France: Paris Competition Bulletin - July 2009

Last Updated: 26 August 2009
Article by Melanie Thill-Tayara, Marta Giner and Emmanuelle van den Broucke

THE EUROPEAN COURT OF JUSTICE GIVES IMPORTANT CLARIFICATIONS ON CONCERTED PRACTICES

In a notable judgement of 4 June 2009, the T-Mobile case, the European Court of Justice (the "ECJ") gave important clarifications on the concept of concerted practice under Article 81(1) EC.

The case arose out of a preliminary reference posed by the Dutch jurisdiction hearing an appeal against fines imposed by the Dutch competition authority on the five leading operators on the Dutch mobile phone market. The judgment is particularly interesting for three reasons.

Firstly, the ECJ confirmed that concerted practices, in this case information exchanges, can be anticompetitive by object and thus require no examination of their effects on the market. The ECJ held that, for a concerted practice to have an anti-competitive object, it is sufficient that it is capable, in its legal and economic circumstances, of affecting competition. The extent to which competition is actually affected in each case is only relevant when determining the level of the fine or damages. It follows that an exchange of information, has an anticompetitive object if it is intended to reduce or remove the degree of uncertainty existing between competitors as to each others conduct on the market. In the T-Mobile case, the Dutch court would therefore have to assess whether the discussion of a possible reduction of dealer remunerations was capable of removing uncertainties between mobile phone operators. The ECJ also stated that, for a concerted practice to be anticompetitive by object, there is no need for a direct link between the practice and consumer prices as Article 81 also protects "the structure of the market and competition as such."

Secondly, the ECJ stated that the existing presumption that the market behaviour of undertakings who participate in a concerted practice, and who subsequently remain on the market, is influenced by the practice is "an integral part of applicable Community law." This principle must therefore be applied by the national courts regardless of national rules of proof. This means that, to avoid the application of Article 81 EC, participating undertakings must prove to the national court that they determined their market behaviour independently of the concerted practice.

Thirdly, the ECJ held that, in principle, a single meeting between competitors can suffice to give rise to this presumed causal connection between the practice and the participants' conduct on the market. However, the ECJ recognised that this presumption depends on the nature of the cartel or concerted practice and "is more compelling where undertakings have concerted their actions on a regular basis over a long period." A single meeting would not, therefore, suffice for a complex and continuous cartel. The ECJ held that, in circumstances such as that in the TMobile case, where the objective of the practice was to organise a one-off change in market behaviour based on one parameter of competition, a single meeting between competitors could suffice.

This judgment confirms that even a concerted practice which has no effect on the market can be condemned as anti-competitive if that practice was capable of influencing the market behaviour of participating undertakings. This judgment confirms the necessity to carefully assess more than ever any information exchange between competitors.

In a judgment of 11 June 2009, the European Court of Justice (the "ECJ") explained the tax position of fines imposed by the European Commission (the "Commission") for anti-competitive behaviour. The ECJ held that the deduction of fines from taxable profits by a company, or even linked company, could jeopardise the efficacy of the Commission's decision condemning anti-competitive conduct. Such deduction, either by the company fined or by its subsidiaries, is thus unlikely to be acceptable under Community Law. The judgment provides welcome clarification on this point as well as confirming the Commission's right to submit observations of its own initiative in national proceedings on the deductibility of fines.

TENDER MARKETS AND ABUSE OF DOMINANT POSITION: THE COMPETITION AUTHORITY RECALLS THE IMPORTANT PRINCIPLES

By a decision of 2nd June, the French Competition Authority (the "Authority") held that it was not an abuse for the Regie de Transports de Marseille ("RTM"), monopoly undertaking on the public transport network for the city of Marseille, to hold a prior selection procedure to choose a partner to respond to a call for tenders for the management of the tramway.

The complainant association SNTU-CFDT argued that the prior constitution of such a grouping of undertakings was not necessary and allowed the exchange of commercially sensitive information. For the Authority, on the contrary, the call for candidates was motivated by RTM's willingness to divide the risks associated with the exploitation of the tramway. Such a division was only conceivable if the financial risks were not solely born by RTM and thus its prior search for a partner was not anti-competitive.

This decision is also the occasion for the Authority to recall how it examines dominant positions in cases of calls for tenders. In practice, the relevant market to be analysed is that of the call for tenders. It is, by nature, ephemeral and does not permit a continuing analysis of the operators' positions.

For this reason, the Authority also uses other elements in its analysis. In doing so, it identifies three recurrent situations.

The exiting incumbent is renewed for a new market: in and of itself, this is not sufficient. It is necessary to demonstrate that the renewal is associated with a situation of dominance and abusive behaviour.

The already dominant undertaking in the sector concerned wins the tender: for example, there can be an abuse when the dominance exercised on the national market distorts competition on the local market of the call for tenders.

Lastly, the most frequent case, the undertaking winning the call for tenders is in a dominant position but in a connected market: it is this last situation which was concerned in the case in question. Even if RTM was dominant on the overall market for transport in Marseille, the Authority observed that, for the call for tender, RTM was in competition with sizeable companies also having large market power. In addition, the selection of a partner was transparent, fair and nondiscriminatory, without any abuse committed.

The Authority here provides the keys to its analysis in the particular framework of calls to tender, giving undertakings a greater visibility as to the practices which they could implement.

FRENCH COMPETITION AUTHORITY AUTHORISES CAISSE D'EPARGNE/BANQUE POPULAIRE MERGER WITH LIMITED REMEDIES

The French Competition Authority (the "Authority") has handed down its first significant decision on merger control for the merger of the Caisse d'Epargne and Banque Populaire groups and used the occasion to give interesting specifications on several aspects of merger control.

In relation, first, to the role of the State who subscribed several billions in the capital of the new entity, the Authority clarified that this intervention must be assessed having regard to the State's shareholder quality and not to its general regulatory or guardianship powers over banks. The Authority then considered that, in this case, the State as shareholder did not exercise control over the future entity, its participation not giving it the power, neither in law or in fact, to exercise a decisive influence.

On the competitive analysis of the operation, the Authority operated a thorough analysis of the different markets affected by the operation, notably by closely studying its impact on the local markets for retail and commercial banking, concluding that the only remedies necessary were in La Reunion. Contrary to the parties' theory that trade signs of the same group would compete against each, the Authority adopted the banking group as a unit for analysis as the decision to withdraw a trade sign or to more closely harmonise the commercial policies of entities of the same group could be taken at any moment.

Turning to the nature of the remedies adopted, while recalling that divestiture remedies were preferable to behavioural remedies where market shares are high, the Authority took into account, in this case and in the current recession, the difficulty, or near impossibility, of finding a candidate purchaser for the assets to be divested in La Reunion and thus accepted a remedy consisting of maintaining distinct and autonomous legal structures for the three trade signs. The parties nevertheless had to undertake the alternative remedy of divestiture of some assets if the competition situation declines substantially.

In this period of recession when candidates for the acquisition of assets are less numerous, the Authority has had to adapt its marked preference for structural remedies and accept behavioural remedies, even if this increases its burden of control.

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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