France: Merger Control
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The French merger control regime is governed by the provisions of Book IV of the French Commercial Code (article L430-1 et seq), as amended by the Law on the Modernisation of the Economy (LME) enacted on 4 August 2008, government Order No. 2008-1161, dated 14 November 2008, and Law No. 2015-990 (the Macron Act).
Presentation of the French Competition Authority
The French Competition Authority (FCA) is an independent administrative authority. It was created in 2009 after the transformation of the former Competition Council.
Concerning antitrust, the FCA (whose ambit is to regulate market competition) is in charge of the application of both national (Book IV of the French Commercial Code) and European legislation (articles 101 and 102 TFEU, ex articles 81 and 82 ECT).
The FCA enforces antitrust and has the power to engage actions for anticompetitive practices on its own or at the request of a plaintiff. The FCA also plays an advisory role by issuing opinions on its own initiative or at the request of corporations representing public interests: government, parliament, local authorities, professional organisations or organisations that defend consumer interests.
Concerning merger control, a specific team within the FCA is dedicated to this task. This department, which is part of the FCA’s investigation services, is in charge of defining the FCA’s merger control policy. The investigation services also include a team of economists in charge of conducting economic analyses in order to evaluate the impact of the concentration on the market.
Merger control is within the exclusive competence of the FCA. The FCA assesses the competition effects of mergers by taking into account any possible efficiency gains. The Ministry of Economy may nonetheless have the last word. In accordance with article L430-7-1, if the Minister, after having received the decision of the FCA, decides whether public interest reasons other than the promotion of competition outweigh the competition concerns raised by the merger.
Article L430-4 of the French Commercial Code provides that the effective completion of a notifiable merger may occur only after the approval of the FCA or of the Minister of Economy.
In application of article L430-2, to be controllable the concentration must meet three thresholds: the worldwide aggregate sales (net of taxes) of the merging parties (or groups of physical or corporate bodies they belong to) must be more than €150 million; the total sales (net of taxes) in France of two of the merging firms must be more than €50 million; the merger must not meet the thresholds for European merger control. 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.
This same article also provides that in the event of a duly substantiated special necessity, 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. This article was recently modified by Law No. 2015-990 for economic growth and activity (the ‘Macron Act’, named after the current Minister of the Economy, Emmanuel Macron), adopted on 10 July 2015. The amendment to article L430-4 states that the exemption to the suspensive effect of the notification of the concentration requested by the notifying party will be void if, within three months after the carrying out of the operation, the FCA has not received the complete notification.
If the operation does not raise any particular competition issues article L430-5 provides that a decision is 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 days of this notification 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 in order to finalise the commitments or in other case of necessity to suspend the procedure for 15 days. Finally the Macron Act promulgated on 6 August 2015 grants the FCA the possibility to stop the clock during the 25-day Phase I review period, if the parties have failed to inform it of a new fact which should have been part of the notification had it taken place before this notification or if the parties have failed to provide in due time all or a part of the information requested by the competition authority or if third parties have failed to provide requested information because of actions of the parties having notified the merger. There is no time limit set for the suspension which lasts until the FCA considers the notification is complete (ie, after the submission of all necessary information).
If any serious doubts of anticompetitive effects persist at the end of this phase, the FCA will decide to open a Phase II investigation, during which the FCA will conduct a thorough examination of the contemplated merger by launching a market test and an economic analysis of the impact of the transaction on the market.
Where a merger raises significant anticompetitive effects that cannot be counterbalanced by economic efficiency gains and where the failing firm defence is not relevant, it may be necessary for the parties to offer commitments that will remedy or compensate for the anticompetitive effects.
Article L430-7 of the Commercial Code provides that the Phase II examination lasts 65 business days except if commitments are presented within the last 20 days of the 65-day period. In such a case, the examination time period will be extended by 20 business days starting from the date of reception of the commitments. The Macron Act, however, set a ceiling on the duration of the extension of Phase II due to late proposal of commitments. The Phase II period can be extended only to a maximum of 85 days. Another 20-day period can be added if the parties or the FCA request suspension of the procedure. Taking into account this stop-the-clock period, the maximum duration of the examination under Phase II is 105 days.
At the end of a Phase II investigation, the FCA can allow the merger in view of the commitments proposed by the parties, prohibit the merger or impose conditions in order to ensure that the contribution of the merger to economic progress outweighs its anticompetitive effects.
Within 25 business days after the FCA has adopted its decision, the Ministry of the Economy can decide to substitute its own decision to the decision of the FCA if a merger raise issues of fundamental interest other than competition and its benefits outweigh the competition concnerns. The fundamental interests that may be in question are related to industrial development, the competitiveness of the undertakings concerned regarding international competition and sustaining employment. However, the Ministry of Economy has thus far not used this right since the FCA was created in 2009.
