France: Impactful decisions exemplify FCA and Supreme Administrative Court’s evolving merger control

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In summary

This article summarises the rules and procedures on merger control in France and provides an overview of recent developments and decisions.


Discussion points

  • French Competition Authority
  • Merger control procedure
  • Notable developments and decisions in 2022 and 2023

Referenced in this article

  • Articles L430-1 et seq of the Commercial Code
  • FCA merger control guidelines of 23 July 2020
  • Commission Notice on Case Referrals
  • FCA Decision No. 22-DEX-01 of 18 March 2022
  • FCA Decision No. 22-DCC-126 of 15 July 2022
  • FCA Decision No. 22-D-15 of 29 September 2022
  • FCA Decision No. 20-DCC-116 of 28 August 2020
  • Conseil d’Etat Decision No. 445680 and 446974 of 14 October 2022
  • European Court of Justice, 6 June 2022, T-342/99
  • FCA Decision No. 19-DCC-180 of 27 September 2019
  • Conseil d’Etat Decision No. 436274 of 22 July 2022
  • Mobilux/Conforama France
  • Phoenix/McKesson
  • Frasers/Go Sport

The French merger control regime is governed by the provisions of Book IV of the Commercial Code (FCC), namely articles L430-1 to L430-10 and R430-2 to R 430-10, as last substantially amended by Statute No. 2015-990 (the Macron Act),[1] as well as the FCA’s merger control guidelines (last updated in 2020).[2]

Presentation of the French Competition Authority

The FCA is an independent administrative authority. It comprises Investigative Services under the leadership of the Head of Investigative Services and a board in charge of making final decisions on cases investigated by the Investigative Services.

Since 2008, the FCA has been in charge of the enforcement of both French and European antitrust provisions (articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) and articles L420-1 and L420-2 of the FCC) and the implementation of the French merger control regime under article L430-1 et seq of the FCC. The FCA enjoys wide investigative powers for the enforcement of both French and European competition rules.

The FCA also has an advisory role in issuing opinions on its own initiative or at the request of bodies in charge of representing public interests: the government, Parliament, local authorities and professional or consumer organisations.

Within the FCA, the merger control unit is part of the Investigative Services under the authority of the Deputy Head of Investigative Services. The FCA also includes an economic team, led by the Chief Economist, who is in charge, among other things, of conducting economic analyses to assess the effects of concentrations in the relevant markets.

Merger control procedure

Scope of the merger control

Merger control is within the exclusive competence of the FCA; however, pursuant to article L430- 7-1 of the FCC, the Minister of the Economy may, upon receiving a merger control decision from the FCA, ultimately decide whether purely public interest considerations, including, for example, industrial development and employment in France, outweigh the competition concerns raised by the concentration.

This provision has been very rarely used, the Minister of the Economy having since 2009 only overturned one decision of the FCA based on that provision (in 2018, the Minister ultimately decided to authorise the acquisition by Cofigéo of Agripole’s assets in the agrifood business without any of the divestitures previously required by the FCA, subject only to a commitment to maintain jobs at its June 2018 level for two years).[3]

Pursuant to article L430-1 of the FCC, the French merger control regime covers mergers, acquisitions of control and full-function joint ventures. The full-functionality criteria applied by the FCA are similar to those of the European Commission (the Commission).

Pursuant to article L430-2 of the FCC, concentrations within the meaning of article L430-1 are considered reportable in France, provided they meet three cumulative thresholds:

  • the global aggregate turnover of the merging parties (or the groups to which they belong) is above €150 million;
  • the total turnover in France of at least two of the merging parties is above €50 million; and
  • the transaction does not meet the European merger control thresholds.

Special thresholds apply for cases in which at least two of the parties to the merger operate retail stores or when at least one of the merging parties operates in an overseas French territory.

Following the issuance of the Commission’s Guidance on the application of the referral mechanism set out in article 22 of the European Merger Regulation (EUMR) to certain categories of cases, dated 26 March 2021, concentrations that do not meet the above-mentioned criteria but nevertheless threaten to significantly affect competition within the French territory can be referred by the FCA to the Commission for review.

This new interpretation of article 22 of the EUMR aims at capturing potential killer acquisitions, namely acquisition of a start-up, particularly an innovative target, or one holding competitively sensitive assets, such as data, IP rights, raw materials or infrastructure, by incumbents to kill or delay innovation, especially in the digital and pharmaceutical sectors. The FCA has consistently indicated its willingness to use this new tool and referred its first case to the Commission in March 2021.[4]

Merger notification procedure

Notification is mandatory for all concentrations that meet the thresholds. For concentrations that do not meet the thresholds but could be subject to a referral under article 22 of the EUMR, the merging parties may voluntarily come forward with information about their intended transaction to get guidance from the FCA or the Commission regarding the likelihood of a referral.

For reportable mergers, the notification file, which is the responsibility of the acquiring party, must include descriptions of the concentration and the undertakings concerned, a definition of the relevant product and geographic markets and the market shares of the parties and their main competitors.

The notification file was streamlined by a decree dated 18 April 2019, notably in respect of the financial data to be provided to the FCA. Whereas companies previously had to submit complete information on their accounts, balance sheet and investments, they are now only required to provide their French, European and worldwide turnovers for the past three last years.

