On October 19, 2017, the French Competition Authority (the “FCA”) imposed a EUR 302 million fine on the three leading companies in the PVC and linoleum floor coverings sector; Forbo, Gerflor and Tarkett, as well as the industry’s trade association, SFEC (Syndicat Français des Enducteurs Calandreurs et Fabricants de Revêtements de Sols et Murs), for price-fixing, sharing commercially sensitive information, and signing a non-compete agreement relating to environmental performance advertising.

The FCA said the significant fine reflected the gravity of the offence and the long duration of the anticompetitive behavior, which for one company lasted 23 years.

WHAT HAPPENED

The proceedings were originally initiated by unannounced inspections carried out in the floor coverings industry in 2013 by the FCA, acting on information submitted by the DGCCRF (Directorate General for Competition Policy, Consumer Affairs and Fraud Control), which resulted in the discovery of three distinct anticompetitive practices.

Price-fixing

The FCA found that the three main manufacturers of floor coverings in France met secretly at so-called “1, 2, 3” meetings, from October 2001 to September 2011, at hotels, on the margins of official meetings of the SFEC or through dedicated telephone lines, in order to discuss minimum prices and price increases for their products. The manufacturers also entered into agreements covering a great deal of other sensitive information, such as the strategies to adopt with regard to specific customers or competitors, organization of sales activities and sampling of new products.

Confidential information exchange via the trade association

The FCA found that from 1990 until the start of the FCA’s investigations in 2013, Forbo, Gerflor and Tarkett also exchanged, in the context of official meetings of the SFEC, very precise information relating to their trading volumes, revenues per product category and business forecasts. In its decision, the FCA also raised the active role played by the SFEC, supporting companies in their conduct.

Non-compete agreement relating to environmental performance advertising

The three main manufacturers of floor coverings in France, together with the trade association, also signed a ‘non-compete’ agreement which prevented each company from advertising the individual environmental performance of its products. The FCA considered that this agreement may have acted as a disincentive for manufacturers to innovate and offer new products, earmarked by better environmental performance, compared to the products offered by their competitors.

Neither the manufacturers nor the trade association disputed the facts and all of them sought a settlement procedure. In addition, Forbo and Tarkett, leniency applicants, benefited from fine reductions corresponding to the respective dates they approached the FCA (the sooner, the higher the fine reduction), the quality of the evidence they provided and their cooperation during the investigation.

WHAT THIS MEANS

The FCA’s decision in the floor coverings cartel case has significant impact due to the total amount of the fines imposed which is (i) higher than the aggregate amount of sanctions imposed by the FCA in 2016 (i.e., EUR 202,873,000), and (ii) until now the highest fine imposed by the FCA in 2017, the FCA having imposed a EUR 100 million fine on Engie for abusing its dominant position in the gas market (Decision No. 17-D-06 of 21 March 2017) and a EUR 40 million fine on Altice and SFR for non-compliance with an agreement made during the acquisition of SFR by the Altice group (Decision No. 17-D-04 of 8 March 2017).

This decision is the first application of the new settlement procedure introduced by the Macron Law of 6 August 2015. This new procedure replaced the previous “no challenge” procedure (“non-contestation des griefs”) pursuant to which companies could only negotiate a percentage reduction without knowing the original amount of the fine. Under the new procedure, the companies’ discussion with the FCA will focus directly on the minimum and maximum amount of the fine and will no longer be limited to a reduction rate applicable to a hypothetical amount of the fine.

This is also the first decision in France where the new settlement procedure and the leniency procedure have been cumulated.

Finally, the FCA raised the very serious nature of the infringement, which lasted for a long time and involved the majority of the market players (between 65% and 85% of the market from 2001 until 2012). This decision sends once again a clear message to companies that cartels and exchanges of competitively sensitive information remain one of FCA’s main priorities. Therefore, discussions in the context of trade association meetings should be approached carefully and in accordance with prior legal advice.

On 7 September 2017, the European Court of Justice issued a decision (Decision) on the interpretation of the European Union Merger Regulation (EUMR). The Decision clarifies the conditions under which the EUMR applies to the setting-up of joint venture companies.

WHAT HAPPENED:

  • 3(4) of the EUMR stipulates that the “creation” of joint ventures requires a notification only if the joint venture “performs the functions of an autonomous economic entity” (Full-Function JV).
  • Companies with management dedicated to its day-to-day operations, as well as access to sufficient resources including staff, finance and assets usually qualify as Full-Function JV. If the joint venture has only one specific function for the parent companies (e.g. supplying input products or services), and has no or only very limited own resources, it is unlikely to be considered a Full-Function JV.
  • There has been considerable uncertainty whether Art. 3(4) EUMR applies only to the creation of a new company (greenfield operation), or whether it also applies if joint control is acquired over an existing company.
  • The European Commission significantly contributed to this uncertainty by repeatedly taking inconsistent and contradictory positions. In a fairly unusually move, the ECJ’s Advocate General chastised the European Commission, calling it “extremely regrettable” that the European Commission did notcommit to a clear and uniform approach and then apply it consistently”.
  • The ECJ’s Decision comes at the request of an Austrian court. The Austrian court had to decide whether the acquisition of joint control over a small asphalt plant–which does not qualify as Full-Function JV–requires notification and clearance under the EUMR by the European Commission.
  • The ECJ has now held that the change of sole control to joint control only requires a notification under the EUMR if the newly created joint venture qualifies as a Full-Function JV.

