Originally Published 2nd March 2009
On 13 November 2008, the French Government adopted a sweeping reform of the competition regime in France1. The reform takes effect today following the first meeting of the new French competition authority, and brings about three key changes to the French competition regime:
- the creation of the Autorité de la concurrence ("the Authority") to replace the Conseil de la concurrence ("the Council");
- the new Authority will centralize most of the powers and resources previously shared between the Ministry of Economy and the Council, and will be responsible for merger control in France;
- the Authority will have enhanced powers in the retail sector.
These developments, which will create a modern system by merging jurisdiction over all competition matters into a single independent institution, will have a significant impact on businesses operating in France. The changes are described in more detail below.
The creation of a new competition authority
The key element of the reform is the creation of a new competition authority which will unify the antitrust enforcement powers currently held by the Council and the Ministry of Economy. This will allow the Authority to have its own investigative services, while before the Council relied on the investigative services of the Ministry of Economy. While this reform simplifies the enforcement of competition laws in France through a central authority, the Minister of Economy will nevertheless retain certain abilities to review mergers and anti-competitive practices considered to have a limited impact.
The Authority is headed by Bruno Lasserre, who has served as President of the Council since 2004. His mandate is for five years and may be renewed once.
France will also now be one of the very rare competition authorities having a Hearing Officer. The new law has created this position and has given it the same responsibilities that Hearing Officers of the European Commission have in antitrust procedures. The Hearing Officer's task will be to receive parties' comments during procedures and prepare a report for the President of the Authority, including observations on these comments and possibly proposing remedies to enhance the abilities of the parties to exercise their rights of defense.
The Reform of the Merger Control regime
Following the reform, the Authority, rather than the Ministry of Economy, will receive notifications of concentrations and investigate proposed mergers, both in Phase I and Phase II. Nevertheless, the Minister of Economy will retain two significant rights of oversight over concentrations:
- at the end of Phase I, the Minister has five working days following the clearance decision to request, but not require, that the Authority open a Phase II investigation notwithstanding the clearance decision;
- at the end of Phase II, the Minister has 25 working days following the conditional clearance or prohibition decision to review the transaction. The LME provides that the Minister may exercise this option for general interest purposes that may compensate for the harm to competition resulting from the transaction.
These Ministerial powers have raised questions and criticisms from the French business community as they create legal uncertainty for parties involved in a transaction. While French law prohibits parties from implementing a concentration prior to the Authority's approval, the reform de facto extends the legal waiting periods in order to allow the Minister to decide whether he wishes to exercise jurisdiction over the case after the Authority's ruling. In addition, the extension of the waiting period is not limited to 5 or 25 working days because, further to the Minister's request (which is not binding on the Authority), the Authority will need additional time to assess the Minister's request and decide whether or not to comply with it. This deadline is not prescribed by law.2 Accordingly, even with a clearance decision in France, parties to a transaction may need to be cautious and wait for at least an additional week from the issuance of the decision before they can safely close their transaction.
While the notification thresholds remain unchanged, the time periods applicable to merger control have also been modified:
- Phase I – 25 working days, extended by 15 working days if commitments are offered. This time limit also may be frozen (similar to the "stop the clock" procedures that existed before the European Commission) for a maximum of 15 working days.
- Phase II – 65 working days, extendable by 20 working days in the case of commitments being offered late into proceedings. As with Phase I, the investigation's timetable may be "frozen" for a maximum of 20 working days
Specific powers in the retail sector
The retail sector has been singled out for special treatment in the reform, including several changes relating to both merger control and anti-competitive practices.
First, the reform creates specific merger control thresholds for mergers in the retail trade sector. For example, any merger involving at least two parties running one or several retail trade sale points in France will have to be notified if:
- the total worldwide turnover of all of the parties concerned exceeds 75 million Euros (instead of 150 million); and
- the turnover in France of each of at least two of the parties concerned exceeds 15 million Euros (instead of 50 million).
These new thresholds target acquisitions of retail stores with individual turnover that do not reach the traditional French thresholds.
Second, the new law broadens the Authority's ability to impose structural remedies in the retail sector. In cases where a business has been found to have abused its dominant position or a position of economic dependence, the business in question could be required to amend or terminate certain contracts, and even to divest the shops involved.
1 Loi de Modernisation de l'Economie ("the LME"), n° 2008-776, 4 August 2008.
2 The Authority is not bound by the Minister's request and can refuse to open a Phase II investigation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.