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 (articles L.430-1 et seq), as last amended by Statute No. 2015-990 (Macron Act). Since 2008, the French merger control process is entrusted to the French Competition Authority, which published in 2013 revised guidelines on merger control.1
Presentation of the French Competition Authority
The French Competition Authority (FCA) is an independent administrative authority. It is composed of investigative services under the leadership of the head of investigative services and a board in charge of making the final decisions on the cases investigated by the investigative services.
Since 2008, the FCA has been in charge of both the enforcement of French and European antitrust provisions (articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) and articles L.420-1 and L.420-2 of the French Commercial Code) and the implementation of the French merger control regime under articles L.430-1 et seq of the French Commercial Code. The FCA enjoys wide investigative powers for the enforcement of both French and European competition rules.
The FCA also plays an advisory role by issuing opinions on its own initiative or at the request of bodies in charge of representing public interests, such as the government, Parliament, local authorities, and professional or consumer organisations.
Within the FCA, the merger control unit is part of the FCA’s investigative services under the authority of a deputy head of investigative services. The FCA also includes an economic team, led by the chief economist, in charge, inter alia, of conducting economic analyses to assess the impact of concentrations in the relevant markets.
Merger control procedure
Merger control is within the exclusive competence of the FCA. However, pursuant to article L.430-7-1 of the French Commercial Code, the Minister for the Economy may, upon receiving a merger control decision from the FCA, ultimately decide whether purely public interest considerations, including, eg, industrial development and employment in France, should outweigh the competition concerns raised by the concentration. In practice, this provision is very seldom used, and the Minister for the Economy has never authorised a concentration that had previously been deemed anticompetitive by the FCA (unlike, eg, the German Federal Minister for Economic Affairs and Energy, who used a similar provision under German law in March 2016 to overrule the Bundeskartellamt’s prohibition of the merger between EDEKA and Kaiser’s Tengelmann in the retail sector).
Pursuant to article L.430-1 of the French Commercial Code, the French merger control regime covers:
- acquisitions of control; and
- full-function joint ventures.
The full-functionality criteria applied by the FCA are similar to those of the European Commission.
Pursuant to article L.430-2 of the French Commercial Code, concentrations within the meaning of article L.430-1 are considered reportable in France provided they meet three cumulative thresholds:
- the worldwide 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.
The notification process has a suspensive effect on the transaction, which cannot be closed prior to receiving the FCA authorisation. However, article L.430-4 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 case of necessity. The exemption to the suspensive effect of the notification of the concentration will be void if, within three months of closing, the FCA has not received the complete notification.
Although theoretically not mandatory, the FCA effectively requires a pre-notification phase. If the operation does not raise any particular competition concerns, 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-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 in order to finalise the commitments or in case of necessity to suspend the procedure for 15 days. Finally the Macron Act grants the FCA the possibility to stop the clock at any time during the Phase I review period, if the parties have failed:
- to inform the FCA of a relevant new; or
- 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 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 necessary information).
In case 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 L.430-7 of the Commercial Code provides, Phase II must be completed within 65 business days, except if 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 105 days.
At the end of a Phase II investigation, the FCA can allow the merger (possibly 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.
Pursuant to article L.430-8 of the French Commercial Code, should the FCA consider that the parties are failing to comply with their commitments or the injunctions imposed by the FCA, it can either:
- withdraw the authorisation decision, and therefore require a new notification and a new review of the merger;
- order the undertaking to comply with the commitments; or
- since 2015, substitute or add new injunctions to the initial remedies with which the parties failed to comply.
Notable decisions from 2017–2018
In 2017–2018, notable cases and developments included:
- the consultation launched by the FCA for the reform of the French merger control procedure;
- several decisions in the audiovisual sector, which has been undergoing major changes in the last few years;
- the approval of the joint venture between La Poste and Suez in the sector for waste management, in parallel with a procedure for abuse of dominance against La Poste for the same activities;
- the merger between real estate websites SeLoger and Logic-Immo; and
- executive orders issued by the French Administrative Supreme Court regarding the implementation of commitments taken in merger control cases.
