1 What are the legal sources that set out the antitrust law applicable to vertical restraints?
Rules applicable to vertical restraints are set out under article L420-1 et seq of the French Commercial Code. EU antitrust law (ie, article 101 of the Treaty on the Functioning of the European Union) may also apply to vertical restraints if they restrict competition within the common market and may affect trade between the EU member states
Under French law, article L420-1 of the French Commercial Code prohibits concerted practices, contracts, explicit or tacit agreements or coalitions between independent companies having as their object or effect the prevention, restriction or distortion of competition on the market, including in vertical agreements. Vertical restrictions of competition may benefit from an individual exemption if the conditions set out under article L420-4 of the French Commercial Code are met. Paragraph 2, article L420-2 of the French Commercial Code prohibits the abuse of economic dominance if it is likely to affect competition, and may also apply to vertical agreements if a company abuses the situation of economic dependency of a customer or supplier
Types of vertical restraint
2 List and describe the types of vertical restraints that are subject to antitrust law. Is the concept of vertical restraint defined in the antitrust law?
There is no legal definition of vertical restraints. As under EU law, vertical restraints caught by French antitrust law are typically:
- direct or indirect price restrictions (eg, resale price maintenance and tying);
- restrictions on territory and customers (eg, exclusive customer or territory allocation); and
- restrictions on sourcing (eg, non-compete obligations and single branding).
Direct or indirect restrictions on exports or parallel imports are sanctioned if they affect the French market. Selective distribution, exclusive distribution and franchise are also monitored.
3 Is the only objective pursued by the law on vertical restraints economic, or does it also seek to promote or protect other interests?
While the first objective is the protection of economic efficiency and free competition, the assessment of vertical restraints will take into account the effect of practices on economic welfare and the wellbeing of the consumer. Article L420-4 I 2 of the French Commercial Code, which exempts certain agreements, explicitly mentions the creation or preservation of employment as a criterion to assess the positive effects of restrictive practices. The protection of small and medium-sized companies or weaker parties in their relations with companies with strong market power is also a driving consideration.
4 Which authority is responsible for enforcing prohibitions on anticompetitive vertical restraints? Where there are multiple responsible authorities, how are cases allocated? Do governments or ministers have a role?
The French Competition Authority is empowered under article L461-1 et seq of the French Commercial Code to enforce the prohibition of anticompetitive vertical restraints. Under article L464-9 of the French Commercial Code, if the practices are not already examined by the Competition Authority, the Minister of the Economy has jurisdiction over practices affecting a local market, provided that they do not fall within the scope of EU antitrust law, and that the turnover of each company in France does not exceed €50 million and have an aggregate turnover exceeding €200 million. In these cases, the Minister of the Economy has injunction and settlement powers that are exercised by the regional directorates for companies, competition, consumer protection, labour and employment under the coordination of the Directorate-General for Competition, Consumer Protection and Repression of Fraud. If the companies concerned do not comply with the injunction or the obligations outlined in the settlement, the case is referred to the Competition Authority. Article L420-7 of the French Commercial Code provides that specialised courts of first instance (eight commercial courts and eight civil courts) and the Paris Court of Appeal, under article R420-5, have exclusive jurisdiction in disputes relating to the application of antitrust laws (private enforcement).
5 What is the test for determining whether a vertical restraint will be subject to antitrust law in your jurisdiction? Has the law in your jurisdiction regarding vertical restraints been applied extraterritorially? Has it been applied in a pure internet context and if so, what factors were deemed relevant when considering jurisdiction?
Vertical restraints will be subject to French antitrust law when they are likely to affect competition on the French market, according to the 'territorial effect' theory. Article L420-1 of the French Commercial Code covers anticompetitive practices carried out 'even through a company of a group established outside France, directly or indirectly'. Restrictions on exports by companies established in France are not subject to French antitrust law if the effects of the practice occur outside of France (Decision No. 99-D-52) unless there are indirect national effects. The Competition Authority has only intervened in cases where at least one undertaking concerned had an establishment in France.
Agreements concluded by public entities
6 To what extent does antitrust law apply to vertical restraints in agreements concluded by public entities?
Antitrust laws fully apply to public entities when they are involved in production, distribution or services activities as set out by article L410-1 of the French Commercial Code. However, the administrative judge will have jurisdiction rather than the Competition Authority if the public entity is exercising a public service mission through acts of public authority (eg, Decision No. 19-D-22 in which the Competition Authority declined competence). A court decision clarified that the Competition Authority has jurisdiction over anticompetitive practices conducted by a public entity in the context of public procurement (T confl, 4 May 2009, No. C3714).
