make an early application of certain presumptions to give full effectiveness to the principles derived from EU law. The Court of Cassation has yet to rule on this issue, and it cannot be excluded that, in the near future, a question for a preliminary ruling may be referred to the European Court of Justice (ECJ) in respect of the compatibility of the French framework with EU law, as is the case in many other jurisdictions faced with similar challenges.

Procedural aspects

Competent courts

French courts have jurisdiction over any private antitrust action directed against a defendant whose residence or place of business is in France, or when the anticompetitive practice took place in France or the damage was suffered in France. The relevant court before which the action should be brought also depends on the parties involved in the dispute (private litigants v public entities).

When a public entity or person is either the author or alleged victim of anticompetitive practices, the administrative courts will have jurisdiction, irrespective of the identity of the other party.

Regarding matters between private litigants, except when parties to an agreement are bound by a jurisdiction clause, articles R 420-3 and R 420-4 of the Commercial Code designate 16 specialised civil and commercial courts (eight of each) spread across the French territory that have exclusive jurisdiction to deal with private antitrust actions. Civil courts will have jurisdiction in matters involving a consumer, whereas commercial courts will have jurisdiction in matters between commercial parties. However, in practice, owing to consumers’ limited resources, most private antitrust actions are lodged between companies and are, thus, brought before commercial courts.

All rulings from the lower courts can only be appealed to the Paris Court of Appeal (articles L 420-7 and R 420-5 of the Commercial Code),^[2] and subsequently to the Court of Cassation. The Paris Court of Appeal recently clarified that the special jurisdiction of those courts extends to summary proceedings aiming, among other things, at gaining access to evidence.^[3]

Standing

When bringing a claim, the claimant must show standing by demonstrating that it has a legitimate, direct and personal interest in seeking compensation from the defendant (article 31 of the Code of Civil Procedure). Establishing standing is a precondition for the admissibility of the claim; however, it is not required to establish the plausibility of the defendant’s liability.

In practice, anyone who considers itself to have suffered harm as a result of a competition law infringement can have standing, whether it is a direct or indirect victim. By way of illustration, besides the obvious possibility for a direct victim of a cartel or abuse of dominant position as co-contractor of the perpetrator of the practices to bring a claim against the latter, French courts have also recognised standing to a professional union defending the collective interest of its members to claim damages for the personal harm (and not that of its members) suffered as a result of a cartel.^[4]

This approach is consistent with EU case law, the ECJ having ruled that persons not acting as suppliers or customers on the market affected by a cartel must nonetheless be able to seek compensation for the loss suffered as a result of the cartel; in Otis,^[5] the ECJ recognised that a state entity that had granted subsidies for the financing of building projects in Austria had standing to act against the companies that had participated in the elevators cartel since, had this cartel not existed, the amount of the subsidies granted could have been less important.

Limitation periods

Under the general regime, pursuant to article 2224 of the Civil Code, private actions, whether based on contractual or tortious liability, are time-barred after five years of the date on which the victim became aware or ought to have become aware of the facts at the origin of its damage.

In respect to cartel cases in particular, it stems from well-established case law that the five-year limitation period only starts to run from the day an infringement decision is issued. Owing to the secret nature of cartels, French courts consider that only an infringement decision can provide potential victims with enough factual elements, such as the identity of the infringers, the nature of the infringement and its duration to initiate a damages claim.^[6]

Case law is less consistent in abuse of dominance cases. Although some decisions recognise that the limitation period should start running from the date of the FCA’s decision sanctioning the abuse,^[7] in some cases, a stricter approach has been adopted, for example, when the victim of the abuse was a plaintiff before the FCA and already knew at the time of his or her harm^[8] or if the victim has actively participated in the investigation of the FCA.^[9]

The rules are similar under the new regime. Article L 482-1 of the Commercial Code provides that claims for damages based on article L 481-1 of the Commercial Code are time-barred after five years for both stand-alone and follow-on actions. This limitation period starts to run on the date the victim becomes aware or should have become aware of, cumulatively, the existence of the practices and the fact that they constitute an infringement of competition law; the fact that the infringement caused him or her harm; and the identity of at least one infringing party.

