Major Changes in French Competition Law

Antoine Choffel and Yann Utzschneider

Gide Loyrette Nouel AARPI

On 4 August 2008, the Loi de Modernisation de l’Economie (LME),¹ Law No. 2008-776, was enacted. The LME amends numerous provisions related to competition law under Book 4 of the Code de Commerce (Code of Commercial Law).
The LME has two general objectives with regard to French Competition Law. The first is to transform the French Competition Council into a new Authority by transferring some of the former powers of the minister of economy to this authority. This reform marks the end of the former dual system. Its second objective is to catch up with the standards of the other member states of the European Union.
The LME also modifies merger control proceedings and antitrust regulations. Before the end of 2008, a government order will finalize the LME’s provisions.² Article 97 of the LME provides that the government is authorised to pass an order to confer all requisite jurisdictions on the Competition Authority relating to antitrust practices, the rules of functioning and proceedings and the methods of investigation. This order will also amend the Code of Commercial Law concerning the right to defence and the power of the competition authorities regarding seizures and inquiries.

Organisation and functioning of the Competition Authority

The LME amends articles L.461-1 to L.461-2 of the Code of Commercial Law regarding the organisation of the Competition Authority. Article 95 of the LME provides that the authority, formerly known as the Competition Council, will become the Competition Authority. It also provides that the Competition Authority is an independent public service authority whose mission is to regulate market competition. The attribution of this status does not, however, imply that the Competition Authority will hire its officials independently. In its opinion on the LME,³ the Competition Council underscores that since it could not independently hire its officials and agents, it did not have all the jurisdiction that an independent public service authority should have.
Compared to the composition of the current College of the Competition Council, the LME makes changes in the College of the Competition Authority. The number of members remains stable at 17. However, the number of members who are magistrates has been lowered from eight to six, whereas five instead of four people will be appointed because of their abilities in competition, economy or consumption. Moreover, article 95 provides that the number of vice presidents will increase from two to four, two of whom will be chosen from among the members recruited for their technical abilities.
The president of the Competition Authority who, currently, is always a magistrate, will be appointed according to his or her legal and economic abilities after parliament has been consulted. The president’s mandate, which was previously renewable several times, will only be renewable once. Furthermore, the LME has finally created a new internal procedure that allows the College to impeach one of its own members.
The LME also transfers powers from the College to the rapporteur général of the Competition Authority. This text clearly distinguishes the judiciary and administrative body from the investigative departments headed by the rapporteur général appointed by the minister of economy. The deputy rapporteur général and all the officials of the investigative departments will be appointed by the sole rapporteur général.
Finally, the LME has also created the position of hearing officer. The purpose of this position, to be held by a magistrate, will be to observe the parties during proceedings. The hearing officer will then report his or her observations to the president and may even offer remedies to ensure the parties’ rights are respected.

Merger control

The LME transfers merger control to the Competition Authority. The control of the concentration’s operations, which fall outside of the European Commission’s jurisdiction, currently falls under the purview of the minister of the economy and, for that matter, of the DGCCRF (General Directorate for Competition, Consumer Affairs and Fraud Control). In many respects, the LME also modifies the proceedings regarding the notification and authorisation of mergers.

