France: France Upholds Competition Authority’s Power To Withdraw Merger Approval

The French Constitutional Council has declared constitutional the French Competition Authority's power to (i) withdraw its decision authorizing a merger, for failure by the parties to comply with their commitments and (ii) has required that the parties re-notify their transaction. This is an important decision upholding the French Competition Authority's merger control powers.

The French Competition Authority's Canal Plus decision

In August 2006, the Minister for Economy, then responsible for mergers, cleared the acquisition of sole control by Vivendi Universal and Canal Plus over TPS and CanalSatellite. This decision imposed 59 commitments on the merging parties.

In September 2011, having determined that some of these commitments had not been complied with, the French Competition Authority (Autorité de la concurrence), which in the meantime had become competent to rule on mergers, withdrew the authorization and required that the operation be re-notified by the original parties to the merger, the Canal Plus group and the Vivendi Universal group (the "Parties").

While complying with such requests, the Parties challenged the legality of the Competition Authority's decision before the French Administrative Supreme Court (the Conseil d'Etat or "Council of State").  Before delivering its ruling, upon request of the Parties, the Council of State referred a question to the French Conseil Constitutionnel ("Constitutional Council"), asking that the Constitutional Council assess whether the applicable provisions of the French Commercial Code are constitutional. 

The Parties argued that the provisions of the Commercial Code that allowed the Competition Authority to withdraw, of its own motion, a merger authorization without defining the specifics of its analysis of the competitive situation and without indicating the date that the withdrawal decision became effective, (i) amounted to a disproportionate violation of the constitutional principle of free enterprise and (ii) were contrary to the constitutional objective of clarity and accessibility of the law. 

Free enterprise

The Parties plead that article L. 430-8§IV C. Com is contrary to the principle of free enterprise. 

The Constitutional Council decided that the right entrusted to the Competition Authority to (i) withdraw an authorization in case of non-implementation of commitments imposed by the initial authorization decision and (ii) sanction those who were in charge of implementing said commitments does not violate the principle of free enterprise, as the restrictions to that principle are in the general interest and are justified. 

The Constitutional Council reasoned as follows: 

  • as a principle, the Legislator is entitled to restrict the principle of free enterprise, provided that such restrictions are justified by the general interest and that they are not disproportionate,
  • when entrusting the Competition Authority with the right to issue injunctions, commitments or sanctions, the Legislator has meant to ensure that whatever commitments are associated with a merger authorization, they will be complied with,
  • the sanctions that may be imposed (a) aim at guaranteeing that the Parties comply with commitments which in turn aim at ensuring an appropriate degree of competition or at compensating restrictions of competition, (b) are subject to a five-year statute of limitations, and (c) can be appealed before a regular Court.  

Thus, this provision of the Commercial Code was declared compatible with the French Constitution and the constitutional principles. 

Independence and impartiality 

The Parties plead that that Commercial Code articles L. 461-1§II, L. 461-3, and L. 462-5§II violate the constitutional principles of independence and impartiality because of (i) a confusion between the Competition Authority department that authorizes the mergers and the department that imposes sanctions for violation of the merger regulation and (ii) an absence of separation between the department that prosecutes cases and the department that imposes sanctions. 

In a nutshell, the Parties objected to a violation of the principle of separation of powers between the Executive and the Judiciary. 

The justifications given by the Constitutional Council to reject the Parties' allegations are in essence that: 

  • the principle of separation of powers does not prevent an independent authority from imposing sanctions as long as this power is limited by the principles of independence and impartialit
  • the relevant articles of the Commercial Code prohibit any conflict of interests on the part of Competition Authority agents:  no member of the Authority can deliberate on a case in which he has an interest. Moreover the department of the Authority in charge of instructing a case and the one in charge of imposing sanctions are totally independent from one another,
  • the department in charge of imposing sanctions may intervene of its own motion only once the head of the department in charge of the case ("Rapporteur Général") has proposed that the sanctions department take the case. At any rate, the head of the instruction department cannot attend deliberations of the sanctions department. 

Thus, the abovementioned provisions of the Commercial Code were declared compatible with the French Constitution.  The result is that the French Competition Authority may withdraw its approval of mergers, on the ground that the merging parties had failed to comply with the conditions that had been imposed as part of the merger approval.  This ruling confirms that the Authority has this significant power with which to enforce its merger decisions. 

Ref:   decision n° 2012-280 QPC of October 12, 2012 (Société Groupe Canal plus et autre).  

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.

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