Access to evidence

Pursuant to article 9 of the Code of Civil Procedure, each party must adduce the necessary evidence to the success of its claim, and all parties are required to disclose to the other parties the documents on which their claim is based. In principle, any evidence is admissible to prove a fact unless the law provides otherwise (article 1358 of the Civil Code) and, before commercial courts, the principle of freedom of evidence prevails (article L 110-3 of the Commercial Code).

Although no general discovery procedure is available under French law, the parties can have recourse to certain mechanisms to force the production of evidence or to safeguard evidence.

Pursuant to article L 481-3 of the Commercial Code, which applies to all claims lodged after 26 December 2014, victims of competition law infringements can request access to certain categories of evidence held by the defendants. Such categories must be identified as precisely and narrowly as possible, and it is for the party requesting the disclosure to establish the relevance of its request for the exercise of its right to obtain compensation; thus, disclosure can be ordered by the court only after a thorough assessment of the request, in light of the principle of proportionality and having regard to the legitimate interests of each party.^[10]

The main exceptions to disclosure concern business secrets, privileged documents and certain categories of evidence submitted or held by the FCA (most notably, self-incriminating statements submitted in support of leniency or settlement applications, which, pursuant to article L 483-5 of the Commercial Code, are excluded from disclosure).^[11] Civil fines of up to €10,000 may be imposed in case of failure or refusal to comply with a court’s order of disclosure, if the evidence is destroyed or if a party fails to comply with the obligations imposed by the court to protect the confidential nature of certain information (article R 483-14 of the Commercial Code).

In addition, pursuant to article 145 of the Code of Civil Procedure, any party can request the court to order investigatory measures to obtain access to evidence held by third parties (other than the FCA) that is deemed necessary to resolve the dispute. The court may accept the request provided, in light of all the relevant circumstances of the case, that it is legitimate and proportionate.

Pursuant to article 11 of the Code of Civil Procedure, a party may also ask the court, during the proceedings, to order the other parties or a third party to disclose any document necessary to prove the alleged facts.

Finally, pursuant to article 10 of the Code of Civil Procedure, the court may order any measure of inquiry deemed necessary if it considers it lacks sufficient elements to rule on a case (eg, auditions or appointment of an expert). For instance, in Doux Aliment, the Paris Court of Appeal, after concluding the existence of a fault and a causal link, decided to appoint an expert to quantify the damage as the evidence provided by the victim was not sufficient.^[12]

Alternative dispute resolution mechanisms

Parties can resort to arbitration or mediation to obtain compensation for the harm suffered as a result of competition law infringements. According to the Damages Directive, alternative dispute resolution mechanisms are complementary to court litigation (recital 5). The Ordinance of 2017 implementing the Damages Directive also indirectly encourages settlements between the parties.

In particular, although not yet applicable in most cases, article L 481-13 of the Commercial Code provides that, in the event that one party settles with the victim, its co-infringers cannot claim contribution from that party, therefore protecting its interests. Moreover, from a strategic perspective, it can be of particular interest for defendants to engage in discrete settlements in the hope to avoid a public judgment and potential claims from other victims.

Establishing civil liability

Fault and wrongdoing

Under the general tort law regime, infringements of competition law constitute a wrongdoing that entitles any victim (direct or indirect) to claim damages for the harm suffered as a result. In practice, French courts already give a probative value to the decisions of competition authorities and have clearly held, in various cases, that the finding of an infringement by either the Commission or the FCA characterises, in itself, a fault under article 1240 of the Civil Code.^[13]

Furthermore, according to the Paris Court of Appeal, a commitment decision (ie, which does not contain any finding of infringement but only states competition concerns) constitutes prima facie evidence of an infringement, which can be relied upon by the claimant to establish a fault under article 1240 of the Civil Code.^[14]

The new regime, although not yet applicable in most cases, is even more favourable to victims. Pursuant to Article L 481-2 of the Commercial Code, a finding of infringement by a decision of the FCA that can no longer be appealed through ordinary means (hence, excluding appeals before the Court of Cassation) is deemed to be irrefutably established for the purposes of follow-on damages claims.

