Competition, a powerful lever to bolster the purchasing power

Competition represents a stimulus to the economy and, when it is effective, generates significant benefits, especially for consumers. It obliges the established operators to control their costs, improve the quality of their products and innovate in order to set themselves apart. In this perspective, tackling unjustified monopolies, artificial barriers to entry and collusive practices makes it possible to ensure that products and services offered to consumers are competitively priced. In this way, competition is a vector for enhancing purchasing power and helps tackle the high cost of living, which is more urgent than ever in the current economic climate.

STIMULATING COMPETITION

In a context of disruption brought about by the Covid-19 pandemic as well as the war in Ukraine, purchasing power is the main concern of the French public, as individuals are confronted with rising prices for their spending on basic necessities: everyday consumer goods, fuel, materials, energy… In this regard, competition policy is a useful lever to bolster the purchasing power of the French public, in particular through its impact on prices. Indeed, competition prompts established companies to raise their game and remain efficient, by keeping their production costs under control and by innovating. Competition therefore avoids unjustified monopolistic situations or excessive market power that leads to higher prices or lower quality products. Moreover, competition favours the entry of new, more efficient and often less expensive operators. For consumers, competition means competitive prices, but also sometimes an increase in the size of the market and a diverse offering, which allows everyone to find the product that suits them best.

As the French public have realised, competition means having a choice and being able to benefit from the most competitive prices. They apply this in practice on a daily basis, in particular by using the Internet as a tool for comparing offers, and as a medium for shopping.

TACKLING ANTICOMPETITIVE PRACTICES

Energy, healthcare, cars, fuels, food … on referral or on its own initiative, the Autorité intervenes in all economic sectors of the country. In particular, the Autorité’s enforcement remit is aimed at combating cartels, arrangements that drive up prices and rip off customers, without any trade-off in terms of efficiency. These unlawful practices result in significant “overpricing” situations, which can be a substantial burden for consumers and businesses alike. To give an order of magnitude, various economic studies have identified average prices up to 17% higher in Europe!

The Autorité is regularly called upon to dismantle anticompetitive agreements that are impacting either consumers (consumer goods) or companies that consume intermediate goods (inputs), with the result that their competitiveness is negatively affected.

For example, in 2021, the Autorité dismantled a cartel between industrial sandwich manufacturers that had the effect of increasing the price paid by mass-market retailers for manufactured products to be sold under their own brand name (private label), with an ultimate impact on the price paid by consumers (Decision 21-D-09 of 24 March 2021, for more details on this case see p. 63). Cartels also have a negative impact on taxpayers, when the primary victims of these practices are local and regional public authorities or the state. In recent months, the Autorité has fined various companies that had distorted public calls for tender. In particular, it fined:

17%

The average level of overpricing by cartels in Europe according to various economic studies.

following an investigation by the DGCCRF in the medical transport contracts of Val d’Ariège and Pays d’Olmes hospitals, an ambulance company for participating in a cartel (Decision 22-D-04 of 2 February 2022; for more details on this case, see p. 77);
several companies for a cartel in the waste collection and management sector in Haute-Savoie (Decision 22-D-08 of 3 March 2022, for more details on this case, see p. 95);
a subsidiary of the Vinci group for having exchanged information with another company during a call for tenders organised by the urban community of Lille for the maintenance and transformation of its building management systems (Decision 21-D-05 of 4 March 2021).

Besides anticompetitive agreements, competition policy also protects consumers and businesses from abusive behaviour by dominant players. These abuses, which can take various forms (strategies to foreclose competitors, obstruct the entry of new players, pricing practices, discriminatory treatment of customers, etc.), are likely to ultimately deprive customers, both consumers and businesses, of competitive prices and a more diversified offering. For example, the Autorité recently fined Google (online advertising) and EDF (access to the files of customers on TRV tariffs), respectively in 2021 and 2022 (Decision 21-D-11 of 7 June 2021, for more details on this case see p. 52 and Decision 22-D-06 of 22 February 2022, for more details on this case see p. 90).

ACTING ON THE STRUCTURE OF THE MARKET

Acting upstream by examining takeovers and mergers

While mergers and acquisitions can be beneficial for growth, by allowing businesses to achieve synergies and critical mass, too much market concentration can be harmful for the economy and consumers. Indeed, companies that acquire or strengthen their market power through a takeover may be tempted to charge higher prices than was the case previously, diminish the quality of the services offered or slow down the pace of innovation. In this respect, merger control is a powerful safeguard, allowing a sufficient level of competition to be maintained after the transaction has been completed.