Merger control proceedings before the Competition Authority

The LME first of all amends articles L.430-2 to L.430-8 of the Code of Commercial Law. These provisions currently cover merger control proceedings. Article 96 of the LME provides that the Competition Authority will be notified of concentrations instead of the minister of economy. At present, the proceeding is composed of two phases. The LME will change the procedural calendar of these phases.
Concerning this calendar, the French proceedings provide at the moment a first phase of examination of a maximum duration of five weeks. Article 96 of the LME provides for an initial examination phase lasting a maximum of 25 business days. In the hypothesis where the notifying parties put forward commitments in order to avoid any competition concern, this first phase can, however, be extended to a maximum of eight weeks. The order provides for an extension of 15 business days in this event. It also provides that if necessary, the notifying parties will be authorised to request the suspension of the time period within a limit of 15 business days.
Currently, where phase two is initiated, the notification is automatically transferred to the Competition Council, which benefits from a three-month period before issuing its opinion to the minister of economy. After this, the minister has to render a decision within four weeks (this is the opinion of the Competition Council). This four-week period can be extended by three more weeks in the event the notifying party proposes certain commitments. On the whole, phase two can last up to four months and three weeks.
The change under article 96 of the LME provides that phase two will last a maximum of 65 business days. Again, this phase can be extended by 20 business days in the event the notifying party proposes certain commitments. Furthermore, if necessary during phase two, the notifying parties can request the suspension of the time period within a limit of 25 business days. Insofar as the Competition Authority is concerned, it can suspend the aforementioned time period if the parties have informed it of new facts or have answered its questions or if a third party has not been able to answer its questions because of the notifying parties. The time period will be suspended until the reason for the suspension no longer exists.

Remaining powers of the minister of economy

The LME creates a new article under the Code of Commercial Law. Article L.430-7-1 provides for a new procedure whereby the minister of economy may intervene. The minister will be able to ask the Competition Authority for a more thorough investigation of the operation within five business days after receiving the decision. Furthermore, within the following 25 business days, the minister of economy will be authorised to investigate the operation. Nevertheless, the minister of economy will only be allowed to use such a procedure where motivated by general interests, such as industrial development, competitiveness of the concerned undertakings with regard to international competition, or the creation or protection of employment. This alternative investigation cannot be based on Competition Law. The minister will, following this procedure, render a fitting decision on the operation. This decision will overrule any former decision made by the Competition Authority. The report of the debate in parliament underlines that this procedure is to be viewed as exceptional.

Creation of new turnover thresholds

The LME does not modify the current legal notification thresholds in France.⁴ Nevertheless, it creates new thresholds regarding retail business. These thresholds are applied when at least two of the undertakings run retail stores. This modification targets the purchasing of retail stores that have turnovers that individually often do not reach the traditional French thresholds. The new thresholds are as follows:
• the combined aggregate worldwide turnover of all the undertakings, legal or natural persons, concerned exceeds €75 million;
• the turnover achieved in France in the retail sector by at least two of the undertakings, legal or natural persons, concerned exceeds €15 million; and
• the proposed concentration does not fall under the scope of EC Merger Regulation No. 139/2004⁵.

Furthermore, these thresholds will also apply to mergers between companies located in French overseas departments and collectivities.

Antitrust regulation

The LME enables the government to pass an order to enhance and complete the LME. The order will broaden this aspect of the Law by introducing antitrust regulatory provisions. On its website, the DGCCRF published a draft of the order. Following the debate in parliament, it appears that a few amendments are going to be made to this draft. The provisions of the order essentially expand on the investigative powers of the Competition Authority and the parties’ right to defence during these proceedings. They also set up new settlement proceedings.

De minimis transaction proceedings

Article 3 of the draft order creates article L.462-5-1 of the Code of Commercial Law. This article will enable the minister of economy to monitor ‘small’ companies that are breaching articles L.420-1 and L.420-2 of the Code of Commercial Law on anti-competitive agreements and abuse of dominant position, with the goal of putting an end to their anti-competitive practices. Indeed, these proceedings can only be put into effect if each of the concerned companies has achieved a turnover in France of less than €50 million and their combined aggregate turnover in France does not exceed €100 million, and if their practices do not fall within the scope of articles 81 and 82 EC.
The minister of economy can, under the same terms, offer a settlement. The amount of the fine resulting from this settlement may not exceed €75,000 or 5 per cent of the last known turnover in France, if its value is less than €75,000. The acceptance of the settlement results in the discontinuance of proceedings before the Competition Authority. However, where the concerned parties refuse the settlement, the minister of economy shall refer the matter to the Competition Authority.

