Cartel Regulation Under French Law: A Pragmatic Approach

In recent times, French procedures for the regulation of cartel activity have increasingly been brought into line with those of the European Union. Furthermore, changes have been made to reinforce efficiency in fighting illegal cartel activities, including: the introduction of a new leniency programme, comprising several constituents; the adoption of increased powers of investigation; and the possibility of imposing important periodic penalty payments. Hence, French cartel regulation is no longer only based on sanctions but also on a dialogue that allows more pragmatism and weakens the structure of anti-competitive practices. Together these changes should ensure that the French competition authorities are not only more effective in enforcing domestic competition rules but are also able to contribute, as part of the European Competition Network, to the enforcement of EU competition rules post-modernisation.

Working in tandem - the enforcement agencies

Regarding cartels, the principal competition authority with responsibility for enforcement is the Conseil de la Concurrence (the Conseil). Set up in 1986, the Conseil is an independent authority responsible for the analysis and regulation of competition in the French market under the relevant provisions of French competition law. Investigations of cases referred to the Conseil are carried out by rapporteurs who, further to a decision of the commercial chamber of the Cour de Cassation in 1999, do not participate in the deliberations of the Conseil but merely report to the Conseil in open session.1 This is to ensure full compliance with the requirements of article 6 of the European Convention of Human Rights.

Where an investigation is commenced, both the offices of the Conseil and the Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes (DGCCRF), an administrative service under the control of the Minister for the Economy (the Minister), may exercise the relevant powers of investigation. In practice, it is the latter which will be responsible, due to the budgetary constraints of the Conseil. In addition, the offices of the DGCCRF are entrusted with pre-investigation powers.

Substantive test

Since the entry into force of the New Economic Regulations (NRE),2 the French substantive test, contained in article L420-1 of the French Code de Commerce (article L420-1 and the Code) prohibits concerted practices, agreements and alliances, express or tacit, between undertakings which have as their object or may have as their effect the prevention, restriction or distortion of competition in a market, and in particular those which aim to:

limit access to, or competition from, other undertakings;

interfere with price setting by market forces, by artificially favouring a rise or a fall;

limit or control production, markets, investment or technical development; or

share markets or sources of supply.

Anti-competitive practices committed directly or indirectly through the intermediary of a subsidiary situated outside the French territory are also expressly included within the scope of the prohibition.

The Conseil has traditionally considered that proof of a demonstrable effect on competition is not necessary where the object of an agreement is to restrict competition. This position of principle has generally been confirmed by French courts, although a ruling by the Paris Court of Appeal3 overturned a decision by the Conseil on the basis that it had not been established that the frequent exchanges of price information between service station operators had any real effect on the pricing behaviour of the major petrol suppliers, ie, Total, Shell, Esso and BP, on which fines totalling €27 million had been imposed.

The Conseil had found that repeated and frequent exchanges of sensitive price information had been taking place between motorway service station operators, ie, service stations had been exchanging information by telephone on the price charged for different types of fuels several times a week, and had been transmitting that information to their respective head offices.

This information had allegedly been used to determine the prices charged by operators on French motorways which, in line with previous decisions by the European Commission, was identified as a separate market. As a result, prices had converged to a higher level than that which would have otherwise prevailed. The Conseil emphasised that these practices were particularly serious in the light of:

the oligopolistic nature of the market;

the fact that consumers of fuels on motorways are captive; and

the widespread nature of these practices, which had been carried out for some years, as admitted by service station managers when questioned.

The position of the Conseil on the object or effect criteria has recently been confirmed in two decisions in which the Conseil considered that the exchange of information involving trade secrets, in particular in an oligopolistic market, is in itself anti-competitive. These decisions were issued within a few days of each other respectively in the luxury hotel and wireless operator sectors.4 In these decisions, the Conseil stressed that sharing strategic information in an oligopoly artificially raises transparency among competitors and thus creates a collusive equilibrium distorting competition. In the luxury hotel case, the infringement only consisted in information exchange and the strategic information mainly included occupation rates, average prices per room and incomes relating to each available room. In the wireless operator case, it mainly included information on the numbers of subscriptions and terminations as well as market shares. The Conseil pointed out that the information exchanged was confidential as the parties could not have had access to it by any other way and that it was not shared with the customers. The following fines were imposed with respect to the information exchange: €709,000 in the luxury hotel case and €92 million in...