Since mid-2021, a platform called Hermes has been available to allow for the dematerialised pre-notification and notification of concentrations. Although highly recommended, the use of the Hermes platform remains optional at this stage.[5]

The notification process has a suspensive effect on the transaction, which cannot be closed prior to receiving the FCA’s approval. However, article L430-4 provides that the notifying parties may ask the FCA for an exemption, allowing them to effectively complete all or part of the merger without waiting for its decision and without prejudice to the latter in the case of necessity.[6]

The exemption to the suspensive effect of the notification of the concentration is void if, within three months of closing, the FCA has not received the complete notification. For mergers that are not reportable to the FCA but may be referred to the Commission pursuant to article 22 of the EUMR, the suspension obligation applies to the extent the concentration has not already been implemented on the date on which the Commission informs the undertakings concerned that a referral request has been made.

Although theoretically not mandatory, the FCA effectively requires a pre-notification phase, which can last from two to three weeks in simple cases to several months in more complex ones. Pre-notification exchanges are generally confidential and usually aim at reaching a first agreement on market definition issues and identifying competition concerns that the transaction might raise according to the FCA.

Review of transactions by the FCA

If the operation does not raise any particular competition concerns, article L430-5 provides that a decision must be made within 25 business days of the filing of a complete notification form (Phase I). The parties can offer commitments either together with the notification or within the 25-day period, in which case the Phase I period is extended by 15 business days. The parties can also request a suspension of the Phase I procedure to finalise the commitments or a suspension of the procedure for 15 days in other cases of necessity.

In practice, the Dechert Antitrust Merger Investigation Tracking Tool (DAMITT) shows that investigations cleared in Phase I with remedies had an average duration of 9.9 months in 2022 (the 2011–2021 average is 6.6 months).

The Macron Act[7] grants the FCA the possibility of stopping the clock at any time during the Phase I review period, if the parties have failed to inform the FCA of a relevant new fact or have failed to provide in due time all or part of the information requested by the FCA, or if third parties have failed to provide requested information because of the actions of the notifying parties. There is no time limit for the suspension, which lasts until the FCA considers the notification complete again (ie, after submission of all required information).

Since January 2011, the FCA has implemented a simplified procedure aimed at speeding up the review of concentrations that are unlikely to raise competition concerns (such as operations in which the buyer and the target do not operate on the same or on linked markets, or certain operations in which at least two of the parties operate retail stores). In that procedure, the Phase I period can be reduced to 15 business days.

In the event of serious competitive concerns, the FCA will decide to open a Phase II investigation, during which a thorough examination of the contemplated merger is conducted. Pursuant to article L430-7 of the FCC, Phase II must be completed within 65 business days, unless commitments are offered by the parties within the last 20 days of the Phase II period, in which case the review period will be extended by 20 business days (starting from the date of reception of the commitments). Another 20-day period can be added if the parties or the FCA request to suspend the procedure. Taking into account the stop-the-clock period, the maximum duration of the examination under Phase II is, in theory, 105 days.

In practice, DAMITT shows that the average duration of Phase II investigations – taken from the date of announcement of the deal to the date of the decision – has reached a record of 18.5 months in 2022.

At the end of a Phase II investigation, the FCA can authorise the merger (possibly in view of the commitments proposed by the parties), prohibit it or impose conditions to ensure that the contribution of the merger to economic progress outweighs its anticompetitive effects.

Pursuant to article L430-8 of the FCC, if the FCA considers that the parties are failing to comply with their commitments or the injunctions imposed by it, it can:

  • withdraw the authorisation decision and, therefore, require a new notification and review of the merger;
  • order the undertaking to comply with the commitments; or
  • since 2015, substitute or add new injunctions to the initial commitments with which the parties failed to comply.

Notable developments and decisions in 2022 and 2023

Notable developments and cases from 2022 to 2023 include:

  • the withdrawal of the TF1/M6 media groups’ planned merger following the Phase II investigation of the FCA;
  • the €75 million fine decision against Altice fixing the definitive amount of periodic penalty payments for non-compliance with injunctions issued in 2017;
  • the validation by the French Administrative Supreme Court of the first prohibition of a merger by the FCA;
  • the confirmation by the French Administrative Supreme Court of the decision of the FCA authorising for the first time a merger conditioned to an up-front buyer commitment; and
  • the referrals by the European Commission of significant investigations reveal a trend towards increased cooperation with the European Commission.

The withdrawal of TF1/M6 merger

After a very long pre-notification phase, Bouygues notified the FCA of its proposed acquisition of Metropole Televisions (M6) on 17 February 2022. Despite the size of the two groups at the European level, the transaction was not reportable to the European Commission. Although merger notification thresholds of article 1(2) EUMR were exceeded, each of the undertakings concerned achieved more than two-thirds of its aggregate EU-wide turnover within France. The transaction was thus reportable in France.

Bouygues controls TF1, a media group that owns several free-to-air and pay television channels. TF1 also offers video-on-demand services and has joint control, with other television channels, over a joint venture that distributes television services, including digital terrestrial television, catch-up TV and subscription-based video-on-demand (Salto).

TF1 is also active in the audiovisual and film production industry, in advertising, and owns several press outlets.