WHAT THIS MEANS:

  • The Decision brings much-awaited clarity to a key issue of European Union merger control.
  • If two or more companies create a joint venture company, it will be subject to the EUMR only if it qualifies as s Full-Function JV. This applies both to greenfield operations, where a new company is created, and the change from sole to joint control over an existing company. Whether a notification to the European Commission is actually required, will depend on whether the jurisdictional turnover thresholds under the EUMR are met.
  • The creation of joint ventures which do not qualify as Full-Function JV does not require notification to and clearance by the European Commission. However, these joint ventures may still be subject to merger control in one or several EU Member States.
  • The European Commission required and accepted in the past the notification of transactions which involved the creation of joint ventures not qualifying as Full-Function JV. Following today’s decision by the ECJ, it appears that the European Commission did not have jurisdiction. An interesting question to be explored in the coming weeks and months is therefore whether the Decision somehow affects the legality of these transactions.

On 10 March 2017, France finally implemented into French law the EU Directive 2014/104 of 26 November 2014 on antitrust damages actions. The implementation provisions faithfully transpose the Directive, but some concepts still, however, need to be clarified by courts at the EU and French levels.

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It is difficult for General Counsel and their teams to monitor all new developments adequately. With the growth of the Internet and the daily updates to EU competition rules, everyone receives and has access to masses of information, but it is difficult to select that which is really relevant to one’s business.

McDermott’s EU Competition team across Brussels, France, Germany and Italy has authored the EU Competition Annual Review 2016 to help General Counsel and their teams to focus on the essential updates that they should be aware of.

This Special Report summarizes recent developments in EU competition rules during the year 2016 where several new regulations, notices and guidelines were issued by the European Commission and many interesting cases were decided by the General Court and the EU Court of Justice.

All these new rules and judicial decisions can be relevant for international companies operating in the EU. Indeed, in addition to the daily update, this booklet provides an overview of the main recent developments in EU competition rules and can be kept as a ready reference when dealing with complex issues of EU competition law.

Read the full report.

On 11 November 2016, the Italian Competition Authority (the Authority) fined eight modelling agencies (B.M. S.r.l. – Brave, D’management Group S.r.l., Elite Model Management S.r.l., Enjoy S.r.l., Major Model Management S.r.l., Next Italy S.r.l., Why Not S.r.l. and Women Models S.p.a.) and their trade association (Assem) of € 4.5 million for alleged price collusion. According to the Authority, the modelling agencies would have agreed on the applicable prices on the market with the aim of avoiding any form of competition. In particular, the alleged price collusion would have concerned all the components of the prices applied to the major maisons and other clients (e.g., fees for models, wages for the modelling agencies and other additional costs). Furthermore, a practical role would have been played by the trade association, Assem, where the modelling agencies had held frequent meetings to develop the alleged concerted practice.

In calculating the fine, the Authority took into account that the alleged conduct took place between 2007 and 2015. Moreover, the Authority granted to Img Italy S.r.l. the full immunity from fines given that it revealed the existence of the alleged conduct. Regarding the European scenario, on 29 September 2016, the French Competition Authority fined the main trade association, SYNAM and 37 modelling agencies of €2.38 million for price fixing. In addition, there is a pending investigation of the Competition and Market Authority into alleged anti-competitive conducts in the model management services in United Kingdom.

Gabriele Giunta contributed to this blog post.

For the first time ever, on 8 November 2016 the French Competition Authority (FCA) sanctioned companies for implementing a transaction that had been notified to the FCA but not yet received a clearance decision, behaviour commonly known as “gun-jumping”. Continue Reading French Competition Authority Imposes Its First Ever Fine for Gun-Jumping

Since entry into force on 1 January 2016 of the French provisions transposing the 2013 EU directive regulating mediation of consumer disputes (Directive 2013/11/EU of 21 May 2013 on alternative dispute resolution for consumer disputes (“ADR”)), and the operability of the online platform provided by the 2013 EU regulation on online dispute resolution for consumer disputes, (“ODR”), France-based traders must comply with new rules regarding in-store and online sales. Essentially, France-based traders must inform consumers of the possibility to have recourse to mediation.

Generally speaking, ADR rules aim at ensuring that EU consumers have access to ADR entities when resolving their contractual disputes with EU-based traders in order to reduce the number of disputes brought before courts and, hence, favor a faster resolution of “simple” disputes. Access to ADR entities must be ensured no matter what product or service is purchased, whether the product or service was purchased online or offline, and whether the trader is established in the consumer’s EU Member State or in another EU Member State.