First, in October 2017, the FCA launched a broad public consultation on the reform of the French merger control regime as described above. The consultation was focused on three main themes:
- the French merger control thresholds;
- the evolution of the simplified procedure under French law; and
- the role of monitoring trustees in the implementation of merger control commitments.
On the first topic, in the context, eg, of the consolidation of significant internet players whose business model is based on gratuity or the acquisition by pharmaceutical labs of biotech companies in the clinical trials phase, the FCA raised several questions related to the level of the turnover thresholds, the opportunity to introduce alternative thresholds to complement turnover thresholds and the necessity to differentiate the thresholds based on the sector at stake. The consultation paper notes in particular that the French merger control regime initially had a market share threshold of 25 per cent, which was abandoned in 2001, and reviews other types of thresholds implemented by foreign national competition authorities, either on a mandatory basis (Germany, Spain) or a voluntary or discretionary basis (United Kingdom, Sweden). In conclusion, the FCA proposed several possible evolutions, including:
- the introduction of new thresholds related to the value of the transaction, similar to those that have been implemented in Germany or Austria, to catch transactions involving companies with little or no turnover but significant market presence or potential;
- the reintroduction of market share thresholds; or
- the creation of an hybrid system with a possibility for the FCA to intervene ex-post in case of below-threshold transactions that nevertheless create competitive issues.
On the second topic, the FCA notes that France is one of the few EU member states not to have a short form for merger filings under the simplified procedure (even though the parties can provide much less information when there is no affected market). However, the FCA also underlines that simplified forms in other jurisdictions, including the European Commission, require that the parties still provide a quite substantive amount of information. As a result, the consultation paper suggests that France could broaden the French simplified procedure, either to include all transactions where there is no affected market or to align the French criteria on the European ones. In counterpart, the pre-notification phase could be made mandatory and a simplified form could be introduced, with reduced requirements in terms of data and documents to provide but including additional questions to ensure the absence of negative impact on competition. The FCA alternatively contemplates the introduction of an ex-ante declaration form for transactions eligible to the simplified procedure, with a deadline resulting either in a tacit authorisation in case of non-opposition by the FCA, or in a review by the FCA where the case is capable of raising competition concerns.
On the third topic, although the FCA acknowledges that monitoring trustees usually perform difficult duties in a satisfactory way, it is envisaged to reinforce the links between the trustees and the authority, and the trustee’s independence from the parties. The consultation suggests that the FCA could require:
- that the parties always propose three different monitoring trustees, the final choice being made by the case team;
- that the relationship between the trustees and the FCA should be further formalised;
- that the identity of the trustee should be published on the FCA website (as is done at the EU level by the Commission); and
- that trustees may be paid by FCA funds (based on a tax to be paid by all notifying parties when they take commitments before the FCA) instead of being remunerated by the parties themselves.
The FCA’s proposals have prompted mixed reactions from competition law professionals. Antitrust lawyers have in particular expressed concerns about the lack of legal certainty related to the alternative thresholds suggested by the FCA and the burden that wider merger notification obligations would impose on companies, without a clear benefit for competition. The proposed reforms regarding trustees also raised concerns regarding their ability to continue working efficiently with the parties. The FCA had originally announced a synthesis of the consultation’s results by the end of 2017, but no white paper has yet been published.
Second, the FCA issued in 2017 a number of interesting decisions related to the audiovisual sector, around French TV network Canal+. In two decisions dated 22 June 2017, the FCA agreed to modify the commitments taken by Canal+ at the time of the acquisition of cable networks TPS and CanalSatellite and TV channels Direct 8 and Direct Star in 2012. In parallel, in its decision 17-DCC-76 of 13 June 2017, the FCA cleared unconditionally the acquisition by mobile network SFR of Groupe News Participations (GNP), which operates several TV and radio channels in France, the new entity being viewed by the FCA as a potentially important new competitor for Canal+.