The Bouygues group is more broadly active in the sectors of telecommunications, construction and real estate.

The Metropole Television group, controlled by Bertelsmann, owns several television channels (free-to-air and pay television channels), video-on-demand services (VOD services) and is also a member of the Salto joint venture.

M6 is active in the audiovisual and film production industry, in advertising (M6 Publicités) and in the radio sector, where it owns the radio group RTL France, which operates three national radio channels.

The FCA decided on 18 March 2022 to open an in-depth examination of the concentration (Phase II)[8] to analyse the effects of the operation on the following markets:

  • the acquisition of broadcasting rights for audiovisual content;
  • the publishing and marketing of television channels;
  • the distribution of television services; and
  • advertising.

Those were all activities where the new entity would have held significant market power.

Following a market test, the FCA noted that the audiovisual sector is currently undergoing profound changes, marked in particular by a change in consumer habits and by the rise of subscription-based VOD services.

Despite these evolutions, the FCA considered that the development of VOD services did not allow, in the foreseeable future, to call into question the position of television, which remains a powerful medium among the French population, to the point of considering as one single relevant market television advertising and VOD and online advertising. Indeed, VOD services remain a paid model based on individualised consumption, which cannot offer the same conditions of advertising as television, where TV channels are able to offer the simultaneous distribution of advertisements to all users.

Considering this restrictive definition of the relevant markets, the transaction would have raised major competitive concerns, particularly in television advertising. Indeed, the market power of the new entity would have created a risk of price increases for advertising spaces sold by the parties. In the markets for the distribution of television services, owing to the essential nature of the TF1 and M6 channels, the FCA considered that the new entity would have gained bargaining power over its distributors, such as internet service providers (ISPs), which could have led to an increased remuneration.

Given the competition concerns identified by the FCA, the Bouygues group offered commitments relating to the television and radio advertising markets, the market for the acquisition of broadcast rights for original French-language films and the markets for distribution of television services. The commitments included, notably, a separation of the advertising agencies for the TF1 and M6 channels. This commitment was considered by the FCA insufficient to remedy competitive concerns, as the incentives of both agencies to compete would have been limited.

After having heard the parties and other market players on the 5 and 6 September 2022, the Board decided that the commitments offered by the parties were not sufficient and that a divestiture of TF1 or M6 was necessary in order to obtain clearance. Following the hearing, Bouygues decided to withdraw its notification and indicated in a press release that, considering the necessary structural remedies, ‘the project no longer had any industrial rationale’.[9]

Another operation, the acquisition of exclusive control of TFX and M6 Generation by the Altice group, was conditioned on the acquisition of Metropole Television by the Bouygues group. These channels had to be divested to the Altice group pursuant to the anti-merger mechanism provided for in the Audiovisual Act.[10] As the TF1/M6 planned merger was withdrawn, the acquisition of TFX/6ter by the Altice group never took place.

However, this second operation was still reviewed by the FCA (before the TF1/M6 merger fell through) and is worth analysing given the intricate links it had with the TF1/M6 merger project, both as regards the relevant markets involved and the impact of the TF1/M6 merger project on competitive analysis.

The new entity would have been active in most of the markets where TF1 and M6 were also present. However, contrary to the position adopted by Metropole Television and Bouygues regarding the definition of relevant markets (notably the television advertising and television service distribution markets), the Altice group decided not to question the traditional market definition adopted by the FCA. The merger to which this operation was conditioned was nonetheless integrated in the competitive analysis (regarding the markets for the acquisition of broadcasting rights for cinematographic works, other audiovisual contents and sports events; the markets for the publishing and marketing of television channels; the market for the marketing of advertising spaces on TV; and the market for the marketing of advertising spaces online).

The FCA concluded that the merged entity would notably face the new TF1/M6 entity in most of these markets.

When determining the vertical effects of the merger on the markets for the publishing and marketing of television channels, the FCA also took into account the potential TF1/M6 merger. Indeed, the Altice group is present, via its telecommunication subsidiary SFR, in the markets for the distribution of internet access offers, including television services, as well as on the markets for the distribution of paid-for television services, which are linked vertically with the markets for the publishing and marketing of television channels. According to one of the plaintiffs, the operation could have led to a distortion of competition between channels integrated to a telecommunication group, such as TF1/M6 with Bouygues and TFX/6ter with Altice, and the other free-to-air digital terrestrial television (DTT) channels that are not backed by such an operator and that could encounter difficulties in being distributed by ISPs, notably the Altice group. The FCA noted, however, that the vertical integration of the Altice group preceded the transaction, which would only slightly reinforce it. It also observed that Altice had no incentive to refuse to supply its channels to competing ISPs, as this would entail a loss of advertising revenue linked to a decline in audience, not compensated by a significant increase of subscriptions to its Internet access offers.

The FCA also had to determine if there was a risk of coordination between Bouygues and Altice in the markets for the publishing and marketing of free-to-air DTT channels resulting from the vertical integration between TFX/6ter and Altice, on one hand, and TF1/M6 and Bouygues, on the other hand. The FCA had, notably, to envisage different potential remedies imposed on the TF1/M6 merger to determine the potential market power of the new entity. It concluded that given the difference in market power between the new potential entities (the new TF1/M6 entity would have a 50 to 80 per cent market share depending on the remedies imposed by the FCA, while the new TFX/6ter entity would have a 10 to 20 per cent share in the markets for the publishing and marketing of television channels), the absence of structural links between them and the conditions of negotiation on these markets, a risk of coordination was hardly plausible.