On 15 February 2016, the EU Commission published on the ODR platform a list of French ADR entities, so-called Médiateurs, that meet the standards of the ADR Directive and are registered with the French ad hoc authority (Commission d’évaluation et de contrôle de la médiation de la consommation).

The ODR platform allows consumers, and in some jurisdictions (Germany, Belgium, Luxembourg and Poland) traders too, to file a claim online. The ODR platform enables a connection between the trader and the consumer, who may then decide to submit the dispute to aMédiateur agreed upon with the trader.

Continue Reading Mediation: New Obligations for France-based Traders

Since the entry into force on 1 October 2014 of the provisions of the “Hamon” law of 17 March 2014, which introduced class actions into French law in relation to consumer and competition law matters, only six class actions have been brought.

The first action was filed on the date the new law came into effect by the consumer association UFC – Que Choisir against Foncia, a real estate group, to obtain compensation for the service charges levied by Foncia. The most recent class actions seem to have been brought in May 2015 by the consumer association Familles Rurales: one against SFR, a network operator that allegedly misled consumers as to the geographic coverage of its 4G network, and one very limited action against a campground operator who forced campervan owners to buy new ones after 10 years if they wanted to keep their plots.

Class actions are clearly not as popular as had been hoped, at least not yet. Indeed, of the (only) six procedures brought before the French Courts, four were brought around one month after the law came into effect, and all relate to consumer matters. One action led to a €2 million settlement intended to compensate the damages suffered by 100,000 consumers who had been required to pay excessive charges for elevator tele-surveillance.

The limited attractiveness of class actions is probably due to the strict conditions for bringing an action under the Hamon law.

Continue Reading French Class Action Law Has Less Impact Than Expected

By its judgment of 28 January 2016 (C-514/14 P, Editions Odile Jacob SAS v Commission), the European Court of Justice (Court) upheld the General Court of the European Union’s (GCEU) ruling with respect to each of the grounds raised by Editions Odile Jacob (Odile Jacob) thereby dismissing Odile Jacob’s appeal.

The case concerned the sale, in 2002, of Vivendi Universal’s subsidiary Vivendi Universal Publishing (VUP) to the Lagardère Group (Lagardère).

The European Commission (Commission) authorized the concentration in 2004, subject to undertakings by Lagardère. Specifically, Lagardère undertook to divest a significant amount of VUP assets. Lagardère thus approached several undertakings potentially interested in purchasing those assets. Odile Jacob was one of the undertakings that expressed an interest in the acquisition of the divested assets. However, Lagardère accepted the purchase offer made by Wendel Investissement (Wendel) whom the Commission approved as a suitable purchaser. Odile Jacob challenged the Commission’s decision authorizing the concentration and the decision approving Wendel as a suitable purchaser. In 2010, the GCEU confirmed the decision authorizing the concentration but annulled the decision approving Wendel as a suitable purchaser on the ground that it had been adopted on the basis of a report drawn up by a trustee that was not deemed independent. This judgment was upheld by the Court in 2012.

Following the GCEU’s judgment, Lagardère made a further request to the Commission for the approval of Wendel by proposing a new trustee who was subsequently approved by the Commission, in 2011, with effect from 2004. Odile Jacob brought another action for annulment of this approval decision which was dismissed by the GCEU by judgment of 5 September 2014 (T-471/11).

In its judgment of 28 January 2016, the Court upheld the September 2014 judgment of the GCEU.

First, the Court considered that the GCEU correctly ruled that, in order to give full effect to the judgments of 2010, the Commission was only required to approve a new trustee responsible for drawing up a new report evaluating Wendel’s candidature and to assess this candidature on the basis of this new report. In this respect, the Court found that the Commission neither had to revoke the decision authorizing the concentration nor to repeat the whole procedure from the date on which Lagardère appointed the first trustee.

Second, the Court ruled that the GCEU had not erred in law by declaring that the 2011 Commission decision, which approved again Wendel as an acquirer of VUP’s assets, could be retroactive. Indeed, the Court found that the Commission could adopt retroactive decisions where this is required by the intended aim and where the principle of protection of the legitimate expectations of the parties is properly observed. Here, the Court confirmed that these conditions had been met in the case: the new retroactive approval decision was intended inter alia to fill the legal vacuum created by the annulment of the first approval decision. In that regard, the Court found that Odile Jacob failed to demonstrate that there were no grounds that could justify such retroactive effect.

Finally, the Court rejected Odile Jacob’s argument that the Commission failed to observe the condition that Wendel had to be independent of Lagardère. Indeed, the Court agreed with the GCEU that the presence of the same person in either the managerial or supervisory boards of both companies was not such as to establish a relationship of dependency between Wendel and Lagardère. In addition, the Court found that the Commission had been able to supervise the asset sale procedure on the basis of the regular progress reports that the trustee was required to submit.

The recent investigations into two pharmaceutical companies active in the ophthalmic drugs market in Italy and France serve as a reminder of the cooperation that takes place between national competition authorities. International groups should therefore take into account all the jurisdictions where they have a presence or do business when developing their antitrust audit and compliance programmes.

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