In the case of retail distribution of products such as clothing, toys or organic products, the Autorité has been called upon, in recent years, to examine numerous merger-acquisition transactions, which were likely to harm competition in certain catchment areas. In problematic areas for competition, the Autorité has intervened and obtained commitments regarding the divestiture of stores. For example, this was the case in 2021 concerning:

the takeover of 128 La Halle stores by Chaussea, which was accepted subject to the divestiture of four outlets in Dole, Lure, Manosque and Saint-Memmie (for an overview of the main mergers in the clothing sector, see p. 72).
the takeover of the 95 Maxi Toys stores by Fijace (King Jouet group) which was cleared subject to the divestiture of three outlets in the Meurthe-et Moselle, Isère and Var departments (Decision 21-DCC-144 of 12 August 2021, for more details see p. 66).
the takeover of 100 Bio c’Bon stores by Carrefour, which received the green light from the Autorité subject to the divestiture of eight Bio c’Bon stores by Carrefour. These commitments, intended to bring the market shares of the new entity in the organic products distribution segment to a reasonable level, will allow competing chains to bolster their presence or set up in the areas concerned (Decision 21-DCC-161 of 10 September 2021, for more details, see p. 71).

In certain rare cases, when no remedies (commitments or injunctions) can effectively resolve the identified harm to competition, the Autorité may even be required to block a merger-acquisition transaction. For example, in 2021, the Autorité formally blocked a transaction involving the takeover of Société du Pipeline Méditerranée-Rhône by the Ardian group. The transaction involved the takeover of control of the pipeline supplying all the depots in the south-east of France with refinery products (diesel, petrol, domestic fuel oil and jet fuel). The Autorité considered that this pipeline constituted an essential infrastructure and believed that the takeover would have given Ardian a monopoly position, with risks of tariff increases following the transaction. The evidence gathered during the investigation showed that a rise in prices would be passed on to consumers, rather than customers shifting to alternative modes of transport. During the investigation, user companies indicated in this respect that: “[a] too large an increase in the tariff will undoubtedly be reflected in the price at the pump” and that “[t]his increase would de facto be passed on in full to consumers, regardless of the percentage” (Decision 21-DCC-79 of 12 May 2021, for more details, see p. 94).

Acting downstream: devising tailored solutions and monitoring behaviour

Some regions, in particular on account of their size and distance from the mainland, already have significant levels of concentration. This is the case, for example, in island economies, where local competition is limited, thereby having a direct impact on general price levels (significantly higher than in mainland France).

Specific means of action

To deal with these kinds of situations, the legislator has given the Autorité a specific mean of action to intervene in French overseas territories, through a structural injunction power. The Autorité can now impose structural injunctions on a dominant company or group of companies that raises “competition concerns” due to high prices or margins, compared to the average prices or margins generally observed in the sector in question. The Autorité can also issue structural injunctions in the event of anticompetitive practices and thereby require a company or group of companies to divest some of its assets, such as a subsidiary or a business line (Law n° 2020-1508 of 3 December 2020, Order n° 2021-649 of May 26, 2021). In its opinion concerning the competitive situation in Corsica, the Autorité considered that, given the specific structural characteristics of the so-called ‘île de Beauté’, which make it particularly difficult for new players to set up outlets and which could affect the smooth functioning of certain local markets, transposing this tool to Corsica could be envisaged. Beyond Corsica, this system could be extended to address similar competition issues in other metropolitan areas with comparable geographic and economic characteristics.

In-depth diagnosis and recommendations

In the context of its advisory role, the Autorité also regularly offers up its expertise at the request of the Government, in order to provide in-depth insight into the specific characteristics of these territories. At the request of the Government, the Autorité examined in particular the situation of the overseas markets in 2019 (Opinion 19-A-12 of 4 July 2019) and then that of Corsica in 2020 (Opinion 20-A-11 of 17 November 2020) in order to make recommendations to improve the competitive functioning of these island economies. In connection with its Opinion on Corsica, in 2021 the Autorité also decided to examine, this time in the context of litigation proceedings, the behaviour of players in the fuel supply, storage and distribution sector on the island (Decision 21-SO-17 of 15 December 2021, for more details see p. 89).

OPENING UP SECTORS TO COMPETITION

2021 saw the completion of two major sectoral reforms for the opening up of competition, which were supported by the Autorité de la concurrence, through its opinions: the partial opening up to competition of visible car parts and the opening up of high-speed rail services. There is no doubt that these two major advances will have significant and lasting benefits for consumers when it comes to their mobility-related costs.

