European Union: Competition News - April 2016

Last Updated: 20 April 2016
Article by Emmanuelle van den Broucke and Sara Pomar

Requests for information: reinforced statement of reasons for late investigative measures

With four decisions of March 10, 2016, the European Court of Justice (the "ECJ") reminded the European Commission of its obligation to state properly the reasons for its requests for information aimed at undertakings in the context of a competition investigation. This decision completes the judgment of the General Court of the European Union of November 14, 2012 which had sanctioned the Commission's practice of reviewing all the activities of an undertaking, when only one activity was concerned by the investigation (fishing expeditions).

In the case at hand, the Commission had carried out inspections in the premises of companies active in the cement sector in November 2008 and September 2009. Following these inspections, a first request for information was sent. On December 6, 2010, the Commission decided to initiate proceedings against seven of these companies. Finally, on March 30, 2011, the Commission sent a further request for information, against which four companies brought an action for annulment.

Following a dismissal by the General Court, the parties obtained, on the grounds of a failure to state reasons, the annulment of the request for information before the Court which adopted a balanced reasoning, protecting both the Commission's investigative capabilities and the parties' rights.

As a reminder, Article 18.3 of Regulation No. 1/2003 states that a decision for request for information must notably indicate "the purpose of the request", i.e. the infringement alleged by the Commission. This allows the parties and the courts of the EU to verify whether the request for information is justified and proportionate.

In the context of this control, the ECJ established a reasoning intended to ensure that (i) the parties are well aware of the infringement of which they are accused and that (ii) the Commission has sufficient elements to specify this infringement. To do so, the ECJ takes into account the general context of the case.

In this case, the General Court had dismissed the parties' claim, considering that although the purpose of the request had been formulated in "very general terms which would have benefited from greater detail", this had not had any impact since the combined reading of the decision in issue and the decision to initiate proceedings were sufficient to enlighten the parties.

The ECJ disagreed with this reasoning. It stated that "the infringement alleged [is] expressed in a particularly succinct, vague and generic manner", whether in the request for information or in the decision to initiate proceedings. Furthermore, the ECJ noted that the request for information "occurred more than two years after the first inspections, and even though the Commission had already sent a number of requests for information [...] several months after the decision to initiate proceedings".

The ECJ thus weighed the two interests at stake. It considered that the Commission could provide more precise elements on the alleged infringement, since numerous elements had been collected during the previous years, thus protecting the interests of the parties under investigation. However, by acknowledging that this appreciation is based in this case on the particularly lengthy duration of the procedure, it did not take away from the Commission all possibility to investigate, notably in the first stages of the investigation (in particular in the case of inspection decisions), when the Commission "does not yet have precise information".

This decision is likely to have significant consequences on the Commission's future practice. The Commission will now have to develop little by little, as the investigation progresses, its justification regarding the alleged infringements for any further request for information. Consequently, if after several procedural acts (requests for information, inspections, etc.), the Commission still does not have sufficient elements to find the existence of an infringement, it will be very difficult for it to justify further investigative measures, and it may therefore be forced to abandon certain insufficiently supported proceedings.

Caudalie/1001pharmacies case: the prohibition to resell products on online marketplaces outside the selective distribution network is not manifestly lawful

By a decision of February 2, 2016, the Paris Court of Appeal rejected Caudalie's request for summary proceedings to put an end to eNova's practices breaching its selective distribution network.

Caudalie, whose primary activity is the manufacturing and distribution of cosmetics, had set up a selective distribution network with pharmacies and parapharmacies, pursuant to which it is possible for a distributor to resell online, provided the latter sells on its own website and that a certain number of qualitative criterions are met.

Finding that 1001pharmacies, an online marketplace set up by eNova, was distributing its products, Caudalie requested in summary proceedings the cessation of this commercialization, in that it constituted a manifestly unlawful disturbance breaching Article L. 442-6, I, 6° of the French Commercial Code which sanctions the breach of a selective distribution network. The summary proceedings judge of the Paris Commercial Court concurred and ordered eNova to cease all commercialization of Caudalie products on the site 1001pharmacies.

But the Paris Court of Appeal overturned the Court's order considering that the prohibition to resell on marketplaces constituted a demonstrated restriction of competition.

However, the Court's decision is flawed because of a hasty and biased legal analysis. First of all, it dismisses the fact that the European Commission had precisely validated in its guidelines on vertical restrictions the possibility to prohibit an approved distributor from selling on a marketplace when the customer accesses the marketplace via a site which bears the name of the marketplace. 

Furthermore, the decision is based on an incorrect interpretation of the decision-making practice on which it relies. Thus, it bases itself on (i) a procedure still pending before the French Competition Authority (Samsung case), (ii) a press release from such Authority observing the unilateral and voluntary modification of Adidas's terms and conditions of sale without this case leading to a binding decision from the Authority, and (iii) a decision from the German competition authority which is still subject of debate in Germany and which is not considered as a precedent in France.

We are far from a body of serious and consistent evidence characterizing the proof required by a judgment in summary proceedings constituting a demonstrated restriction under competition law!

This decision seems to fall within the trend towards an obligation for suppliers to accept resale by their approved distributors of their products on online marketplaces. But this point is currently the subject of debate in Europe and it is surprising that the Court has chosen, in summary proceedings, to anticipate the French and European decisions expected on this question.

Communications or warnings from independent administrative authorities can be invalidated by the French Supreme Administrative Court

In two decisions dated March 21, 2016, the French Supreme Administrative Court (CE) accepted the admissibility of appeals against, on the one hand, a letter from the French Competition Authority (FCA) informing Numéricable of its unpublished decision to modify the undertakings to which it had subjected a merger authorization and, on the other hand, against communications from the French Autorité des Marchés Financiers warning investors against Fairvesta's activities.

The CE thus acknowledges the administrative courts' control over acts of independent administrative authorities which are not decisions. Whereas an appeal was admitted only against decisions with a general and mandatory nature or setting out individual requirements, the CE accepts that operators with a certain and direct interest to sue may lodge appeals against warnings or communications from independent administrative authorities if the latter are likely to produce significant effects, notably of an economic nature, on these undertakings, or intended to influence significantly their recipients' behavior (which could be the case for instance of reports from the French Court of Auditors).

These decisions have special resonance in competition law. First of all, the CE opens the right to appeal against decisions modifying an operator's undertakings made by the FCA. Furthermore, it greatly extends the possibilities to appeal against FCA opinions by allowing such appeals when they have significant economic effects, whereas until now, these appeals were only accepted when the opinion had a general and mandatory nature or set out individual requirements.

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