The restrictive, and sometimes repressive, dimension of competition law for companies is probably the one that springs spontaneously to mind for most people.
In addition to sanctions and enforcement measures, however, competition policy has a broader aim, which is to protect companies from abusive behaviour by dominant players and prevent the adverse consequences that mergers of their customers, suppliers or competitors may have for them.
The Autorité is helping to sustain economic growth and dynamism by ensuring that everyone has a chance to develop and innovate.
If consumers suffer harm as a result of anticompetitive practices, companies too can be affected, and must be protected against the consequences of any anticompetitive behaviour. Certain cartels, for example, can affect intermediate markets and lead to higher input costs (intermediate products or raw materials). In this respect, a study published by the IMF concluded that the dismantling of cartels in France would lead to a 2% increase in productivity1.
Abuses of a dominant position also illustrate the need to protect customers and partners from powerful players.
We must not forget that being in a dominant position, when it reflects the merits of the goods and services offered on the market, it is first and foremost a business success that should be welcomed. However, this special status imposes particular responsibilities, not least of which is the prohibition on abusing this position of superiority. The settled case law of the Court of Justice defines dominance as “a position of economic strength enjoyed by an undertaking which enables it to hinder the maintenance of effective competition on the relevant market by allowing it to behave to an appreciable extent independently of its competitors and customers and ultimately of consumers“2.
2%
2022 was a record year in terms of the number of decisions sanctioning abuses of dominant positions, with six decisions.
Among the types of behaviour sanctioned in 2022 was the abusive use of resources that could not be reproduced by competitors.
In February 2022, EDF was fined 300 million euros for using files and resources from its former status as a historical monopoly to develop the marketing of gas and energy services (Decision 22-D-06 of 22 February 2022).
In November 2022, Audiens Santé Prévoyance was also fined 800,000 euros for using the data available to it in its capacity as a manager of collective provident and complementary health insurance contracts for entertainment workers to facilitate the marketing of the offer of payroll management services for entertainment workers from its subsidiary Movinmotion (Decision 22-D-20 of 15 November 2022).
Gaz de Bordeaux relied on human and technical resources inherited from its historic monopoly and linked to regulated sale tariffs (TRV), which were not replicable by its competitors and which constituted a competitive advantage, to implement a strategy aimed, in the context of the opening up of retail gas supply markets to competition, to preserving its position on these markets by directing almost all of its new customers to its market offerings. It was thus sanctioned in October 2022, 1 million euros (Decision 22-D-17 of 11 October 2022).
These cases illustrate the temptation for certain operators who enjoy a monopoly or quasi-monopoly due to regulatory or legislative provisions to use the resources at their disposal to expand into related markets, if necessary by promoting the activities of their own subsidiaries.
In October 2022, Essilor was fined 81 million euros for implementing a discriminatory commercial policy aimed at hindering the development of the online sales of corrective lenses in France. The sanctioned behaviours involved restrictions on online sales operators in terms of deliveries, communication and guarantees. While electronic commerce sites are highly competitive in terms of price and respond to the policymakers’ desire to encourage a form of marketing that is conducive to lower prices, Essilor’s practices affected their ability to compete, thereby slowing the growth of the market (Decision 22-D-16 of 6 October 2022).
Merger control has a crucial impact on business life.
The purpose of such control is to ensure that the planned merger will not cause excessive harm to competition that is likely to have detrimental consequences not only for end consumers (drying up of competition, with the risk of price rises in particular), but also for companies operating upstream or downstream of the new entity, or active in related markets. When the risks are proven, the completion of the planned transaction may be subject to conditions, i.e. remedies, which most often take the form of commitments by the parties.
This was the approach adopted in 2022, for example, during the review of the acquisition by Française des Jeux of Aleda, a company specialising in global cash register solutions for convenience stores, particularly tobacconists and newsagents. Behavioural remedies were deemed necessary to avoid the risk of the new entity implementing several strategies which would have led to the foreclosure of Aleda’s competitors (strategies involving the subordination of approval, coupled offers, technological bundling and damage to interoperability) (Decision 22-DCC-219 of 14 November 2022).
In some cases, the search for appropriate remedies to outweigh the negative effects of the merger is unsuccessful, and the scale of the commitments required would render the planned transaction devoid of substance. As a result, in the TF1/M6 case, the market power of the two players combined led to a strong risk of higher prices for advertising space, to the detriment of advertisers, as well as a risk of higher remuneration likely to be demanded by the new entity from Internet service providers, and the commitments proposed by the parties did not appear sufficient to remedy the problems identified. Bouygues finally decided to withdraw its clearance request on 16 September 2022 (see Press release of 16 September 2022).
APPLICATION OF THE FAILING
FIRM EXCEPTION:
PROTECTIVE PRAGMATISM
Despite the competitive risks it had identified, the Autorité authorised the takeover of Conforama by the But Group, applying for the first time the “failing firm” exception.