THE FRENCH PUBLIC AND COMPETITION

The French public strongly condemn cartels:
an Ifop poll revealed that the majority of French consumers regard cartels as being as serious, or even more serious, than theft. By way of comparison, in other international studies, cartels are never regarded as being as serious as theft (IFOP survey available on the Autorité’s website).

Spare parts for cars: major progress for consumers

Owning a car is expensive. In addition to the price of fuel, the cost of maintenance and repairs is also constantly rising. In France, visible car parts (front wings, bonnets, bumpers, windshields, lights, mirrors, etc.) were until now protected by design rights and copyright. In accordance with these provisions, only the car manufacturer can distribute these parts to the various repairers. But the lines are shifting and, from 1 January 2023, the sale of visible car parts will be partially open to competition.

As such, all equipment suppliers will be able to sell spare parts in glass, whether they are original equipment manufacturers (meaning that they have produced the glazing for new vehicles) or independent. For all other visible spare parts (e.g. mirrors, optical and body parts), the equipment suppliers who manufactured the original part will also be able to sell products, alongside the manufacturers. Finally, all equipment suppliers will be able to produce and sell these parts after a period of 10 years from the registration of the design of the part, compared to 25 years currently.

The Autorité welcomes this step forward in favour of consumers and the dynamism of the automotive industry, which represents the culmination of a long-standing commitment on this issue. As early as 2012, after studying the competitive functioning of the sector, the Autorité had recommended the gradual and controlled lifting of the de facto monopoly held by the manufacturers on visible spare parts, starting in particular with glass parts. The Autorité considered that this opening up to competition would lead to a price decrease for these parts, while ensuring a more efficient operation of the sector. In its opinion, the Autorité had estimated that the gradual lifting of this protection should, in the long run, result in an average decrease of around 6 to 15% in the price of visible parts for consumers and that it would also allow carmakers and equipment suppliers to protect themselves against the risk of being unprepared if the market were to be opened up at the European level (Opinion 12-A-21 of 8 October 2012).

At the Autorité’s 10^th anniversary in 2019, Prime Minister Édouard Philippe had announced his intention to implement this measure, which was eventually introduced into the draft law to combat climate disruption and strengthen resilience, voted in Parliament in the summer of 2021. At the referral of members of Parliament, on 13 August, the Constitutional Council validated the law, paving the way to the partial opening to competition for these spare parts (Law n° 2021-1104 of 22 August 2021 on combating climate disruption and strengthening resilience to its effects).

In the rail sector

The opening of the railways for passengers on the main lines became a reality at 7:26 a.m. on 18 December 2021, with the departure from the Gare de Lyon of the first train of the company Trenitalia on French rails. This step marks the end of the SNCF monopoly and the arrival of other competitors in the years to come.

This opening to competition will dynamise the rail sector as a whole and allow users to enjoy cheaper tickets and more varied services, and much more… As underscored by Bernard Roman, Chairman of the Transport Regulatory Authority (ART): “opening up the market is by no means an end in itself: by leading to lower prices, improved quality of service and the development of innovations, it represents, on the contrary, a potentially very powerful lever for improving and developing the rail system, to the benefit of its users, as the feedback from European countries that are more advanced in this process clearly shows”. (Study on the opening of passenger rail transport services to competition, 2022 edition, ART).

In 2012, the Autorité supported this opening up by issuing two opinions on access to passenger stations for new entrants, making recommendations to the public authorities, the sector-specific regulator and the SNCF, with a view to ensuring that the opening up to competition proceeds smoothly (Opinion 11-A-15 of 29 September 2011 on a draft decree on passenger stations and other service infrastructures of the rail network and Opinion 11-A-16 of 29 September 2011 on the proposed separation of the accounts of the passenger station activity within SNCF).

The prospects of this opening up to competition have prompted the sector to prepare, by undergoing comprehensive modernisation. The Autorité accompanied this reform process, regularly being requested by the Government to provide information on the competitive impact of the draft law and its implementing decrees (Opinion 13-A-14 of 4 October 2013 concerning the draft law on railway reform, Opinion 15-A-01 of 6 January 2015 concerning the draft decrees drawn up for the application of the law on railway reform). Many of the recommendations made were taken into account in the law of 4 August 2014 on railway reform.

At the regional level, the opening up of regional express trains (TER) is also underway. The Southern Region was the first region in France to open its rail network to competition. For the occasion, the President of the region declared: “This expansion of the offering will lead to more journeys and therefore more revenue. It’s a virtuous circle!” (Press Release Région Sud, 25 October 2021).