Finally, the FCA cleared the proposed merger in July 2022.[11]

€75 million fine decision against Altice

The Altice group took over SFR in 2014. The acquisition of exclusive control over SFR was cleared by the FCA in a decision dated 30 October 2014, subject to structural and behavioural commitments.

At the time, the FCA considered that the operation would have called into question the new entity’s incentive to honour its contractual obligations concerning Bouygues Telecom.

SFR and Bouygues Telecom had signed a co-investment agreement in 2010. Pursuant to this contract, SFR acted on behalf of both operators to carry out deployment of the horizontal optical fibre network in the main French cities (including Paris). This deployment involved horizontal deployment for the fibre to the home (FttH) network in the street near buildings (ie, to the concentration point) and installation of the ‘last leg’ connecting the horizontal network to the buildings (vertical network).

Given the very high coverage rate of the cable network in these areas – Numericable (controlled by Altice) was at the time the leader in the field of access to high-speed broadband by cable – the FCA feared that SFR would have had little incentive to continue deploying an optical fibre network, as a significant part of the FttH end-user access points that SFR planned to deploy in high-density areas would be made redundant by the Numericable network after the operation.

Thus, Altice committed to continue to develop fibre as per the co-investment contract (ie, for buildings already connected to vertical fibre by building operators at the date of the clearance decision, to connect them to the horizontal network within two years). Altice also committed, for buildings that would be connected to fibre by the building operator following the decision, to add concentration points (installing cables connecting the horizontal network with the vertical network already installed in a building) within three months. Altice had also undertaken to maintain infrastructure per the conditions laid down in the co-investment contract in a transparent and non-discriminatory way.[12]

Following this first decision clearing Altice’s acquisition of control over SFR, Altice was imposed several fines totalling €210 million for a number of infringements.[13]

Among these infringements,[14] Altice was fined in March 2017 €40 million for failing to comply with its commitments related to the co-investment contract signed with Bouygues Telecom.[15] The FCA noted that after the two-year time period, 19 per cent of the required connections had not been carried out. As regards the flow of concentration points to add as of the clearance decision, the FCA considered that only half of the buildings that Bouygues Telecom wanted to connect had actually been connected and that Altice only partially respected the three-month period given to operate these connections. This delay gave time to Bouygues Telecom’s competitors to pre-empt prospective customers.

As regards its obligation of maintenance of the network, the FCA found that Altice experienced numerous incidents and lots of delays in dealing with these. These incidents were often linked to the absence of air conditioning during summer, which generated outages that could have an impact on the life span of the equipment used on the network as well as on the quality of service. This led to a degradation of the FttH network detrimental to Bouygues Telecom, whereas Altice and SFR chose on the other end to only market high-speed broadband by cable in areas where the new entity could. Altice did not provide any plausible justification for non-compliance with these commitments.

The FCA considered that these commitments were essential to prevent the new entity from impeding the development of FttH optical fibre in the concerned areas and to allow normal use of the networks already deployed by the co-contracting operators, primarily Bouygues Telecom. The FCA also retained that Altice’s breaches were serious given:

  • the strategic importance of high-speed broadband development in the telecommunications sector;
  • the position of the Altice group on this sector and the fact that these breaches weakened the position of Bouygues Telecom, presented as a maverick; and
  • the breaches:
    • related to a contract with a national dimension and, in particular, 22 cities of very high density;
    • impacted most of the optical fibre network, which was developed on the basis of this co-investment contract; and
    • reached between 2.5 and 3 million homes in France.

As regards the harm to competition, the FCA noted that the fact that Bouygues Telecom had access to Numericable cable network could not compensate for the difficulties it experienced to develop its FttH network. The FCA insisted on the need to encourage, in the telecommunications sector, the development of infrastructure-based competition, which, unlike service-based competition, allows each operator to own its own network. It also noted that these breaches had unquestionably affected Bouygues Telecom’s competitive position.

In addition to the fine imposed on Altice, the FCA pronounced new injunctions. It ordered Altice to connect of all the concentration points that were not yet connected within 12 months and to maintain the infrastructure. To make sure Altice would refrain from repeating its breaches, the FCA imposed a strict calendar with successive stages of completion of its commitment goals and progressive periodic penalty payments to force Altice to carry out the connection of all concentration points.[16]

The Altice group appealed the FCA’s decision before the French Administrative Supreme Court. The Supreme Court rejected the appeal considering that the FCA did not disregard the scope of the commitments imposed on Altice, nor did the FCA err when inferring from the facts that Altice had breached these commitments. The Supreme Court also decided that the €40 million fine imposed was proportionate. Finally, it found that the Altice group was not entitled to claim that the FCA had disregarded the principle of proportionality by imposing a one-year deadline for the implementation of the new injunctions, as it was not demonstrated that it would have been materially impossible for Altice to implement the connection of all the concentration points within that deadline, if it decided to allocate the human and financial resources necessary to achieve this goal.[17]