7 Do particular laws or regulations apply to the assessment of vertical restraints in specific sectors of industry (motor cars, insurance, etc)? Please identify the rules and the sectors they cover.
There are no rules generally assessing vertical restraints in specific sectors. However, specific regulations may apply to address identified restrictions. Articles L5125-33 et seq and R5125-70 et seq of the French Public Health Code set out specific provisions concerning the online sale of drugs. Taking into account the Competition Authority's Opinion No. 16-A-09, two orders were adopted on 28 November 2016 setting out Good Practices for the sale of drugs and Technical Rules applicable to online sales websites. The Competition Authority has analysed the current framework releasing opinion No. 19-A-08 on 4 April 2019, which through different proposals pushes for an opening of the drugs distribution sector and the medical biology one to online sales and services, as applied in other European countries.
In the hotel sector, article L311-5-1 of the French Tourism Code regulating contractual relations between hotels and online booking platforms provide for full pricing freedom for hotels by prohibiting any form of price parity clauses. In the retail sector, article L341-2 of the French Commercial Code prohibits post-contractual non-compete clauses, except if they relate to goods and services that compete with the contractual goods and services, in which case:
- they are limited to the premises and territory from which the buyer operated during the contract period;
- they are indispensable to protect know-how transferred by the supplier to the buyer; and
- the duration of the obligation is limited to one year.
Article L420-2-1 of the French Commercial Code prohibits agreements granting exclusive importation rights to a company in certain French overseas territories. In its Decision No. 16-D-15, the Competition Authority applied this provision for the first time and fined a large homecare products manufacturer and five distributors for exclusivities granted after 22 March 2013 in various French overseas territories. In 2018, the Competition Authority issued two decisions in which it fined companies for having maintained exclusive import clauses in their agreements after 22 March 2013 in overseas territories for the purchase of consumer goods (Decision No. 18-D-21, action pending before the French Supreme Court) and in the marketing of termite traps (Decision No. 18-D-03), and in 2020, for the purchase of champagne (Decision No. 20-D-16).
Article L420-2-2 of the French Commercial Code concerns specifically practices hindering undertakings that provide public passenger transport services in using third-party platforms from directly offering their services or promoting these as such. Agreements or concerted or unilateral practices with this object or effect are prohibited, yet can be exempted under certain conditions as per article L420-4, III.
8 Are there any general exceptions from antitrust law for certain types of agreement containing vertical restraints? If so, please describe.
Article L464-6-1 of the French Commercial Code provides for a general de minimis exemption under which the Competition Authority can decide not to open proceedings against parties to an agreement if these parties jointly hold a market share not exceeding 10 per cent in one of the affected markets, if they are actual or potential competitors in one of these markets, or not exceeding 15 per cent in one of the affected markets if they are not actual or potential competitors in any of these affected markets. However, the de minimis exception does not apply to the hardcore restrictions listed in article L464-6-2 of the French Commercial Code.
TYPES OF AGREEMENT
9 Is there a definition of 'agreement' – or its equivalent – in the antitrust law of your jurisdiction?
There is no definition of an agreement under French antitrust law. According to the Competition Authority, an anticompetitive agreement results from the concurrence of wills that is not necessarily evidenced by a contract or a jointly adopted decision, but only requires a conscious adherence to a collective behaviour (Decision No. 97-D-52).
10 In order to engage the antitrust law in relation to vertical restraints, is it necessary for there to be a formal written agreement or can the relevant rules be engaged by an informal or unwritten understanding?
Vertical relationships are generally evidenced by a contract, which, if it contains restrictive provisions, demonstrates in itself the concurrence of wills (eg, Decisions Nos. 05-D-66 and 07-D-04). Without these contractual provisions, the individual intention of each party to take part in the restrictive agreement must be demonstrated in the form of an offer made by one of the parties and accepted by the other (eg, Decisions Nos. 05-D-70 and 06-D-04). However, if one party (ie, a supplier or manufacturer) unilaterally adopts a new policy that is not implemented by the other party (ie, the distributor), a concurrence of wills cannot be established (Decisions Nos. 05-D-06 and 05-D-72).
Parent and company-related agreements
11 In what circumstances do the vertical restraints rules apply to agreements between a parent company and a related company (or between related companies of the same parent company)?
Agreements between a parent company and its subsidiary or between two subsidiaries of a parent company are not, in principle, caught by article L420-1 of the French Commercial Code if these subsidiaries do not freely determine their commercial policy. If they act autonomously on the market, antitrust laws apply to agreements between related companies. Commercial and financial autonomy of the subsidiary and its parent must be mutual and sufficient to ensure each company takes independent decisions in economic matters (eg, in Decision No. 94-D21). The same applies to two subsidiaries of the same group
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