This special ability has not been widely used in Europe. The Autorité had never applied this option since it received the power to control mergers in 2009, given the very strict nature of the assessment criteria. What is it about? In exceptional cases, a transaction which harms competition may, nevertheless, be cleared when the acquired company is failing, there is no better credible potential acquirer from the point of view of the competitive analysis and the harm to competition would be no less serious if the company had disappeared.
In this case, the Autorité conducted its examination with pragmatism, as the takeover prevented the disappearance of part of the offer in an already weakened market. Moreover, although this is not part of the competitive analysis criteria, this decision ultimately not only prevented the loss of productive assets on the market but also protected and saved jobs.
Decision-making practice in other countries tends to show that competition authorities make greater use of this mechanism in times of crisis.
To keep pace with market realities and changes in the business world, the control system is adding new, complementary instruments for ex ante intervention. The new application of Article 22 of European Merger Regulation 139/2004 and the entry into force of the measures of the European Digital Markets Act (DMA) broaden the scope of intervention and, in particular, protect new entrants and SMEs.
The scope of merger control will change significantly, thanks to a renewed and broader approach to the application of Article 22. The use of this article, which enables national authorities to ask the European Commission to examine certain transactions “below the thresholds”, provides in fact, without affecting current legislation, the necessary flexibility to target problematic mergers which would otherwise have escaped scrutiny.
This new approach to Article 22 gives full scope to this mechanism and is a response to the requests expressed by several stakeholders, including the French Autorité to mobilise the merger control tool at the European level in order to more effectively combat predatory or consolidating acquisitions. These acquisitions consist of absorbing a company that is likely to become a significant competitor, or integrating young start-ups in order to strengthen a position in the dominated market or related markets. In particular, the use of this tool will improve the control of acquisitions of high-value companies in fields such as digital innovation, healthcare and biotech.
A first case in point arose in 2022, when the Autorité de la concurrence submitted a request to the European Commission concerning the takeover of Grail, an innovative company developing a blood based cancer screening test based on genomic sequencing technology, by Illumina, a powerful American healthcare company (Press release of 13 July 2022).
The Autorité welcomed the ruling3 handed down on 13 July 2022 by the General Court of the European Union, which upheld the Commission’s decision to accept the referral request made by the Autorité de la concurrence and joined by several Member States of the European Union and the European Economic Area (Belgium, Greece, Iceland, Netherlands, Norway). The proceedings are pending before the European Court of Justice.
It is here! The Digital Markets Act, which imposes rules on digital platforms designated as gatekeepers, came into force on 1 November 2022 and into effect on 2 May 2023. This regulation aims to prevent gatekeepers from imposing unfair conditions on companies and endusers and guarantee the opening up of digital markets. The new legislation will thus limit barriers to entry to the markets concerned so that new entrants can gain access. It creates a more favourable framework for innovation, growth and competitiveness by facilitating the expansion of smaller platforms, small and medium sized enterprises and startups (Questions & Answers, Europa 31 October 2022).
Large platforms will be subject to a precise list of obligations and prohibitions, and these rules will help to create a more favourable framework for the growth of smaller companies wanting to compete with gatekeepers on the merits of their products and services. The following are prohibited in particular:
requiring application developers to use some of the gatekeeper’s services (such as payment systems or identity providers) in order to appear in the gatekeeper’s application shops.
While the Commission alone is empowered to enforce the rules, it will work closely with the authorities of EU Member States. Penalties can reach up to 10% of a company’s global turnover, and up to 20% in the event of repeated infringements. In the event of infringements considered to be systematic, the Commission may also impose the behavioural or structural remedies necessary to guarantee the effectiveness of the obligations, including a ban on new acquisitions.
The DMA and competition law will be two complementary and mutually reinforcing tools. Competition law will apply to operators and practices not covered by the DMA and will guide future developments of this text. Symmetrically, the implementation of the DMA will improve the Autorité’s ability to control mergers by allowing the competition authorities to be aware of all the acquisition transactions of large platforms, which will have to inform the European Commission, regardless of thresholds.
Lastly, the Digital Markets Act provides for the Commission to open market investigations aimed at ensuring that the obligations laid down in the Act are kept up to date with the constant evolution of the markets.
With its entry into force, the regulation begins a crucial implementation phase: potential gatekeepers will need to have notified the Commission of their essential platform services by 3 July 2023, if they meet the thresholds set by the Regulation. If they are designated as gatekeepers, they will have six months, until 6 March 2024, to comply with the requirements of the Digital Markets Act. The Commission is now working on a regulation containing provisions on the procedural aspects of notification.
1/ F. Moreau, L. Panon, “Macroeconomic effects of market structure distortions – Evidence from French cartels”, IMF Working Paper, May 2022.
2/ Judgment of the Court of Justice, 14 February 1978, United Brands and United Brands Continentaal BV/Commission, 27/76, EU:C:1978:22, pt. 65; judgment of the Cour d’appel de Paris (Paris Court of Appeal) of 21 December 2017, TDF, 16/15499, pt. 59.
3/ Aff. T-227/21.
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