In October 2019, the FCA decided not to renew the bulk of the commitments undertaken by Altice when acquiring SFR. However, the commitments relating to the co-investment contract signed between Altice and Bouygues Telecom and involving the deployment of the optical fibre network were maintained, as well as the periodic penalty payments imposed by the FCA in March 2017.[18]

In September 2022, the FCA found that the Altice group had again failed to comply with these commitments. The FCA called that, when it had first authorised the merger in 2014, it was on the basis of commitments offered by Altice and not imposed by the FCA. The FCA considered that, in such a case, the company offering commitments bears a responsibility to propose commitments that are sufficient to remedy competitive concerns identified by the regulator and to ensure, even at this early stage, that the company can effectively implement these commitments. In that regard, the injunctions issued by the FCA in its decision of March 2017 were designed to force Altice to comply with the commitments it offered when acquiring SFR, including a new implementation schedule and penalty payments, and should be thus read as performance obligations. Altice should, therefore, be held liable for these breaches, except for cases of ‘duly justified performance difficulties’.

The FCA then found that a very high number of concentration points had not been connected in the time allocated to the Altice group, without suitable justification. It also found that the Altice group had not ensured maintenance of the infrastructure as per the terms of the commitments.

However, the FCA decided that there was no point in continuing to enforce the injunctions and lifted them, given that an important part of the concentration points had been connected and that, for the remaining part, the Altice group had experienced duly justified blocking situations.

Nevertheless the FCA decided to impose a global sanction of €75 million,[19] encompassing both clearance of penalty payments and non-compliance with the injunctions issued in 2017.[20]

French Administrative Supreme Court validates the first prohibition of a merger by the FCA

On August 2020, the FCA prohibited its first merger since it was granted the power to review concentrations in 2009.[21] The operation concerned the acquisition of joint control over a food retail business located in Troyes by Soditroy and the Association des Centres Distributeurs E. Leclerc (ACDLec).

The parties (Soditroy and ACDLec) appealed the FCA’s decision before the Supreme Court, which rejected their claims.[22]

The Supreme Court first confirmed that the FCA had not erred when considering that ADCLec exercised a determining influence over Soditroy, within the meaning of article L430-1 of the French Commercial Code, and thus that it jointly controlled the company with Mr Le Hen, the individual owner of Soditroy.

The Supreme Court then confirmed the traditional market definition followed by the FCA, which retains a distinct relevant market for hypermarkets.[23] Interestingly, the Supreme Court held that the fact that, in some cases, the Commission retained a unique market for food retail businesses, including both supermarkets and hypermarkets, did not mean that the FCA had erred in law, as the delineation of the relevant markets must be carried out according to the geographic and competitive environment specific to the local characteristics of the transaction under review.

The FCA had excluded from its competitive analysis two food retail businesses under the brand name Intermarché, although their selling surface was similar to that of a hypermarket. The Supreme Court confirmed this exclusion by considering that their product range could not be compared with that of a hypermarket: their offer of non-food products, in particular, was far more limited than what a hypermarket can offer. Moreover, a local market test revealed that several food retail business managers considered that these stores were comparable to supermarkets and that only a small proportion of consumers would switch to these stores in the case of price increases.

As regards competitive assessment, the Supreme Court followed the FCA’s analysis, which found that the only two hypermarkets under the brand name E. Leclerc and two hypermarkets under the brand name Carrefour remaining in the local area after the merger would be in a position to coordinate their behaviour. The Supreme Court first reminded the standard for a collective dominant position:

A collective dominant position significantly impeding effective competition in the common market or a substantial part of it may thus arise as the result of a concentration where, in view of the actual characteristics of the relevant market and of the alteration in its structure that the transaction would entail, the latter would make each member of the dominant oligopoly, as it becomes aware of common interests, consider it possible, economically rational, and hence preferable, to adopt on a lasting basis a common policy on the market with the aim of selling at above competitive prices, without having to enter into an agreement or resort to a concerted practice within the meaning of Article 81 EC (see, to that effect, Gencor v Commission, paragraph 277) and without any actual or potential competitors, let alone customers or consumers, being able to react effectively.[24]

In view of this standard, the Supreme Court considered that the competitive structure of the market could lead to coordinated effects, given that the target frequently aligned its prices on the prices charged by the Carrefour stores (condition of detection), so that the two players (Carrefour and E. Leclerc) would be able to react quickly if one was to deviate from a common policy (condition of dissuasion). Moreover, given the strong barriers to entry resulting from the local policy prohibiting any new hypermarket creation in the surroundings of Troyes, it was not plausible for any new actor to destabilise the tacit coordination (condition of non-contestation). Thus, the two players would be able to maintain high prices, without other supermarkets or discounters in the local area exerting sufficient competitive pressure.

As regards unilateral effects, the Supreme Court validated the FCA’s analysis as well, finding that the latter demonstrated, on the basis of gross upward pricing pressure index diversion ratios, that, once the transaction completed, part of the clientele of the existing E. Leclerc store would switch, not to the competing store that was closer, but to the target’s store. Thus, diversion would create an incentive for the existing E. Leclerc store to increase its prices. The parties argued that given ACDLec’s low price policy and price index, any price increase was unlikely. The Supreme Court, however, responded that even though ACDLec’s members must conform to this index, the parties were still free to apply any price they wanted on the 30,000 products that are not covered by the price index or even to increase the price of the best-selling or most expensive products by offsetting these increases with lower prices on lesser-selling or less expensive products.