In decisions 17-DCC-92 and 17-DCC-93 of 22 June 2017, the FCA considerably loosened the commitments imposed on Canal+ at the time of the acquisition of TPS and CanalSatellite on the one hand, and several TV channels including in particular Direct 8 and Direct Star on the other, based on the significant evolution of the sector.
The initial commitments, adopted in 2012, included 33 injunctions from the FCA related to:
- the acquisition of broadcasting rights for both free and pay TV;
- the distribution of speciality channels; and
- video-on-demand (VoD).
As is not uncommon before the FCA, the commitments were taken for a period of five years, renewable once for five more years. In practice, in similar cases, the FCA typically renews the commitments without any modification at the expiry of the first period, making the review a rather formalistic process. In this case however, the regulator concurred with the arguments put forward by Canal+ and released the audiovisual group from most of its obligations.
The FCA notes that the pay and free TV sectors have evolved at an intensive pace since 2012, and in particular since the end of 2016. These evolutions are linked to profound changes in the habits of viewers. In parallel of traditional pay TV, the FCA describes the development of:
- non-linear offers (VoD and Subscription VoD), available on multiple devices, including mobile phones and portable devices, such as Netflix or Amazon Prime; and
- new ‘over-the-top’ (OTT) offers, ie, TV channels that are not distributed through internet access providers but can be directly subscribed by the viewers through the internet (including, eg, BeIn Sports).
As regards free TV, the FCA mainly takes into account the development of non-traditional free channels broadcasted via the French terrestrial network TNT. In both cases, the FCA also took note of the development of illegal streaming, downloading or peer-to-peer solutions as a factor of change in the sector.
Based on these general evolutions, although the FCA found that Canal+ still enjoys a quasi-monopsony in terms of purchasing broadcasting rights for recent French-language films, it remains the market’s only producer of a mixed premium channel (the Canal+ channel and its derivatives) and is still an inevitable choice for channel producers seeking distribution, their analysis concluded that Canal+’s position is increasingly being challenged across all the markets in which it operates. The FCA underlined both the existence of an offensive and ambitious strategy by the Altice group (which acquisition of GPN was being examined in parallel) and the development of Netflix and other non-linear international operators. Regarding Altice, the decision notes that Altice group is pursuing a global strategy based on convergence between its activities as internet service provider, television producer and distributor, with:
- the acquisition of premium sport broadcasting rights (football British Premier League and Champions’ League);
- the conclusion of all-platform exclusive distribution agreement with major networks including the Discovery group and NBCUniversal; and
- the acquisition of free and pay TV channels belonging to GPN.
Regarding VoD and Subscription VoD, the FCA finds that global operators such as Amazon and Netflix are now able to leverage synergies between the various geographical markets in which they operate and compete strongly with Canal+, in particular with regard to the acquisition of American contents.
As a result, the FCA decided to:
- entirely lift the Canal+ commitments related to the acquisition of American content;
- marginally ease the restrictions regarding the acquisition of French content; and
- remove some of the requirements regarding the distribution of TV channels by Canal+, especially as regards the prohibition of exclusives (based inter alia on similar exclusive deals entered into by Altice).
Commitments are maintained as regards in particular French-language films (due to the prominent role of Canal+ in the financing of French motion pictures) and the obligation to distribute independent and premium channels on a transparent, objective and non-discriminatory basis. Relationships with the monitoring trustee are also made more flexible for Canal+.
Finally, a last unusual step is taken by the FCA, with the remaining commitments being made enforceable until 31 December 2019 only, instead of the additional five years foreseen in the original decision, to take into account the increasingly rapid evolution of the markets. Maintaining the injunctions for another full five years would therefore have been ‘disproportionate’.