Investigations by the Competition Authority

The rapporteur général of the Competition council and the DGCCRF currently share investigative powers. The draft order tends to transfer much investigative powers and means to the rapporteur général without, however, removing powers from the minister of economy.
New article L.450-1 of the Code of Commercial Law provides that: ‘The investigators and the rapporteur général of the Competition Authority can carry out any inquiry necessary for the implementation of titles II and III of the present Chapter’. The order does also provide that, for each case, the rapporteur général will ask the competent authorities to make a certain number of officials available for a given period.
Furthermore, this transfer of powers can also be analysed through the amendments made to article L.450-5 of the Code of Commercial Law. Pursuant to this article, the rapporteur général is promptly notified of any investigation commissioned by the minister of economy. Article 2 of the draft order provides that the rapporteur général of the Competition Authority will be notified of any new investigations that are initiated and commissioned by the minister of economy and, consequently, he or she will be able to head them. At any rate, the rapporteur général will be notified of the results of these investigations.
Nevertheless the provisions regarding the powers of the investigators of the Ministry of Economy are not deleted from the list. The minister of economy will indeed be able to ask the Competition Authority to commission investigations. Moreover, this draft order does not indicate whether the DGCCRF will retain its jurisdiction on a regional level, since it is the only authority with a local network, or whether the Competition Authority’s jurisdiction will also include the regional scale.

Modernisation of proceedings

The draft order will modify proceedings to strengthen the parties’ right of defence and make investigations more effective. Article L.450-4 of the Code of Commercial Law is vastly amended. This article covers the investigations that can be conducted and the seizures that can be made by officials from the Competition Authorities. Currently, the order allowing investigations and seizures can only be appealed before the French Court of Cassation, the judiciary’s highest court, which can only adjudicate on the legality of the order. Article 2 of the draft order provides that, in the future, these practices will be subject to appeal before the first president of the Court of Appeal. Thereby it implies that the first president of the Court of Appeal will examine the validity of the order on its merits. It will be possible to challenge the decision of the first president of the Court of Appeal before the Court of Cassation.
Furthermore, the draft order amends the current appeal process regarding the course of investigations and seizures. Currently, article L.450-4 provides that parties can motion for leave to appeal before the judge who allowed the investigations. The order modifies this paragraph of the article and provides that the parties will be entitled to appeal before the first president of the Court of Appeal. The order thus combines the different proceedings before a single jurisdiction.
The order also enhances the parties’ right to defence by including, in the Code of Commercial Law, the possibility for them to receive assistance from counsel during investigations. Such counsel need not be an attorney. Furthermore, the officials in charge of the investigation have to inform the parties of this right.
Finally, the draft order sheds light on a matter that was, until now, strongly discussed by attorneys before the Competition Council. Indeed, investigators often seized documents that were not covered by the judge’s order allowing the investigation. Article L.450-4 currently provides that the investigators can only seize documents that fall within the scope of the order. Article 2 of the draft order provides that investigators will be authorised to confiscate documents not covered by the order, however, in this case, the judge will have to be informed, and can then order the seizure of this evidence. If the judge does not authorise the seizure of the documents, they will be returned to the parties.

Notes

1 Loi de Modernisation de l’Economie, No. 2008-776, 4 August 2008. The highlights of the LME are available in French on the following website: www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000019283050.
2 Draft of the government’s order published by the DGCCRF on 11 June 2008. The order is available in French on the following website: www.dgccrf.bercy.gouv.fr/actualites/docs/projet_ordon_conc.pdf.
3 See Competition Council, Opinion No. 08-A-05, 18 April 2008.
4 The French law turnover thresholds provided by article L.430-2 of the Code of commercial law are: (i) the combined aggregate worldwide turnover of all the undertakings concerned exceeds €150 million; (ii) the turnover achieved in France by at least two of the undertakings concerned exceeds €50 million; and (iii) the proposed concentration does not enter into the scope of EC merger regulation No. 139/2004.
5 Council Regulation (EC) No. 139/2004, 20 January 2004 on the control of concentrations between undertakings, Official Journal of the European Union, L.24 of 29 January 2004, p1.

An extract from The European Antitrust Review 2009