In application of article L430-8, if the FCA considered that the parties to a controlled merger did not meet their obligations to comply with their commitments or comply with the injunctions imposed by the competition authority, it could either withdraw its authorisation decision and therefore require a new notification and a new review of the merger, or order the company to comply with the commitments it had undertaken. The Macron Act of July 2015 has amended this article and provided the FCA with a third option: it can substitute new injunctions or prescriptions to the initial remedies with which the parties did not comply. However, the law does not give any details on the procedure to be followed for the imposition of new injunctions or prescriptions.
Notable decisions from 2015–2016
In 2015 notable cases included two decisions related to multi-sided markets and three decisions raising issues of vertical foreclosure in the energy sector.
In decision No. 15-DCC-63 of 4 June 2015, the FCA examined the acquisition of the ‘Société du Journal du Midi Libre’ by the ‘La Dépèche du Midi’ group. The acquirer and the target are media companies publishing regional daily and weekly newspaper and magazines in southern France. The activities of the two groups overlapped on the market for regional daily press in two ‘departements’ (French administrative subdivisions): Aude and Aveyron. In both ‘departements’ the transaction was a 2:1 merger with the parties to the transaction having a 100 per cent market share on the local markets for readers of daily regional newspapers as well as 100 per cent of the local markets for newspaper advertising and personal ads.
The FCA considered that there was no risk of price increase of the newspapers because of ‘their readers’ sensitivity to prices’, because their readers had a high degree of loyalty to their daily newspaper (which meant that they were unlikely to switch to another paper) and, finally, because of the two-sidedness of the daily newspaper market. However, the FCA did not elaborate further on the interaction between the two faces of the market.
Nevertheless, the FCA was concerned about the possibility of a decrease in the quality and diversity of the newspapers. It stated that the merged firm could be tempted to ‘harmonise the editorial content of the newspapers’ which would translate into a ‘reduction in the quality and the editorial diversity of the daily regional newspapers’. The FCA, however, did not explain why the merged entity would want to editorially harmonise the competing newspapers it would publish if the readers of each of these newspapers were very attached to its editorial line. In any case, to remedy the competition concerns of the FCA the merging parties committed themselves to keep separate and distinct the national, regional or local information news coverage of the relevant newspapers for a period of five years and also committed themselves to continue the publication of these newspapers for the same period of time as long as their readership was above a certain threshold.
In Decision No. 15-DCC-139 of 20 October 2015, the FCA assessed the takeover of five companies controlled by ‘Les Editions P. Amaury’, which published Le Parisien and Aujourd’hui en France (respectively a daily regional newspaper and a national newspaper) by group LVMH-Moët Hennessy Louis Vuitton, the manufacturer of a large number of well-known luxury brands and the publisher of Les Echos, a leading economic and financial national daily newspaper, some magazines (Investir, Série Limitée) and a few technical and professional publications. The takeover did not raise any horizontal concern as LVMH was taking over a daily regional newspaper on a market where it was not yet present. However, the FCA examined the possible vertical and conglomeral effects of the merger. With respect to the vertical effect it examined whether the merger would be likely to lead LVMH to advertise only its own brands in Le Parisien, the only regional daily newspaper in the Paris region, and refuse to sell advertising to competing luxury brands, thus foreclosing its competitors from access to advertising in the Paris regional daily press. The FCA considered that this was unlikely, among other things, because the readers of Le Parisien are not buyers of LVMH luxury brand products. With respect to the conglomeral effects, the FCA considered it unlikely that the merged firm would resort to tying or bundling in order to use the leverage it had on the advertising market of the daily economic press or on the advertising market of the daily Paris regional press to reinforce its position on other advertising markets. The readerships of Les Echos and Le Parisien and the advertisers of both publications were considered too different for such a strategy to succeed. The acquisition was cleared without commitments.
In three decisions in the energy sector, the FCA has been concerned with the risks of vertical foreclosure in the petroleum market.