These two decisions should be read in conjunction with decision 17-DCC-76 of 13 June 2017 authorising the acquisition by SFR, a fully-owned subsidiary of the Altice group, of GPN, the parent company of a media group producing content mostly broadcasted over TV and radio channels (especially BFM TV, RMC Découverte, RMC and BFM Business). Consistent with the Canal+ decisions, the FCA found in that case that the transaction would actually strengthen the competition in the markets for free and pay TV, by creating a stronger, vertically integrated player to compete with Canal+ head-on.
Even after the transaction, and especially compared to Canal+, Altice would not hold any significant market position for the acquisition of broadcasting rights (except premium sport rights), the publishing and marketing of pay TV or in the advertising sector. Even with regards to potential vertical effects related to the acquisition of football rights, where Altice recently acquired the broadcasting rights for the Champions’ League and Europa League for the 2018–2021 period, the FCA found that it would not confer sufficient leverage to Altice to foreclose competing TV channels, especially considering the legal right of competitors to broadcast extracts of the games for information purposes. The FCA also excludes any credible risk of foreclosure due to potential conglomerate effects between free and pay TV, or between GPN’s activities and Altice’s position as a major internet service provider, taking into account in particular the remaining competition (mainly Canal+) and the regulatory control exerted by the French Media Regulatory Authority (CSA).
Third, in December 2017, the FCA cleared, subject to commitments, the creation of a full-function joint venture between La Poste and Suez in the collection and recovery of non-hazardous office waste sector. ‘In an unprecedented move’, as described by the FCA itself, the regulator cleared the merger on the same day as it closed a litigation procedure involving the same activity of La Poste.
In both procedures, the FCA had identified the same concerns:
- a risk of using La Poste’s competitive advantages that could not be reproduced by competitors, linked to the universal postal service; and
- a risk of price setting by La Poste of offers or services for the collection of non-hazardous office waste at prices below cost.
The results of the two analyses led the companies to offer similar commitments in both procedures.
As regards the merger control process specifically, the FCA was reviewing the transaction upon referral by the European Commission. Due to the respective sizes of the two parent companies, the creation of the joint venture reached the European thresholds. However, upon request by the parties the European Commission referred the case to the FCA on 29 May 2017, on the ground that the joint venture was meant to be active in France and most of the effects of the transaction would therefore take place in France (see COMP/M.8407, La Poste/Suez RV/NewCo).
The FCA did not find any significant risk of horizontal effect, as either the market shares of the parties would remain limited (below 25 per cent in national and local markets) or the overlaps were below 5 per cent, with strong remaining competitors such as Veolia and Paprec. Similarly, the FCA dismissed the risk of vertical foreclosure based on the fact that, even though Suez is active in markets downstream from the joint venture (which would collect the waste and resell them to Suez for valorisation), its market share in these activities remain below 25 per cent under all possible market definitions. The FCA also dismissed the risk of conglomerate effects between the collect of various types of waste, even though such concerns had been raised during the market test, due to the limited market positions of the parties.
As regards the risk of conglomerate effects between the collect of waste and postal services, however, the FCA raised concerns regarding both:
- the potential advantages that La Poste would derive from the universal postal service and its access to customers to sell waste collect services; and
- the risk that these services may be sold at predatory prices, due to potentially lower prices charged by La Poste to the joint venture.
The FCA expressly referred to the preliminary evaluation made in the parallel antitrust procedure, as confirmed by the market test conducted in the context of the merger control procedure, as the basis of its concerns. Even though the FCA acknowledged that La Poste does not benefit from essential infrastructures, the decision considered that the concerns raised were sufficiently credible to require commitments. These commitments, which are identical to those taken by La Poste in the antitrust procedure, are purely behavioural – which in itself is uncommon, as the FCA usually has a strong preference for structural remedies that do not require heavy follow-up actions. La Poste committed to regulating its behaviour regarding the promotion and marketing of the joint venture’s services and to pricing any services it provides to the full-joint venture at market price, via a cost handling methodology compliant with competition law.