The Supreme Court added that the FCA also based the prohibition of the merger on a risk of unilateral effect stemming from an increase in prices by the target store, compared to the counterfactual situation. Indeed, the FCA had found that if the transaction led to a decrease in purchasing costs for the target, such a decrease would also occur in the absence of the transaction, without leading to a reduction in the number of hypermarket stores present in the local area. The FCA also noted a risk that the prices of the E. Leclerc store already active in the market would increase given the competitive proximity and symmetry between these two stores. The Supreme Court found that although this risk could not alone justify the prohibition of the transaction, the FCA had also based its decision on the two other risks mentioned above.

In light of these elements, the Supreme Court rejected the appeal.

Confirmation by the Administrative Supreme Court of the first clearance of a merger conditioned to an up-front buyer commitment

The FCA authorised, in September 2019, the acquisition by Société Antillaise Frigorifique (SAFO) of sole control over NDIS, operating a hypermarket under the brand name Super NKT in Cayenne (French Guiana), and of its subsidiary NG Kon Tia, active in the wholesale distribution of food and non-food products.[25] As both parties were active in the food retail sector in French Guiana, the FCA identified two main risks of harm to competition in the markets for:

  • retail distribution;[26] and
  • wholesale distribution of food and non-food products.[27]

To remedy the concerns identified by the FCA, SAFO offered commitments.

First, considering the fact that another hypermarket under the brand name Carrefour was present in the local catchment area, SAFO committed not to operate the target hypermarket under the Carrefour brand name. Moreover, the contracts to be concluded between SAFO and the Carrefour group had to give the hypermarket commercial autonomy, whether in terms of product assortment or pricing policy.

Second, SAFO had undertaken not to carry out the transaction until it had divested NG Kon Tia’s wholesaler-importer business and the buyer was approved by the FCA (up-front buyer commitment).

In February 2020, the FCA approved the company Sainte-Claire et Cie as the buyer of the wholesaler-importer business.[28]

Guyane Ruiling, a trading company, which was dissatisfied with both decisions (ie, the clearance decision and the decision accepting the up-front buyer), filed an appeal before the French Administrative Supreme Court.

However, the Supreme Court confirmed the FCA’s decisions and rejected Guyane Ruiling’s claims.[29]

The Supreme Court first found that the FCA had not erred in fact when delineating the relevant market and confirmed the FCA’s assessment of the effects of the merger on the downstream markets for food retail distribution.

More interestingly, Guyane Ruiling tried to challenge the procedure followed by the FCA to implement the up-front buyer commitment offered by the parties in the wholesale distribution of food and non-food products. First, the appellant argued that the FCA disregarded point 596 of its guidelines because the commitments it accepted should have included the designation of a trustee responsible for monitoring the proper implementation of the divestiture commitments, in particular by ensuring that the viability of the assets to be divested is maintained. But the Supreme Court considered that the specific commitment taken by SAFO consisted in not being able to carry out the merger until the buyer was approved by the FCA as having the capacity to carry on the business in a viable manner and to animate competition. It gave the parties a strong incentive to maintain the viability and attractiveness of the business in question and to actively seek a suitable buyer. Moreover, Guyane Ruiling argued that the FCA had failed to comply with point 599 of its guidelines on the grounds that the commitments it accepted should have provided for the appointment of a trustee responsible for a report on the viability and ability of the proposed purchaser to animate competition. Similarly, the Supreme Court ruled that the commitments undertaken by SAFO were sufficient to ensure that the divested business would be taken over by an appropriate purchaser. The Supreme Court concluded that the FCA had not erred in facts when it decided that the commitment to sell NG Kon Tia’s wholesaler-importer business was likely to remedy the harm to competition resulting from the horizontal effects produced by the transaction.

As regards the commitments on the retail distribution of food markets, Guyane Ruiling maintained that, even though the target store could not use the Carrefour brand name, these commitments could not prevent the disappearance of an independent brand and the strengthening of the position of the Carrefour brand name, in particular through the distribution of this group’s product by the target store. The Supreme Court answered, in line with past case law, that it is only in cases where franchised stores do not have sufficient autonomy in determining their commercial policy with the head of the network that these stores are taken into account to assess the market power of the distribution network. When a distribution network gains, as a result of a merger, market power likely to affect competition, the FCA can, therefore, accept behavioural commitments from the parties designed to maintain this autonomy, without requesting the severance of any contractual link with respect to the head of the network. Precisely, the commitments provided that the contract cannot include any obligation of supply from the Carrefour group. The Supreme court added that the fact that Carrefour could give its administrative, fiscal and financial assistance to the target would not necessarily mean a loss of commercial autonomy as this assistance would not lead to interference in the management of the target store. Thus, Supreme Court found that the FCA did not err in facts when considering that these commitments could maintain competition on the downstream markets for the retail distribution of food, by eliminating any overlap of activities at the level of the Carrefour brand and maintaining three competing hypermarket brands and the competitive structure of the market that prevailed before the transaction.

