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 L.430-1 and following), 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 (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 L.430-7-1, if the Minister, after having received the decision of the FCA, decides if public interest reasons other than the promotion of competition outweigh the competition concerns raised by the merger.
Article L 430-4 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; and
- 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 former minister of the economy, Emmanuel Macron), adopted on 10 July 2015. The amendment to article L.430-4 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 of 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 L.430-5 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 FCA 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 defense is not relevant, it may be necessary for the parties to offer commitments that will remedy or compensate for the anticompetitive effects.
Article L.430-7 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 to suspend 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 concerns. 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 L.430-8, 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 FCA, 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 2016-2017
In 2016, notable cases included one decision related to a merger in the retail sector, where the central issue was that of the relationship between brick and mortar retailers and online retail; one decision related to the issue of gun-jumping; and two decisions in which the concerns of the FCA were related to the reinforcement of buying power of intermediaries in the agro-food sector and to the possibility of foreclosure of entrants in the same sector.
On 18 July 2016, the FCA conditionally cleared the merger between FNAC and rival appliance and electronics retailer Darty (Decision No. 16-DCC-111 of 27 July 2016). The decision is a landmark decision because for the first time the FCA included both online stores and brick-and mortar-stores in its definition of the relevant local retail markets (in this case, the market for electronic products).
Previously online stores were generally considered not to be on the same market as brick-and-mortar retailers but their existence was taken into consideration in the assessment of the competitive forces on the brick-and-mortar market. For example, in its decision No 14-DCC-15 of 10 February 2014 relative to the acquisition of the exclusive control of Mediaserv, one of the main suppliers of internet access in French overseas departements and regions, by Canal Plus Overseas, the main provider of subscription television services in France's overseas departements and regions, the FCA had authorised a concentration which resulted, inter alia, in a market share of 47% on the brick-and-mortar retail market for internet access distribution, in light of the fact that internet subscriptions were also available online.
In the press release which accompanied the FNAC/DARTY merger decision, the FCA stated that it considered that, for the type of goods considered, the competitive pressure exerted by online sales has become significant enough for the online retailers to be included in the market, whether they be pure players (such as Amazon or Cdiscount) or brick-and-mortar stores or manufacturers' own websites.
Unlike the parties which argued for considering a national market for retail sales of electronic products, the FCA - noting that 70% of buyers still would go to a brick-and-mortar store - was of the view that the competitive analysis should be undertaken at the local level. Thus for each catchment area of the stores of the merging parties it considered the market share of the new entity and of its competitors, including online operators. Overall, the FCA ordered the divestment of six stores in Paris and its suburbs.
In 2014, the Altice Group, a telecoms operator, which at the time operated in France through its subsidiary Numericable, had notified two mergers to the FCA: first, the acquisition of the SFR Group; and second, the acquisition of the OTL Group (which, among other things, distributes telecom services under the Virgin Mobile brand). Those acquisitions were cleared respectively in October 2014 and in November 2014. The Altice/SFR merger was cleared subject to commitments and the Altice/OTL Group merger was cleared unconditionally. Having subsequently come across a number of indications (provided notably by competing operators) which suggested a possible gun-jumping in connection with both acquisitions, the FCA dawn-raided Numericable, SFR and OTL premises on 2 April 2015.
Article L. 430-8 V provides that:
If a concentration has been carried out in breach of the decisions taken pursuant to articles L. 430-7 and L. 430-7-1, the FCA shall enjoin the parties to return to the state prevailing prior to the concentration, subject to a progressive coercive fine, within the limits of the provisions of article L. 464-2.The FCA may also impose the financial penalty specified in I on persons upon who the foregoing decisions were imposed.
