France: Competition News - December 2015

Last Updated: 31 December 2015
Article by Emmanuelle van den Broucke and Sara Pomar

The French Competition Authority recalls that a resale price mentioned publicly is not necessarily an imposed resale price

The French Competition Authority inaugurated December with a non-suit concerning an alleged unlawful agreement on resale prices between a supplier and its distributors.

The novelty of this case resides in the fact that the prices in question were simply mentioned by the supplier during a press conference. To mark the launch of its Wii console on the European market, Nintendo organized a press conference in London, during which the president of the group made several announcements in English on the sale prices of the Wii console indicating that the "estimated" sale price of the new console was €249.

At the stage of the preliminary investigation, the Authority's investigating service considered that these practices could constitute resale prices imposed by Nintendo, and they sent a statement of objections in this respect to Nintendo.

However, the Authority did not follow its case-handlers. In its decision of December 1, 2015, the Authority first recalled that proof of such unlawful agreement on prices, in the absence of clear contractual clauses signed between the parties to the distribution agreement, results from precise serious and concordant items of evidence including:

  • The mention between the supplier and its distributors of the resale prices of the products to the public;
  • The implementation of a policy or at least monitoring on these prices; and
  • The observation that the prices mentioned were actually applied by the distributors.

Concerning the first condition, i.e. mentioning the prices, the Authority pointed out that this includes all forms of communication likely to be used by a supplier to inform its distributors of the recommended sale prices. Thus, in this case, this condition is met, according to the Authority, since the announcements made by the group's president at the press conference, and relayed in France by Nintendo's European website and by the French press, did concern the French market and were intended to inform the distributors of the recommended retail sale prices.

However, the Authority dismissed the existence of an anticompetitive practice in the absence of proof concerning the second condition relating to the monitoring by the supplier of the resale prices charged.

Although in the end, Nintendo was not held liable in this case, the fact remains that this decision shows that mentioning resale prices is interpreted in an extremely broad manner by the Authority and that the first condition for a vertical unlawful agreement on prices is very easily met. Although suppliers can unquestionably mention the resale prices, they have to be very vigilant in ensuring that these prices remain merely mentioned and not monitored.

France continues its fight against late payments between companies

French legislation has always been particularly active in the fight against late payments between companies, because of the significant prejudice which results therefrom for these companies' cash flow and potentially their survival.

In this respect, Article L.441-6 of the Commercial Code imposes a legal payment maximum of 60 days after the invoice date or, subject to certain conditions, 45 days after the end of the month of invoicing. This deadline must be respected by the purchaser under penalty of fines up to €375,000. It is precisely in accordance with this Article that the DIRECCTE of several regions recently imposed a fine on Numericable (€375,000), SFR (€375,000), Paul Predault (€100,000), Airbus Helicopters (€375,000) and COMASUD (€87,900) for delays in the payment of their suppliers' invoices. By making these fines public, the Minister of Economy is seeking to create an additional deterrent effect.

However, these delays are constantly increasing according to the Ministry of Economy which announced several measures at the end of November, including notably the increase of the maximum fine incurred by later payers to €2 million.

A decree was also issued on November 27, 2015, modifying the Commercial Code to make the information drawn up by companies with regard to payment terms more transparent and to allow the administration to identify the bad payers more easily.

The French Competition Authority sanctions SFR's abusive differences in price

Since 2008, the prohibition as a principle of discriminatory practices between professionals has been abolished in France. For a price discrimination to be sanctioned under competition law, it has to constitute either an abuse of a dominant position or an unlawful agreement.  

In its decision of November 30, 2015, the Competition Authority illustrated this by fining SFR and its subsidiary in La Réunion SRR €10.7 million for having implemented an abusive difference in price between calls made to other clients of its network ("on net" calls) and those, priced higher, to competing networks ("off net" calls), without this difference having any economic justification.

To base its decision on the provisions relating to the prohibition of abuses of a dominant position, the French Competition Authority first established the existence of SFR's leading position on the non-residential (professional) mobile telephony markets in La Réunion and Mayotte.

The Authority then noted that SFR commercialized on these markets offers including difference prices between on net and off net calls, so as to disadvantage off net calls, significantly more expensive than on net calls, without such difference in price being justified by the costs relating to each type of call.

According to the Authority, the difference in price becomes abusive "when this difference in price exceeds the difference in cost borne by the dominant operator". In this case, the differences in price in La Réunion were up to 10 times higher than the differences in cost, and in Mayotte they were three times the differences in cost.

To conclude that the practice in issue was abusive, the Authority finally noted the existence of anticompetitive effects on the professional mobile retail market due to the incentive resulting therefrom for companies to subscribe to SFR to maximize the chances of being able to call and be called at attractive prices. Moreover, the Authority pointed out that these practices had tarnished and degraded the reputation of SFR's competitors making them appear to have more expensive offers.

Accordingly, despite their freedom to set prices recovered in 2008, economic operators often remain required to justify economically their policy of difference in price since beyond the present case founded on the law on anticompetitive practices, the difference can be sanctioned on other grounds such as that of restrictive practices.

The ECJ rules that a clause limiting the freedom of the lessor of a shopping center to rent premises to competitors is not anticompetitive per se

The Latvian competition authority had sanctioned Maxima Latvija, a local player in food distribution, for having inserted in its 112 lease agreements for the rental of premises in shopping centers, a clause pursuant to which it could, as reference tenant, object to the rental by the lessor of premises to other tenants, including potential competitors. A preliminary ruling was requested by the Latvian authorities from the European Court of Justice to know whether this clause was prohibited per se, regardless of its effects on the market.

In its decision of November 26, 2015, the ECJ considered that given the economic context surrounding these agreements and the terms of these agreements, they did not present a sufficient degree of "harm" with regard to competition to restrict competition by their very nature.

The review of the restrictive nature of the agreement therefore had to be conducted with respect to its effects on the market. The ECJ indicated that the legal and economic circumstances of the case at hand had to be taken into account. In this case, this meant assessing all the factors which determine access to the market, and particularly whether, in the catchment areas where the shopping centers which are covered by those agreements are located, there are real concrete possibilities for a new competitor to establish itself. The conditions under which competitive forces operate on the reference market must also be assessed (such as the number and size of operators, the degree of concentration and customer fidelity to existing brands).

The Court concluded that the agreements in issue are only anticompetitive if they contribute significantly to closing-off the market, depending on the position of the contracting parties and the duration of the agreement.

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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