The Court confirmed the decision of clearance of the merger and of the decision approving the up-front buyer.

Towards an increased cooperation with the European Commission?

One-third of significant FCA investigations[30] in 2022 were referred by the European Commission (two out six decisions).

In the first case, the transaction was referred in June 2020 to the FCA at the request of the parties (Conforama/Mobilux) on the basis of article 4(4) of the EUMR,[31] under which the Commission can refer a case to a national competition authority at the request of the parties to the transaction. The parties must justify that the concentration may significantly affect competition in a market within a member state that presents all the characteristics of a distinct market and, therefore, should be examined, in whole or in part, by that member state.

Based on the reasoned submission filed by Conforama and Mobilux (parent company of the BUT group), the Commission concluded that all potentially affected markets were retail supply markets located in France. The Commission retained that the proposed concentration could give rise to affected local markets in the retail supply of furniture and in the retail of electronics and appliances (in particular, white and brown products). Furthermore, the Commission considered that the concentration may affect competition in the procurement of furniture in France, given that: the majority of products sourced by BUT and Conforama France originates from France; Mobilux has a purchasing policy favouring French industry; and the parties have very low upstream procurement shares at the EEA level. Lastly, the Commission took into account additional factors, the examination of which is prescribed by the Commission Notice on Case Referrals.[32] The Notice provides that it should also be considered whether the competition authority to which the parties are contemplating requesting the referral of the case is the most appropriate authority for dealing with the case. The Commission considered that the FCA was well placed to examine the case as the effects of the proposed transaction were likely to be confined to France and each of the potentially affected market was not wider than national in scope and located in France. It also noted that the FCA had developed a significant experience and expertise in the relevant industries, the Commission having already referred a similar case to this authority.[33]

In the second case, the referral was granted following a request from the FCA itself (Mckesson/Phoenix) concerning a transaction involving the market for pharmaceutical distribution recently analysed by the FCA in its healthcare sector inquiry.[34]

The Commission decided to refer the examination of the effects in France of the acquisition of sole control of McKesson Europe by the German group Phoenix to the FCA.

The referral was made pursuant to article 9 of the EUMR, which allows the Commission to refer the examination of a transaction to the national competition authority best placed to assess its effects on competition, at the request of this national competition authority. The request for referral can be based on two alternative conditions: either the concentration ‘threatens to significantly affect competition in a market within that Member State presenting all the characteristics of a distinct market’ or it ‘affects competition in a market within that Member State, which presents all the characteristics of a distinct market, and which does not constitute a substantial part of the common market’.

After examination of the case at hand, the Commission concluded that the proposed transaction could indeed significantly affect competition in the markets for the wholesale distribution of pharmaceutical products in France, where McKesson and Phoenix are currently and respectively the No. 1 and No. 5 players on the market. Thus, the Commission decided to partially refer the case to the FCA.[35]

It is only the fourth transaction to be referred to the FCA at its request, pursuant to article 9 of the EUMR.[36]

While these two cases were referrals from the EU Commission to the FCA, the FCA can also refer cases to the EU Commission under article 22 of the EUMR, as mentioned above. In February 2021, the FCA took advantage of the new interpretation of this article to refer the Illumina/Grail merger to the EU Commission, which later prohibited the transaction.[37] The decision of the FCA to refer the case was challenged before the French Administrative Supreme Court. The Supreme Court ruled in February 2023 that, regardless of the effects of such a referral for the companies concerned, it does not have jurisdiction to hear an appeal against the FCA’s decision to refer the merger to the EU Commission, as such a referral is not detachable from the review procedure of the merger itself, under the review of the ECJ. It follows from this decision that the FCA’s power to refer cases on the basis of the new interpretation of article 22 of the EUMR is, at the national level, discretionary and cannot be appealed under national law.[38]

This cooperation is bound to continue in 2023 as the FCA recently received a new referral pursuant to article 4(4) of EUMR with the proposed takeover of GO Sport assets by the British group Frasers’ subsidiary, Sportsdirect.com.[39] This new referral stands as the 35th transaction referred by the European Commission to the FCA since 2009.


Notes

[1] The latest amendments stem from the Decree No. 2021-715 of 2 June 2021, which mainly provide for the use of the electronic platform Hermes for the exchange of documents with the French Competition Authority (FCA).

[2] Merger Control Guidelines of the French Competition Authority 2020. The Guidelines refer to Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings.

[3] Similar provisions exist in other EU member states, such as Germany, where mergers prohibited by the Federal Cartel Office may exceptionally be approved by the Federal Minister for Economic Affairs and Energy if public interests outweigh the adverse effects on competition.

[4] The validity of the referral and new interpretation of article 22 of the EUMR was confirmed by the General Court of the European Union (GCEU, 13 July 2022, T-227/21, Illumina v European Commission). An appeal is currently pending before the ECJ (C-611/22). Following the referral, the merger was prohibited by the European Commission in September 2022 (No. M.10188). The European Commission sent in July 2022 a statement of objections in the framework of the article 14 procedure (in the case of non-compliance with the standstill obligation under EU Merger Regulation) (No. M.10483). Following the early implementation of the concentration, the merging parties have been subject to interim measures adopted by the European Commission in October 2021 (No. M.10493), which were renewed and adjusted in October 2022 (No. M.10938). In December 2022, the Commission adopted another statement of objections outlining measures to unwind Illumina’s acquisition of Grail following the Commission’s decision to prohibit the implemented concentration (No. M.10939).