The perfect identity of concerns and remedies between the antitrust and merger control procedures raises a strong question regarding the merger control procedure. Indeed, under French competition rules (as under EU competition rules), concerns raised in the context of a merger control procedure must be merger-specific, ie, arise from the completion of the merger itself. Competition concerns pre-existing or unrelated to the merger cannot be addressed in the context of the merger control decision, but must be the object of a distinct antitrust procedure. In the present case, the FCA acknowledged that the joint venture itself was not liable to generate any significant competition concerns due to the small extent of the overlapping activities of the parties, but still raised competition concerns related mainly to the position held by La Poste in the different postal services markets (which pre-existed the concentration). It is therefore doubtful whether the concerns identified can be considered merger-specific – which the FCA did not try to demonstrate. Although the FCA recognises that the facts of the case were very peculiar, the decision therefore still raises problematic issues as to the criteria used to assess a concentration under French rules.
Fourth, on 1 February 2018, the FCA authorised, in its decision 18-DCC-18, the merger between French real estate online platforms SeLoger and Logic-Immo, after a Phase II investigation but without commitments, despite significant combined market shares. The decision is based on an extensive investigation, including interviews of customers and competitors, an online questionnaire shared with more than 30,000 market players (a method similar to that already used by the FCA in the Fnac/Darty case), the review of numerous internal documents, and several economic studies submitted to the FCA.
After Fnac/Darty in 2016 (decision 16-DCC-111 of 27 July 2016), the decision raises again the issue of the articulation between online and offline sales, and in particular the question of geographic market definitions for online activities. The main relevant product market considered in the decision is defined as the two-sided market for online real estate ads – the first side of the market bringing together the platform and the real estate advertisers, while the second side links internet users to the platform. The FCA further distinguishes between ads placed by individuals, who have access to peer-to-peer websites, and ads placed by real estate professionals, who are banned from placing ads on peer-to-peer websites. The market is then defined as national in scope, but with a requirement to also analyse the local impact of the transaction because of disparities in competition conditions at the local level (in terms of platform notoriety, pricing policies or closeness of competition between the platforms). However, the FCA does not take platforms dedicated to local ads into account in its nation-wide analysis. As in Fnac/Darty, the FCA therefore bases its analysis on a dual geographic scope, which blurs the line between market definition and competitive analysis.
Despite a very concentrated market, where the parties hold combined market shares above 50 per cent in value and mainly face competition from a single competitor, French website Le Bon Coin, the FCA eventually found, after an in-depth analysis, that the transaction is unlikely to raise competition issues due to the specific characteristics of the market. First, as regards the risk of price increases, the FCA considered that because advertisers and internet users generally place or search for ads on several online platforms in parallel (multi-homing in the FCA’s terminology), an increase in Seloger’s prices would not result in a switch of the ads towards Logic-Immo, since these ads are already published on Logic-Immo anyway. Based on a detailed study of diversion ratios, the FCA confirmed that in case of a price increase, Seloger would risk losing sales without any significant diversion of the lost demand towards Logic-Immo. Similarly, as regards the risk of price increases at the local level, even in the two regions where the new entity will hold market shares around 60 per cent, the FCA concluded that the competitive pressure that the two platforms exert on each other is insufficient to make price increases more likely post-transaction. These conclusions are not affected either by:
- the existence of limited network effects linked to an increased number of ads on the new platform, which the FCA found to be minimal;
- the lack of significant competitive constraint from internet players such as Facebook (especially considering that the pressure could increase in the future); or
- the lack of countervailing buyer power of advertisers.
Second, regarding the potential risk of foreclosure, although the parties would be in a position to offer bundles to publish ads on both www.seloger.com and www.logic-immo.com, the FCA found that such bundling offers would not have a significant negative impact on competitors. Even if bundling could decrease the number of ads available to competitors, this decrease would remain limited and network effects would not be sufficient to create a downward spiral for competitors. The FCA also noted that Le Bon Coin would continue to exert a sufficient competitive pressure to counterbalance the new entity’s market power.