In Decision 14-DCC-167 of 13 November 2014, the FCA examined the potential consequences of a modification of the structure of governance of SPSE, a company jointly owned by Total, Exxon Mobil, BP, Shell and two German companies. SPSE manages pipeline and oil storage facilities in southern France and there are no easy-to-use other storage facilities for oil products in the region. The shareholders of SPSE can have a priority access for long-term storage of their products when the demand for storage capacity is larger than the available storage capacity. As a result of the change in the structure of governance of SPSE, Total Raffinage France would acquire a blocking minority on the board of SPSE and therefore would have the ability to play a decisive role in decisions to adopt or repeal priority measures. The FCA was concerned that Total could oppose the principle of equality of treatment of shareholders and oil companies who do not have shares in SPSE with respect to access to the storage facilities. The FCA cleared the operation after having received commitments of the parties to the effect that Total would not use its blocking minority possibility when it came to decisions about allowing priority access to the storage facility by SPSE shareholders.
In May 2015, the FCA examined the sale of the shares sold by Total in the ‘Société Anonyme de la Raffinerie des Antilles’ (SARA) to ‘Société Rubis’ which already owned 35.5 per cent of the shares of SARA. A third shareholder, SOL, held a 14.5 per cent interest. Rubis is a supplier of crude oil for SARA, manages a network of gas stations in the French Antilles and sells refined oil products to industrial users. SARA, which manages a refinery in Martinique and storage facilities in Guyane and Martinique, is the monopolist importer of crude oil in the region and bought from its shareholders (Total and Rubis and Exxon) exclusively prior to the change in the ownership of SARA. The FCA, first, examined the possibility that Rubis could increase the cost of its deliveries of crude oil to SARA, which would increase the cost of oil sold by its competitors to final consumers. Next it examined the possibility that Rubis would refuse access to the SARA storage facilities by its competitors importing crude or semi-finished products in order to maintain its monopoly on imports. Next, it examined whether SARA could have an incentive to deny its competitors access to its pipelines (which are the only pipelines reaching consumers) or to charge them more for the use of these pipelines. Finally, the FCA asked itself if Rubis could deny its competitors at the resale level access to the refined oil produced by SARA or to increase the price to them. It concluded, in all instances, that Rubis could have an interest in foreclosing its competitors and it cleared the merger only after having accepted the commitments of Rubis to maintain the price of the imported finished and semi-finished products used by SARA (since the cost of imports of crude oil was subject to price regulation), to offer an access to the SARA storage capacity and to its pipelines to its competitors without any discrimination and at a price reflecting its costs, to supply all third parties with fuel and GPL at transparent and non-discriminatory prices.
Finally in July 2015, the FCA examined the acquisition by the same company, Rubis, of the shares owned by Total and Shell in the capital of the Société Réunionaise des Produits Pétroliers (SRPP), which imports, stores and sells oil and liquefied gas on the island of La Réunion. Rubis was to acquire the exclusive control of SRPP. SRPP had three competitors on the downstream oil and LPG markets (Total, Engen and Lybia Oil). One of the differences with the previous case is that there is no refinery on the island of Réunion. All the firms active on the Réunion oil and GPL markets import together through a common structure. SRPP owns the only storage facilities for oil and LPG on the island. Some petroleum products are subject to price controls. The FCA considered that Rubis, which was to acquire the only significant storage facilities on the island for oil and LPG, would have an incentive to deny access to these facilities to its competitors or to increase the price charged to them for access on two non-regulated downstream markets (the market for gas for boats and planes). Similarly, the FCA concluded that there was a risk that SRPP would deny access or charge a high price for its monopolistic bottling facility for LPG. Rubis offered various commitments: it committed itself to give access to third parties to its storage facilities and to meet all demands from third parties to fill LPG containers at non-discriminatory prices oriented toward costs (including a reasonable profit). The transaction was cleared in view of the commitments offered by Rubis.
Overall, there is a growing number of cases of merger control applying to multi-sided markets. Depending on the case, the FCA may take into consideration the interaction between the various sides to assess whether the effects of the possible pricing strategies it examines are likely and are anticompetitive. This is, by the way, equally true of FCA antitrust decisions. For example, in Decision No. 15-d-18, which deals with an alleged (but ultimately unproven) Nintendo setting of a uniform resale price for its game console, the FCA, although admitting that Nintendo was operating on a two-sided market, did not consider the interaction between the two sides of the market and whether such a strategy could even have made sense for Nintendo. Thus merging firms (or dominant firms) in multi-sided markets must be aware that they may have to defend their transactions or their past practices on the basis on one side of the market.
Second, these merger decisions show that the FCA routinely conditions the approval of the transactions it examines to far-reaching, quasi-regulatory, behavioural commitments by the merging parties. This is true, in particular, in cases of vertical mergers where there is a risk of foreclosure at one level or another of the vertical chain, but it can also be true in horizontal mergers in highly concentrated industries as the above-mentioned decision on La Dépêche du Midi shows. The commitments accepted by the FCA can go far beyond what it could impose as an injunction to allow the mergers.