France: Competition News May 2017

Last Updated: 16 May 2017
Article by Emmanuelle van den Broucke

Transposition by France of the European Directive on compensating harm caused by anticompetitive practices

On March 9, 2017, France adopted, a little late, the texts transposing the directive of November 26, 2014, whose purpose was to facilitate compensating the harm caused to the victims of anticompetitive practices.

Although French law was already largely in line with the directive, the transposition texts add a few useful novelties for these actions for damages for anticompetitive practices.

Scope: France has chosen not to limit the scope of the action to unlawful agreements and abuses of a dominant position but to open it to any and all breaches of European or domestic competition law which include, for example, the abuse of economic dependency or the practice of abusively low prices.

The offense is presumed: when a breach of competition law has been committed, the offense is presumed, and this presumption is irrebuttable in case of final sanction by the French Competition Authority or the European Commission. However, the presumption of offense is a simple presumption for a decision adopted by a competition authority of another Member State.

Principle of full compensation of the harm: the transposition also includes the principle of full compensation of the harm suffered by the victims of anticompetitive practices. Article L.481-3 of the French Commercial Code contains a non-exhaustive list of the harms open to compensation including, notably, lost opportunity and moral harm. Harm is presumed when several companies have agreed on prices to the detriment of other competitors. The action of direct purchasers is also facilitated since it is now up to the defendant to prove that the purchaser passed on the overcharge resulting from the anticompetitive practices to the indirect purchaser (consumers for example).

Joint liability of the parties to the unlawful agreement: all the companies which contributed to the same breach shall be jointly held liable to compensate the resulting harm. Then, the principle of allocation between them is that they contribute to the debt in proportion to the seriousness of their offense and their causal role. However, there are two exceptions: SME and beneficiaries of a leniency measure are not concerned by this principle of joint liability, subject to certain specific reservations, notably when full compensation cannot be obtained from the other companies involved.

Adapted 5-year statute of limitations: the new text adapts the 5-year statute of limitations, to have it start, at the end of the practices, as soon as the claimant knows that the anticompetitive practice of an identified author has caused it harm, which in practice extends the possibility to claim compensation.

Easier production of evidence: the judge can now order the French Competition Authority or the European Commission to produce certain exhibits, or categories of exhibits, provided these exhibits do not self-incriminate the companies, in order not to weaken the leniency and settlement procedures. In addition, the judge can more easily obtain documents protected by business secrecy by ordering the production of a version of the exhibit redacted of its confidential elements or a summary thereof.

Despite definite progress, the transposition of the directive, as such, does not overcome the main difficulty which concerns the quantification of the harm, quantification which can be complicated and costly when it means determining the surplus price resulting from an unlawful agreement. It remains to be seen whether the judge will wish to call on the French Competition Authority, as provided by law, so that it gives him its orientations on the assessment of the harm, knowing that the Authority which has sanctioned the practices will in all likelihood not be completely neutral in this exercise. This could also prompt companies to be particularly careful when producing economic studies before the Authority when they are defending themselves, if the data produced to demonstrate the existence of limited harm to the economy can then be used by the Authority to help the judge quantify the harm.

The French Competition Authority rules that there is no case to answer for exchanges of information in the short-term car rental sector

On February 27, 2017, the French Competition Authority ruled that exchanges of business information between competitors will not be sanctioned, taking into much better consideration than before the impact of the information exchanged on the actual behavior of the companies concerned on the market.

The first practice reported concerned monthly exchanges of information enabling car rental firms to have access, via airport managing bodies, to each operator's turnover, number of contracts and average value of the contracts during the previous month.

The Authority explained that in order to analyze the anticompetitive effect of exchanges of information between competitors, it is necessary to analyze not only whether the exchanges of information had taken place on a sufficiently concentrated market but also the strategic nature of the data exchanged. Only data which allows a company to decipher its competitor's business and pricing strategy with sufficient precision to adapt its own business behavior accordingly has an anticompetitive effect.

In this case, the information received by the different competing agencies via the airport managing bodies did not allow them to separate the turnover from individual clients from that of key account clients. For individual clients, the information exchanged on a monthly basis did not allow them to observe in an ongoing manner the effectiveness of the pricing policy of each rental firm on this client base for which pricing evolves in real time according to demand and competitor prices. Regarding the key account clients, monthly statistics, aggregated with the individual clients, do not reinforce the transparency of this market for which negotiations take place by calls for tenders on an annual or biannual basis.

In the absence of proven potential effects on competition, the Authority therefore ruled that there is no case to answer.

Furthermore, the main car rental firms were accused of having consulted each other on a "supplement for train station" to be applied to their clients, after experiencing themselves a significant increase of their operating costs. Several rental firms decided to apply a price supplement to their clients, from December 2005, following the adoption by SNCF and EFFIA of new operating conditions which were most expensive for the car rental firms.

The application of this price supplement by several rental firms at the same time aroused the authorities' suspicions on a potential unlawful agreement on prices between such firms. However, as the operators concerned explained, some "key account" clients which used the services of several rental firms, had communicated to their various car rental firms information on the pricing practices of their competitors and notably on the future application of the "supplement for train station". Persuaded by the argument, the Authority finally concluded that there had simply been parallel behavior and dismissed the characterization of concerted practice.

The European Commission launches its anonymous whistleblowing tool on anticompetitive practices

Since March 16, 2017, any individual can now alert the European Commission in a totally anonymous manner in case of unlawful agreement and other anticompetitive practices. Whistleblowing systems by third parties already existed in certain Member States such as the United Kingdom – where the procedure however is not anonymous vis-à-vis the authorities – or Denmark.

The new tool proposed by the Commission guarantees the anonymity of the whistleblowers, both vis-à-vis third parties and the Commission itself, thanks to an encrypted email system managed by an external specialized service which transmits only the content of the messages without any other metadata. The whistleblower retains the right to reveal his identity at any time.

For its part, the Commission has the possibility to answer these alerts, notably to ask for more information or clarifications.

This system complements the Commission's leniency program which enables companies to come forward about their own involvement in an unlawful agreement in exchange for a cancellation or reduction of the fines imposed.

Although this system has already paid off in Denmark where according to Danish competition authorities, 10% of alerts lead to investigations, it raises issues notably regarding the total anonymity from which the whistleblower benefits including vis-à-vis the Commission. The question of these whistleblowers' motivation, a priori employees of the companies whose actions are reported, may arise (employee in conflict with his managers, dissatisfied dismissed employee, etc.). In France, the law of December 9, 2016 known as "Sapin II" on transparency, the fight against corruption and modernizing economic life did not recognize total anonymity to whistleblowers reporting offences or felonies but only simple confidentiality.

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