Third, the FCA analysed the impact of data gathering by the new entity, and especially the possibility for the parties to develop non-replicable services based on the unparalleled amount of data they would be in a position to collect from users and advertisers. However, given the existence of multi-homing and in the absence of exclusivities, the decision concludes that competitors will retain the possibility to gather the same data as the parties and therefore will not face increased constraints after the transaction.
Finally, the FCA excludes the risk of coordinated effects between the new entity and Le Bon Coin, especially due to the lack of transparency in the market and the subsequent impossibility for the market players to detect deviations. The FCA also notes that the new entity and Le Bon Coin operate on different business models, making coordination unlikely.
Although the proceedings before the FCA lasted more than six months, not even including pre-notification talks, the decision demonstrates that it can be worth going to Phase II for companies. The FCA’s analysis to clear the transaction without remedies relies in large part on sophisticated economic analysis, which would not have been available in a Phase I procedure. As in Fnac/Darty, this new case shows that it may be worthwhile for the parties to engage in very significant econometrical work, when timing is not of the essence for the transaction.
Finally, it should also be noted that the French Administrative Supreme Court recently denied several requests for interim relief against the FCA’s refusal to either approve a buyer for divested assets or extend the divesture period in the Fnac/Darty case. On 30 October 2017, the Administrative Supreme Court issued four executive orders finding that the Fnac/Darty group and the Dray group had failed to demonstrate the existence of an emergency that would either require the suspension of the FCA’s refusal to approve Dray group as a suitable buyer for the brick-and-mortar stores to be divested by Fnac/Darty, or require that the FCA grant a deadline extension to the parties for the divesture.
As regards the refusal to approve Dray group as a suitable purchaser, the Administrative Supreme Court found that although the FCA’s decision deprives Dray of potential financial gains and may have a negative impact on the relationships between the two groups, it cannot be demonstrated that those consequences would actually endanger the economic and financial situation of either of the companies involved. Regarding the rejection of the deadline extension, the Administrative Supreme Court found that the envisaged deal, which involved a modification of the commitments to switch between two of Fnac/Darty’s stores, could not be considered as sufficiently advanced so that the mere refusal to grant a deadline extension would create a strong and immediate risk to the Dray group’s economic and financial situation.
Besides, in both cases, the court considered that the risk for Fnac/Darty to have its merger control authorisation withdrawn for failure to comply with the commitments, in case they do not sell the assets to a suitable buyer within the agreed timeframe, derives directly from the authorisation decision itself, and not from the FCA’s refusal to approve Dray group as the purchaser, or to grant a deadline extension.
With these orders, the Administrative Supreme Court reiterates that commitments taken by the notifying parties in merger control cases must be carefully assessed, and that their implementation in a timely manner is a requirement that weighs on the parties themselves. In that specific case, the fact that the transaction was authorised based on light commitments only may also have played a part in the FCA’s strict position regarding their implementation.
Interestingly, in the same case, the Administrative Supreme Court also referred to the French Constitutional Court the French provision that allows, since 2015, the president of the FCA Board alone to approve or reject a potential buyer for divested assets. In 2013, the French Administrative Supreme Court had found that the French Commercial Code required that FCA decisions be taken collegially, including those approving (or not) a suitable buyer following merger control commitments. The law was therefore modified in 2015 to allow these specific decisions to be taken by the president alone.
In a decision dated 20 April 2018, the Constitutional Court confirmed that such modification does not breach either the freedom to undertake or the principle of equality before the law (in that latter case, the claimants challenged the possibility for the president to either make the decision himself or refer the case to the whole FCA Board). In both cases, the court found that the necessity for the FCA to ensure the swift and efficient implementation of its own decisions was a compelling enough reason to legitimate a limited restriction to the two principles put forward by the claimants.