Similarly, article L 481-2 of the Commercial Code provides that national courts cannot make a finding that would be contrary to that made in a Commission’s decision, thereby granting an automatic probative value to the Commission’s decision in the context of subsequent damages claims. Finally, the new regime provides that, in respect of other types of decisions, including decisions of other EU member states’ competition authorities, the finding of an infringement will only constitute prima facie evidence of a wrongdoing.

Civil liability of parent companies

As a general principle under French and EU competition law, a present or former parent company that has not directly participated in the infringement can, nonetheless, be held liable for the infringement and for the payment of the corresponding fine if it is established that the parent company exercises or exercised a decisive influence over its subsidiary. A 100 per cent shareholding in the subsidiary constitutes a presumption of decisive influence.

In such a case, the parent company and subsidiary are considered as forming a single undertaking at the time of the infringement, and it is that undertaking that is held responsible for the infringement. The question now arises before French courts on whether this concept of ‘undertaking’, which is very specific to competition law, should extend to civil liability matters, where the principle under article 1240 of the Civil Code is normally that of personal liability.

In this respect, article L 481-1 of the Commercial Code expressly refers to the liability of ‘the undertaking’, thereby possibly opening the door for an extensive interpretation of the notion of personal liability in private antitrust cases. However, as for some other provisions of the new regime, article L 481-1 of the Commercial Code currently does not apply in most claims for damages, and it remains to be seen how French courts will interpret this provision in the future.

For the time being, under the traditional approach, French courts have, for example, ruled that a parent company can be held liable for the damage caused to a victim as a result of the anticompetitive behaviour of its subsidiary if it is established that the parent company has interfered with the business of its subsidiary.^[15] In the same way, the liability of a subsidiary that has not directly participated in the infringement can be engaged if the latter applied the directives of its parent company.^[16]

French courts may, however, be encouraged to revisit their approach even before the effective application of article L 481-1 of the Commercial Code. Although in very specific circumstances where, as a result of a restructuring, the entity that had participated in the infringement ceased to exist, the ECJ seems to consider that, out of principle, the notion of ‘undertaking’ should not have a different scope with regard to the imposition of fines by competition authorities compared with actions for damages based on an infringement of competition law.^[17]

Similarly, Advocate General Pitruzzella recently concluded, in his opinion concerning a question for a preliminary ruling referred to the ECJ in the trucks cartel, that a victim should be able to seek the civil liability of a subsidiary that has not directly participated in the infringement, provided that it can be established that the subsidiary belongs to the undertaking, within the meaning of competition law, that has been held liable for the infringement of antitrust rules, and that the subsidiary has indirectly, in this capacity, contributed to the occurrence of the damage.^[18]

Existence of a damage in relation with the wrongdoing (causal link)

Several presumptions facilitating the victim’s burden of proof have been introduced by the Damages Directive. In particular, under article L 481-7 of the Commercial Code, cartels are presumed to cause harm; however, owing to French rules governing the applicability of law over time, this provision currently does not apply in most damages claims.

Under the old regime, it is therefore for the victim to prove the causal link between the anticompetitive practices that form the basis of its claim and the harm it considers to have suffered as a result.

In practice, the causal link can be established on the following bases.

• On the basis of the elements contained in the decision of the FCA or the Commission, which often constitute a useful resource: for example, the fact that the victim is named in the decision as being the addressee of targeted price increases decided between cartelists can be deemed sufficient to establish the causal link.^[19] More recently, the Paris Court of Appeal confirmed that the causal link between the cartel and the damage allegedly suffered by the victim could be established on the basis of the FCA’s findings in its decision, where the latter held, in relation to a cartel between suppliers of personal and homecare products, that the purpose of the cartel was to decrease the uncertainty on the market and to improve the suppliers’ position in their negotiations with their distributors, in order to obtain better commercial conditions.^[20]
• On the basis of economic analyses that can help to materialise the impact of the anticompetitive behaviour and its causal link with the alleged damage: for example, visual charts can be used to reflect the impact of a cartel. Economists also tend to consider that, when the conditions to use it are met, the difference-in-differences method is particularly effective insofar as it allows for isolation of exogenous factors to the cartel that can influence prices and, thus, the empirical demonstration of the causal link between the practice and the alleged damage.

