In the current inflationary crisis facing the French economy, competition is an effective lever for boosting consumer purchasing power.
The mobilisation of competition policy, in particular through the fight against anticompetitive practices, as well as merger control, can help to protect consumers by preserving the competitive spirit and promoting better prices.
The French public has fully understood that competition is a daily reality, and makes use of it whenever it can, comparing products, prices and services and having no qualms about changing brands to enjoy more attractive offers.
Inflationary periods can affect price clarity and lead to a deterioration in competition. Faced with a sharp rise in the cost of raw materials and a generalised increase in prices, certain players may be tempted to take advantage of the situation (windfall effect). This opportunistic anticompetitive behaviour amplifies price rises and encourages the “spiral effects” characteristic of inflationary periods. For example, a monopoly or oligopoly may be more inclined to use its market power to increase or maintain its rents. Or companies may decide to form a cartel to pass on price rises to their customers in a concerted manner.
This particular context calls for heightened vigilance which is reflected in closer European cooperation between national competition authorities and increased monitoring of the behaviour of economic stakeholders on national territory (dialogue with the stakeholders, economic studies, sector-specific inquiries, dawn raids, processing and cross-checking of clues from different sources).
In this respect, the Autorité would like to draw attention to the existence of a box to report an anticompetitive practice on its website, and to the forthcoming opening of a dedicated space for whistleblowers. The French Directorate General for Competition Policy, Consumer Affairs and Fraud Control (Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes, DGCCRF) is also heavily involved, providing a single point of contact for reporting pricing anomalies (DGCCRF press release, 6 July 2022).
While the main mission of competition policy is not to fight inflation, its use at different levels can help to combat inflation and protect consumers through its influence on price levels.
By dismantling cartels, sanctioning agreements between distributors and suppliers and punishing abuses of a dominant position, the Autorité helps to restore purchasing power to consumers.
The fight against anticompetitive practices is therefore of fundamental importance. In this respect, national and European Union law provide for severe penalties, with fines capped at 10% of the worldwide turnover of the group to which the company belongs. Over the past ten years, the Autorité has handed down almost 7.1 billion euros in fines (cumulative figure for 2013‑2022), intervening in all sectors of the economy, including telephony, healthcare and transport. Consumer goods are the subject of particular vigilance on the part of the Autorité, with the dismantling of numerous large-scale cartels (hygiene and cleaning products, compotes, dairy products, ham and cold meats, industrial sandwiches, washing powder, flour, etc.).
10%
This is the upper limit on fines provided for under national and European union law to fight anticompetitive practices.
While competition policy makes it possible to sanction anticompetitive behaviour ex post, it can also act ex ante on market structure, by controlling takeovers and mergers above a certain size. A merger between two companies can harm competition by strengthening their market power. In some cases, changes in the market configuration can imply significant risks for consumers, leading to higher prices, lower quality services, less innovation and therefore less choice, etc.
This upstream control of market structures is essential, as increasing market concentration can fuel inflationary dynamics, adding to cost shocks from the supply chain, energy prices or labour market tensions. The European Central Bank itself has highlighted the risk of excessive profits fuelling an inflationary spiral1.
When transactions are likely to excessively reduce competition, the Autorité systematically makes its authorisation conditional on the implementation of commitments designed to remedy the situation. It does not hesitate to prohibit the operation when conditions require it.
An empirical study of a large sample of cartels showed that the price rises resulting from these practices averaged nearly 14% in Europe2.
In addition to its inflationary effect on prices, a cartel also limits product choice and quality. In France, the dismantling of cartels in the historical monument restoration and road signage sectors had an immediate impact on the local and regional public authorities concerned, with prices falling by 20-25% as soon as the cartels came to an end.
The Autorité also plays a full role in informing the government and parliament during the development and implementation of public policies, and in promoting the principles of competition for the benefit of consumers.
As part of its advisory remit, it issues opinions on draft legislation envisaged by the policymakers, but can also conduct sector-specific inquiries on its own initiative. Some of these may lead it to identify untapped growth potential or malfunctions and to propose reforms, sometimes with a direct impact on French purchasing power (liberalisation of the coach market, recommendations concerning the hearing aid market, etc.).
For example, in 2012, the Autorité recommended the gradual and controlled lifting of the manufacturers’ monopoly on visible spare parts to bring down the price of these parts while ensuring the more efficient operation of the sector (Opinion 12-A-21 of 8 October 2012).
Its recommendations gained ground, eventually convincing the government to initiate reform. Since 1 January 20233, garages and body shops have no longer been obliged to buy headlights, body parts, mirrors, windows and windscreens from the manufacturers. This opening up to competition should lower motorists’ bills in more ways than one, since according to Mathieu Séguran, general delegate of the French Motor Distribution Federation (Fédération de la distribution automobile), “spare parts that are not made by manufacturers can be between 15% and 30% cheaper on average”4.
