France: Competition News January 2016

Last Updated: 1 February 2016
Article by Emmanuelle van den Broucke and Sara Pomar

Record fine imposed on Orange by the French Competition Authority despite being reduced by the early application of the settlement procedure

By decision of December 17, 2015, the French Competition Authority imposed a record fine of €350 million on Orange for implementing four series of anti-competitive practices in various electronic communication markets. This was the biggest fine ever imposed by the French Competition Authority on a company on an individual basis.

Initially, Bouygues Télécom, one of Orange's biggest competitors, brought proceedings against it before the French Competition Council (now the Competition Authority) in 2008. This initial referral concerned a series of practices implemented by Orange in the electronic communications sector, targeting non-residential clients, in particular on the business mobile telephones market.

Bouygues criticized Orange in particular for using loyalty and coupling discount schemes, as well as for implementing predatory pricing, and argued that these practices constituted an abuse of its dominant position within the meaning of Articles L. 420-2 of the Commercial Code and Article 102 of the TFEU. In 2010, SFR then brought proceedings before the Authority for unfair practices implemented by Orange, on the same mobile telephone market targeting non-residential clients.

Despite Bouygues Télécom's withdrawal in 2014, the Authority notified Orange of four objections of abuse of dominant position on March 6, 2015, which the offending company undertook not to challenge on November 6, 2015.

In the meantime, the Loi Macron entered into force on August 7, 2015 and with it a new settlement procedure applicable before the Authority. By virtue of this procedure, provided that it does not contest the objections made against it, an offending company can be offered a fine for an amount between a minimum and maximum amount, on the basis of a negotiation then a mutual agreement with the General Case Handler. This procedure replaces the former "no-challenge" procedure and is now provided for in Article L. 464-2, III of the Commercial Code.

While, in principle, this settlement procedure can only apply to cases in which the statement of objections was received after the entry into force of the Loi Macron, the Authority's investigation service nonetheless made the decision to draw inspiration from this new process when handling Orange's case, offering it a maximum fine of €350 million, an amount which the company accepted and which the Authority then ratified in its decision.

On the merits, the Authority judged that all of the practices reported by competitors were proven. In particular, it considered that Orange had abused its dominant position (i) by promoting its commercial services in the access to information regarding the local loop, (ii) by unfairly ensuring the loyalty of its business customers through the "changer de mobile" (change mobiles) program, (iii) by implementing a discounts system encouraging companies to remain clients and to entrust all the lines in their park to Orange, and (iv) by implementing an exclusivity discount on virtual private network offers targeting businesses.

In addition to the penalty imposed, the Authority handed down a number of injunctions against Orange, pursuant to which the sanctioned company undertakes to cease ongoing abusive practices and not to reiterate such practices.

Despite the amount involved, Orange declared that it would not appeal the decision. Surely this is one of the major advantages of this settlement procedure for the Authority. While the company can better predict the maximum amount of the fine if it chooses not to contest the objections, it is, however, more difficult for it to contest the amount, i.e. fewer reversals possible of the Authority's decisions by the Paris Court of Appeal...

The General Court of the European Union to leave an airline cartel unsanctioned by annulling a decision of the Commission due to contradictory grounds

The General Court of the European Union recently annulled a decision handed down by the European Commission against a cartel of around twenty airlines due to contradictory grounds. Such severe censure of a Commission decision is so rare in practice and has such serious consequences that it deserves particular attention.

In 2010, the Commission had adopted a decision finding an anti-competitive cartel between several airlines which had coordinated their behavior regarding the pricing of airfreight services. Following an appeal before the Court, it found a contradiction between, on the one hand, the grounds of the appealed decision, according to which all of the companies concerned are accused of having participated in a single and continuous infringement regarding all routes covered by the cartel and, on the other hand, the operative part of said decision which sets forth either four separate single and continuous infringements or a single and continuous infringement for which liability is only attributed to the airlines referred to in each of the infringements cited in the operative part.

The Court then verified whether, as a result, the concerned companies' rights of defense were infringed and found in this respect that the contradictions do not allow them to understand the nature or the scope of the infringement(s) observed, which is contrary to the principle of effective judicial protection. Moreover, the Court found that it cannot control the lawfulness of the appealed decision. As national courts are bound by the Commission's decision, the operative part must be unequivocally understood in order to draw the necessary conclusions with respect to damages. According to the Court, as a result, the appealed decision is marred by contradictory grounds, justifying its annulment.

While this annulment is justified on a purely theoretical level, it has serious practical consequences. As the Commission's annulled instrument no longer has any legal effect, its findings regarding an anti-competitive cartel between airlines disappears retroactively. In principle, the institution which had adopted the annulled instrument is of course bound to fill the legal void, but in the case of lack of grounds, it is very difficult for the Commission to remedy an irregularity already committed. The airfreight cartel may therefore remain unsanctioned and on top of that be reimbursed for the fines already paid to the Commission.

Demanding the maintenance of volumes subject to penalties during the notice period is not in itself a significant imbalance under French law

The organization representing dispensing pharmacists sought the CEPC's (French commercial practices review panel) opinion on the scope of various clauses included in the terms and conditions of sale fixed by certain full-line wholesalers with respect to pharmacists.

In particular, the CEPC was asked to give its opinion on the validity of (i) clauses obliging pharmacists to maintain a certain volume of orders during the notice period in case of termination of commercial relations, and (ii) the provision of a penalty clause in case of non-compliance with this obligation.

The CEPC considered that such clause does not in itself seem imbalanced within the meaning of Article L 442-6, I, 2° of the Commercial Code, provided that the penalty seems to comply with best practices. However, the CEPC indicated that this is subject to the risk that such clause could constitute if, depending on the number of full-line wholesalers, it could prevent the redeployment of the activity due to a lack of alternative solutions.

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