Finally, there is currently inconsistent application of the above-mentioned principles by the French courts. In particular, while commercial courts tend to adopt a rather strict approach, imposing a high standard of proof on victims, administrative courts generally seem to be more lenient towards victims of competition law infringement and make a clear distinction between the existence of the harm, on the one hand, and its quantification, on the other hand, which becomes mandatory as soon as the judge has concluded the existence, out of principle, of damage.^[21]

Quantification of harm

Quantifying the harm suffered as a result of a competition law infringement is a rather complex task that generally requires the use of a counterfactual (ie, a hypothetical situation that would have happened absent the infringement) as part of the demonstration. The role of economic experts in private antitrust litigation is, therefore, extremely and increasingly important.

In practice, several methodologies can be used by economists to demonstrate the existence of damage (eg, a price increase) in relation with the infringement, and then to precisely quantify the damage suffered as a result. However, French courts are faced with two main challenges.

First, although as robust as possible, the analyses presented by victims of competition law infringements are often not exact science; yet, the judge has to award damages that reflect, in light of the principle of full compensation, the loss actually suffered by the victim.

Second, the interpretation of the results of an economic analysis is not an easy task for judges, as illustrated by certain recent judgments. The Paris Commercial Court, in particular, has already refused to grant compensation to a victim on account that, despite the finding of the FCA that the cartel at the origin of the alleged harm had resulted in an increase in price, the economic analyses presented by the victim in support of its damages claim would have failed to evidence that it had personally suffered harm as a result of the cartel.^[22]

In practice, the harm suffered by a victim generally entails an overcharge that directly results from the anticompetitive behaviour, from which, in order to avoid an over-compensation, the passing-on of such overcharge must subsequently be deduced.

Overcharges

Over the past years, French courts have accepted different methodologies in order to assess the overcharge resulting from a competition law infringement. One of the most common methodologies is the comparison of prices over time on the market affected by the practices. Yet, other methodologies have been considered admissible such as, for example, a method based on a linear margin regression^[23] or the difference in differences method, which compares the evolution of prices over time on two distinct, yet similar markets.^[24]

Passing-on

Under the current rules, one of the biggest challenges faced by direct victims of competition law infringements is to demonstrate the absence of passing-on to their own customers of the overcharge that has been imposed to them on the upstream market. According to established case law of the Court of Cassation, it is for the plaintiff to establish its damage: therefore, when the defendant raises the passing-on defence, the plaintiff must demonstrate that it has not and could not pass-on the overcharge to its own customers. Failure to do so generally results in compensation being denied to the victim.^[25]

On the contrary, the new regime resulting from the implementation of the Damages Directive provides for two presumptions that shift the burden of proof from the victim to the defendant, both for direct and indirect purchasers (article L 481-4 of the Commercial Code): in the case of direct purchasers, the defendant will have to demonstrate the passing-on of the overcharge, whereas in the case of indirect purchasers, it must demonstrate the absence of passing-on by the direct purchaser to escape liability.

In practice, recent case law shows that French civil courts are reluctant to make an early application of those presumptions. Except in limited cases,^[26] they tend to adopt a very strict approach to passing-on, referring to the above-mentioned case law of the Court of Cassation, which has recently resulted in compensation being denied to direct purchasers in cartel cases.^[27]

According to the Paris Court of Appeal, although there is an incompatibility between the principles that derive from previous case law that places the burden of proof on the plaintiff and the presumptions established by the new regime, in the absence of a special provision, it considers itself not to have the power to derogate from the current rules.^[28] By contrast, administrative courts have already reversed the burden of proof, considering that requesting the victim to prove the absence of passing-on amounts to a negative proof that is practically impossible to establish.^[29]

Finally, passing-on often entails as a consequence a ‘volume effect’ (ie, a decrease in the volume of sales as a result of the increase in price that has been imposed to customers). In principle, this specific component of the damage must also be compensated; however, French courts have so far been reluctant to award damages on this basis.^[30]

Remedies

Principle of full compensation

Pursuant to articles 1240 and 1241 of the Civil Code, plaintiffs are entitled to seek full compensation for the damage suffered; hence, any victim that has suffered harm as a result of a competition law infringement is entitled to claim compensation for both its actual loss and loss of profit, plus interest. No punitive nor exemplary damages are available under French law.