Another positive effect for consumers is that lower costs for spare parts could have an impact on the financial situation of insurance companies, thus lowering insurance premiums.
The Autorité ‘s advisory missions may also lead it to support the policymakers in developing responses to crisis situations. In February 2022, the French government referred to the Autorité, asking it to take an urgent look at the planned framework for dealing with rising electricity prices (draft decree and orders aimed at temporarily modifying the regulated access mechanism for historical nuclear electricity in order to contain the rise in regulated tariffs (TRV)).
The Autorité considered that the framework met a short-term objective justified by the unprecedented crisis in electricity prices, and recommended that control measures be stepped up to ensure that this exceptional framework would actually benefit consumers, and that consideration be given to the future implementation of more targeted measures to protect, just as effectively if not more effectively, those customers most severely exposed to the crisis, including the most vulnerable groups, such as the elderly, low-income households and electricity-intensive businesses (Opinion 22-A-03 of 25 February 2022).
ONLINE SALES,
A SALES CHANNEL THAT
ENCOURAGES COMPETITION
In everyday life, comparing, consulting and trying to find the best quality/price ratio have quite simply become common ways for consumers to gain purchasing power.
The emergence of players operating on the basis of a new business model (pure players), the emergence of new tools (marketplaces, price comparison) and, more recently, the health crisis have led to an explosion in ecommerce sales. This alternative channel to physical store sales offers consumers a wide choice of products, often at lower prices thanks to lower distribution costs.
The Autorité has long been committed to preventing unfair obstacles to online sales, and regularly fines practices aimed at restricting such commerce. Its action in this area concerns all kinds of products, such as spectacle frames (Chanel, Logo, Luxottica and LVMH) video surveillance devices (Mobotix/2021), tea (Dammann Frères/2020), bicycles (Bikeurope/2019), outdoor power equipment (Stihl/2018), and hifi and home cinema equipment (Bang&Olufsen/2012).
The Autorité has long been involved in the subject of everyday mobility, which is very important to the French population. In particular, it was behind the procompetitive coach liberalisation reform in 2015. At no cost to the taxpayer, this reform has led to the broadening of the offer by providing a new, practical and economical mode of transport for customers, particularly the young and the elderly, who previously did not always have the resources or opportunity to use other existing modes of transport.
Aware of the stakes in this area, the Autorité recently decided to launch two major sector-specific inquiries concerning land transport on the one hand, and charging stations for electric vehicles on the other:
At the end of 2022, it started proceedings ex officio to review its previous work and adapt or propose new recommendations better suited to current situations and future developments in the sector, particularly in terms of intermodality and sustainable development, thus contributing to the work underway on the link between competition law and environmental concerns (Press release, 19 December 2022).
In February 2023, it announced the launch of another sector-specific inquiry, this time on electromobility, to carry out an overall analysis of the operation of competition in the electric vehicle charging infrastructure sector. Its opinion will take effect in a sector in the process of being structured, with business models that are not yet stabilised, and in which a large number of players are involved (charging operators, mobility operators and interoperability platforms (Press release, 17 February 2023).
President of the Consumer Association
UFC-Que Choisir
UFC-Que Choisir, seeking to ensure free and fair competition for the benefit of consumers, had the opportunity to request the Autorité de la concurrence to issue opinions on the functioning of competition in certain sectors and to make recommendations: loan insurance, propane, spare parts for car bodywork, self-medication, etc.
The Autorité’s recommendations have led to certain significant legislative reforms (termination at any time for loan insurance, partial liberalisation for auto parts, etc.). However for certain sectors (automedication, propane), the competitive landscape did not drastically improved and a new positioning from the Autorité would be welcome. Likewise, the biases in application of the Omnibus Directive on comparison prices have competitive issues that would be worthy of an intervention by the Autorité.
UFC-Que Choisir has never ceased to point out that the disappointing track record of group actions in France was notably linked to excessive limitation of compensable damages, the individual economic loss being, in particular, difficult to quantify within the framework of anticompetitive practices, and to call for an extension to all the damages suffered, as provided for in the bill discussed in Parliament.
It’s a step forward, but the question of the time limit for the procedure remains, with the issue of preservation of evidence. Regarding anticompetitive practices in the sector of everyday consumer products, the proof being often the receipt, it is a real subject which is not, as it stands, settled by the bill.
1/ Óscar Arce, Elke Hahn and Gerrit Koester, “How tit-for-tat inflation can make everyone poorer”, European Central Bank blog, 30 March 2023.
2/ M. Boyer, R. Kotchoni, “How much do cartels overcharge?”, Review of Industrial Organization, 47-2, 2015, pp. 119-153.
3 / Law 2021-1104 of 22 August 2021, Article 32.
4 / Le Parisien, 1 January 2023.
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