United States: Settlement: The Competition Authority Clarifies The Course Of The Procedure

On Dec. 21, 2018, the French Competition Authority (the Authority) released a procedural notice on the settlement in order to clarify the implementation of this procedure.

The settlement procedure set out in Article L. 464-2, III of the French Commercial Code was introduced by a law of Aug. 6, 2015, and replaces the "no contest of objection" procedure that had existed since 2001. The settlement procedure allows companies that do not challenge the statement of objections issues by the Authority to benefit from a settlement proposal fixing a minimum and a maximum amount of the penalty incurred. The mechanism no longer consists of a reduction of the penalty by a given percentage, the amount of which was unknown until the final decision, as was the case under the previous "no contest of objection" procedure. The settlement procedure before the Authority, which is more similar to the settlement procedure before the European Commission (EU Commission), is already as successful as the latter. The new procedural notice is intended to increase the predictability of the final amount of the penalty and thus the legal security for the parties. However, this goal may not be fully achieved.

The main features of the French settlement procedure

The French settlement procedure can be implemented in any type of anti-competitive practices case whereas the settlement procedure under EU antitrust law is available only in cartel cases. Among the 11 decisions adopted so far, two of them are related to abuse of dominance cases. 

As is the case in the proceedings before the EU Commission, the settlement procedure can be implemented along with the leniency procedure, thus offering the company a double reduction of the penalty.

Since the French settlement procedure occurs after the company is granted full access to the file, the company can better assess whether to request a settlement or not. This is not the case at the EU level, where only partial access to the file is granted by the EU Commission to the party applying for a settlement.

First stage: negotiations with the General Rapporteur

The settlement procedure consists of a negotiation between the General Rapporteur and the party concerned and is typically initiated after the notification of the statement of objections. However, in practice, there is no obstacle to informal discussions with the General Rapporteur about a potential settlement starting before the notification of the statement of objections.

Formally, it is up to the company to file a request for settlement with the General Rapporteur, which decides, at its sole discretion, on a case-by-case basis, to enter into a settlement procedure.

After discussions with the company, the General Rapporteur proposes a penalty in a given range. The company may propose commitments in order to discuss an additional reduction of the fine amount.

Within two months of the statement of objection, if the company accepts the settlement proposal, a settlement report records, on the one side, the company's waiver of the right to challenge the objections and its offer of commitments and, on the other side, the General Rapporteur's proposal of a minimum penalty and a maximum penalty. Under the settlement, the company waives any right to contest the reality of the practices; their materiality, duration or geographical scope; their legal qualifications, especially with regards to their anti-competitive object and/or effect; as well as their imputability to the party. This report is not available to other parties involved in the probe.

As does the EU Commission, the Authority seeks to avoid hybrid procedures, that is, a situation where only some of the parties enter into a settlement. This situation is problematic for the Authority, which needs to continue the ordinary procedure jeopardizing the procedural gains allowed by the settlement, and for parties wishing to challenge the objections, since the practices are de facto admitted by the other parties. Therefore, in order to obtain the largest adherence to the settlement procedure, the General Rapporteur may inform all the other parties about ongoing settlement discussions and about the execution of settlement reports with some parties.

Second stage: discussion of the penalty before the Authority's Board

During the hearing before the Board, the party is allowed to discuss only the criteria for the determination the penalty (i.e., the gravity of the practice, the damage to the economy and the mitigating circumstances) in order to get a penalty as close as possible to the minimum amount proposed by the General Rapporteur. The party should not raise arguments relating to the reality and the qualification of practices since doing so may be considered as renouncing the settlement and eventually challenging the objections. If the party does raise arguments, except under the simplified procedure, the case is referred back to the investigation service of the Authority in order to resume the ordinary procedure and to allow the drawing-up of a complete report about the alleged infringements and a full discussion of the objections before the Board in a further hearing.

In the settlement procedure, the Board can impose a penalty in the range fixed in the settlement report, but it is not supposed to do so and may disregard the General Rapporteur's settlement proposal. If it considers disregarding the penalty level set out in the settlement report, the Board refers the case back to the investigation service for the preparation of a complete report. Similarly, if the Board considers that the objections are not justified (which is unusual but possible), it may also refer the case back for further investigation.

Greater legal security for the parties, really?

The stated objective of the procedural notice was to offer companies involved in antitrust proceedings before the Authority greater legal security by increasing the predictability of the level of fines. The outcome is far from meeting this goal as the sources of uncertainty are various. On the one hand, the Authority's procedural notice on sanctions of May 16, 2011, is expressly disregarded as guidance in determining the potential fine incurred, confirming the decision-making practice of the Authority. On the other hand, the decisions in settlement cases do not mention the extent of the reduction of the penalty resulting from the settlement and do not allow parties to identify trends in fixing penalties in this type of procedure.

Ultimately, even in the settlement procedure, the Authority has great discretionary power in setting the final amount of the fine. It is therefore difficult to rely on decision-making practice to try to estimate a potential level of sanction in a given case. This situation certainly involves risks for companies but can also, to some extent, offer more opportunities in the negotiation with the General Rapporteur. In assessing the option of a settlement, it should always be kept in mind that the settlement procedure leads to a decision enacting the alleged anti-competitive practices and the company's involvement in such practices. Therefore, a settlement does not eliminate the risk of follow-on damages claims based on infringement of antitrust laws. 

In order to mitigate this risk, as it is possible before the EU Commission, the parties may anticipate the statement of objections and attempt, informally, to discuss with the Rapporteur General a common definition of the allegations that they undertake not to contest in a settlement procedure. Therefore the parties could limit the scope of the infringement and thus limiting potential successive damages claims.

Authority's procedural notice.

Read the Client Alert here: French version

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