Under the new regime, article L 481-3 of the Commercial Code provides that compensation notably includes:

• the loss resulting from the overcharge (unless it was passed on to customers) or from a lower price paid by the infringer;
• the loss resulting, notably, from the decrease in sales volume linked to a partial or total passing-on of the overcharge;
• the loss of opportunity; and
• non-pecuniary harm.

Interest

The payment of interest is an essential component of compensation. Interest is due to the victim as compensation for monetary erosion during the time it suffered a financial loss. The victim must prove that, had it not suffered this loss, the funds could have been used for another purpose.

Under French law, interest accrues from the moment the damage arose until the judgment is adopted; however, French courts have already ruled that interest should be due until full payment of the damages.^[31]

In practice, the interest rate retained by the courts depends on the circumstances of each case. While the legal interest rate is the default applicable rate, some victims of competition law infringements have obtained that a rate based on their weight average cost of capital (WACC) be taken into account for the calculation of interest; however, recent case law suggests that interest awards based on the WACC are subject to the fulfilment of strict criteria that, in practice, may be difficult to satisfy.

In particular, in the Orange Caraïbe case,^[32] the Paris Court of Appeal held that the victim must establish a specific harm by demonstrating either:

• a reduction in its activity without being able to find alternative financing through loans or equity capital; or
• the abandonment of specific investments on which the return to be expected would be equal to the WACC.^[33]

However, other alternatives to the legal interest rate (which is often considered as not reflecting the economic reality for a company) or the WACC (which is hardly obtainable) could be considered. In particular, the Court of Appeal considers, in its explanatory notice on the quantification of the damage, that the sums lost by the victim as a result of an infringement of competition law may have increased its financing needs. In those cases, the Court of Appeal considers that the marginal financing rate could be used to calculate compensatory interest.

The Court of Appeal has notably applied for the first time a sui generis interest rate of 5.3 per cent for part of the damage in the Digicel case,^[34] on account of the fact that Digicel proved that it could have used the funds lost as a result of Orange’s anticompetitive behaviour for other purposes, such as, in this case, its deleveraging.

In addition to compensatory interest, specific interest is due to compensate the delay of any payment due. The interest is automatically granted when damages are awarded in a judgment and are due from that day. Unless otherwise provided, the interest is due until the other party pays the ordered amount (articles 1231-6 and 1231-7 of the Civil Code). The interest is calculated according to a legal rate set by a decree each semester.

Conclusion and trends

Unlike the United Kingdom or, within the European Union, Germany and the Netherlands, France has not traditionally been considered as an attractive forum for private antitrust litigation. However, private antitrust litigation is on the rise in France, with more and more actions being brought before French courts, especially follow-on damages claims.

In practice, however, enforcement still lacks consistency, especially between the judiciary and the administrative order, which seem to have different approaches to damages claims; while administrative courts tend to adopt decisions that are rather favourable to the victims, civil and commercial courts adopt a more balanced approach. It, thus, remains to be seen how the Court of Cassation, will, pending the application of the new regime, interpret the current rules.

More particularly, the Court of Cassation will, most probably, in the near future, have to decide whether the presumptions provided for in Ordinance Law No. 2017-303 of 9 March 2017 should already receive an early application in light of the principle of effectiveness of EU law or whether the current regime should continue to apply to all damages claims based on practices implemented before the adoption of the 2017 Ordinance.

Other key challenges for the courts include the calculation of damages, which generally involves complex economic analyses with which judges are not yet familiar, and the assessment of passing-on, which French courts tend to regard as a condition of liability rather than a component of damage quantification.

In the same vein, the question of interest awards still remains largely debated in France; however, it seems that the courts are slowly evolving towards a sui generis approach, halfway between the WACC and the legal interest rate.

Notes