In this case, the FCA established that although the ownership of assets was not transferred during the suspensive period, the evidence showed that Altice exercised a decisive influence on its target and gave it access to a significant quantity of strategic information, even before the merger was given clearance by the FCA. In particular Altice had intervened in the operational management of SFR before the clearing of the merger, for example, by: approving the conditions under which SFR sub-groups could bid for a fibre optics public development project in the department of Seine-et-Marne; vetting the renegotiation of a major mobile network sharing agreement between SFR and Bouygues Telecom; and asking SFR to suspend a promotional offer on fibre. Altice and SFR also exchanged large quantities of strategic information with SFR in readiness for the integration of the two groups. The FCA also considered that Altice and SFR had gun-jumped by negotiating and operationally preparing the launch of a new range of very high-speed broadband internet access offers under the SFR brand before the clearance of their merger in order to be able to launch this service just a few days after the FCA clearance (note that it is not clear that in all jurisdictions this last element would have been considered to amount to gun-jumping).
Similarly with respect to the Altice/OTL Group merger, the FCA established that Altice had set up a weekly information reporting mechanism allowing it to keep close track of OTL's economic performance. This monitoring, which was comparable to that exercised by a controlling shareholder, provided Altice with access to commercially sensitive information concerning OTL. The FCA also established that OTL's managing director had begun to carry out his duties within the SFR Numericable group before the merger had been cleared.
The FCA issued a decision to jointly fine Altice Luxembourg and SFR Group €80 million, in application of section II of article L. 430-8 of the French Commercial Code, for having prematurely completed two mergers, notified in 2014, in the electronic communications sector. According to the press release, this decision was the first to be issued in Europe or anywhere else in the world in terms of the scale of practices sanctioned and the amount of fines handed out.
Finally, in two merger decisions - both related to transactions among buyers of agricultural products - the French FCA imposed conditions to mitigate the effect of an increase in the buying power of the merging parties.
On 22 September 2016, the FCA conditionally cleared the acquisition of sole control of Agri-Négoce by Axéréal Participations (an agricultural cooperative), subject to the divestment of six grain storage facilities (Décision 16-DCC-147 du 21 septembre 2016 relative à la prise de contrôle exclusif de la société Agri-Négoce par la société Axéréal Participations). Both parties were involved in the storage and commercialisation of grains, the sale of supply for agriculture, the production and sale of seeds and the production and sale of animal feed.
The FCA considered that access to the services of storage companies was crucial to allow farmers to sell their grain as the storage companies were important intermediaries conditioning the grain for sale, cleaning it, controlling the quality of the grain and aggregating the grain in homogeneous lots sufficiently large to be attractive to buyers. The FCA then observed that the merger would eliminate competition between the two largest storage companies in one French ‘department' (an administrative sub-division) where the merging firms would have a more than 60% market share of the storage business, an 84% share of the storage capacity, and control over 12 of the 13 largest storage facilities. As in this department smaller competitors did not constitute a credible alternative for grain producers, their choices for storage would be restricted by the decrease in the number of storage companies. The FCA thus conditioned its approval of the merger on the divestment by the parties of six grain storage facilities in this department.
On 9 December 2016, the FCA conditionally cleared the merger between Sicavyl and Sicarev, two agricultural cooperatives mainly active in the beef, pork and lamb sectors at all stages of the vertical chain from operating slaughter houses to the commercialisation of meat to retailers (Decision 16-DCC-208 du 9 décembre 2016 relative à fusion par absorption de la société Sicavyl par la société Sicarev). The FCA considered that the merger raised a competition issue because the merging cooperatives owned the only two slaughterhouses certified for the slaughter of cattle benefiting from the geographical indication ‘Boeuf de Charolles' (Charolais beef). Another three slaughterhouses in the relevant region could be quickly certified for Charolais beef, but the FCA feared that the cattle raisers of Charolais beef - members of the merging cooperatives - would enter into exclusive contracts with the slaughter houses owned by the merging cooperative, thus foreclosing the market for potential competing slaughterhouses for Charolais beef.
The FCA cleared the merger after the merging cooperatives let the farmers raising cattle eligible for the geographical indication ‘Boeuf de Charolles' choose the slaughterhouse of their choice.