[5] Article R430-2 of the French Commercial Code states that the notification form must be sent to the FCA in one paper copy or through the platform. The FCA’s rules of procedure modified by its Decision dated 21 December 2022 state that the platform is the preferred means of communication of documents with the FCA (article 1) but that if the notifying party does not use the platform, it must nevertheless send a copy in electronic format accompanying the paper copy.

[6] This was the case, for example, in 2020, regarding the acquisition of 100 Bio c’ Bon stores by Carrefour. The FCA granted Carrefour a derogation from the standstill obligation in October 2020 (FCA Decision No. 21-DCC-161 of 10 September 2021).

[7] Law No. 2015-990 of 6 August 2015 (‘pour la croissance, l’activité et l’égalité des chances économiques’)

[8] FCA Decision No. 22-DEX-01 of 18 March 2022.

[10] Law No. 86-1067 of 30 September 1986, article 39 and ff.

[11] FCA Decision No. 22-DCC-126 of 15 July 2022.

[12] FCA Decision No. 14-DCC-160 of 30 October 2014.

[13] Apart from the case described hereafter, Altice was notably fined €80 million for gun-jumping in two operations: the first operation was the takeover of SFR notified in June 2014 mentioned above and the other was the acquisition of sole control of the OTL group notified on September 2014 (FCA Decision No. 16-D-24 of 8 November 2016).

[14] Altice had already been fined €15 million in April 2016 for not complying with several obligations related to the commitment to divest mobile phone activities of Outremer Telecom in La Réunion and in Mayotte, made to address the significant market power that Numericable and Altice would have had in mobile telephony in these territories. The new entity committed to maintain the viability, market value and competitiveness of Outremer Telecom but, in the end, increased the price of its mobile phone subscriptions in these territories.

[15] FCA Decision No. 17-D-04 of 8 March 2017.

[16] The progressive periodic penalty payments were set as follows: €50 per concentration point not connected and per day of delay, if Altice has not connected 50 per cent of the concentration points within six months, €75 per concentration point not connected and per day of delay, if Altice has not connected 75 per cent of the concentration points within nine months, €100 per concentration point not connected and per day of delay, if Altice has not connected 100 per cent of the concentration points within 12 months.

[17] Conseil d’Etat Decision No. 409770 of 28 September 2017.

[18] FCA Decision No. 19-DCC-199 of 28 October 2019.

[19] Altice requested the benefit of the settlement procedure.

[20] FCA Decision No. 22-D-15 of 29 September 2022.

[21] FCA Decision No. 20-DCC-116 of 28 August 2020.

[22] Conseil d’Etat Decision No. 445680 and 446974 of 14 October 2022.

[23] The distribution service offered by hypermarkets is not substitutable to the service offered by supermarkets and discounters, considering: the very wide depth of product range they offer, and the specific habits of their consumers (one-stop-shop); the fact that, in the case of an increase in price, demand is transferred to other hypermarkets; and the main discounters on the local geographic market indicated that they did not compete with the target.

[24] ECJ, 6 June 2022, T-342/99.

[25] FCA Decision No. 19-DCC-180 of 27 September 2019.

[26] In the markets for the food retail distribution, the FCA considered, in particular, that the operation would be a four-to-three concentration for hypermarkets in a catchment area defined by a radius of 30 minutes by car from the target store.

[27] In the market for the wholesale distribution of food and non-food products to supermarkets, even though SAFO submitted economic data indicating that the parties would not have a cumulated market share over 25 per cent, the market test conducted by the FCA concluded that NG Kon Tia and Sogifru (SAFO’s subsidiary) were the main operators in the wholesale distribution of fresh and frozen products in French Guiana.

[28] Letter of acceptance, 4 February 2020, No. 19-DCC-180 (19-034).

[29] Conseil d’Etat Decision No. 436274 of 22 July 2022.

[30] Ie, investigations in Phase I leading to remedies or in Phase II.

[31] Commission Decision COMP/M.9894 Mobilux/Conforama France of 26 June 2020

[32] Pointt 19 of the Commission Notice on Case Referrals.

[33] Commission Decision COMP/M.7823 Kingfisher/Mr Bricolage of 11 August 2014.

[34] FCA’s Opinion 19-A-08 of 4 April 2019.

[35] Commission Decision COMP/M.10404 Phoenix/McKesson of 30 March 2022.

[36] Previous referrals have resulted in the following decisions from the FCA: No. 10-DCC-02 of 12 January 2010, No. 10-DCC-98 of 20 August 2010 and No. 19-DCC-42 of 12 March 2019.

[37] Commission Decision COMP/M.10188 Illumina/Grail of 19 April 2021 and Commission Decision COMP/M.10188 Illumina/Grail of 6 September 2022. See footnote 4 for further details.

[38] Conseil d’Etat, 10 February 2023, No. 450877.

[39] Commission Decision COMP/M.11085 Frasers/Go Sport of 30 March 2023.

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