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Lionel Lesur advises domestic and international companies from a broad range of industries, as well as investment funds and top managers, in matters involving corporate and competition/distribution law. Lionel has experience in the negotiation of private mergers and acquisitions, leveraged buyouts (including management packages and long-term incentive plans), and complex commercial contracts. He has in-depth experience with European and French competition law, including international merger control and antitrust proceedings. Lionel also regularly advises clients in relation to distribution strategies and compliance programs. Read Lionel Lesur's full bio.

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 10 May 2017, the European Commission published its final report on the e-commerce sector inquiry. The report is divided into two sections, covering e-commerce issues in relation to consumer goods and digital content. It also identifies business practices that might restrict competition and limit consumer choice. It would be advisable for e-commerce businesses to review their commercial practices and revise them as necessary in light of the Commission’s stated aim of targeting e-commerce business practices that may negatively impact the functioning of the Digital Single Market.

Read the full article. 

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.

Read the full article.

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

Financial regulatory authorities such as the US Security and Exchange Commission (SEC) and the French Autorité des marchés financiers frequently impose on companies that are listed on a stock exchange the obligation to disclose key information to investors to help them make informed investment decisions.

The difficulties for companies lie principally in the nature of the information to be disclosed, the timing of the disclosure, and the balance of the obligation towards financial regulatory authorities on one hand, and competition authorities on the other.

Read the full article here.

In May, the Federal Trade Commission (FTC) required Hikma Pharmaceuticals PLC to divest its 23 percent interest in Unimark Remedies, Ltd. and its US marketing rights to a generic drug under manufacture by Unimark as a condition to allowing Hikma to complete its acquisition of Roxane Laboratories. The FTC was concerned that Hikma’s continued holding of a 23 percent interest in Unimark after consummation of its proposed acquisition of Roxane would create the incentive and ability for Hikma to eliminate future competition between Roxane and Hikma/Unimark in the sale of generic flecainide tablets (a drug used to treat abnormally fast heart rhythms) in the United States.

The FTC’s divestiture requirement was unusual but not unprecedented. The Horizontal Merger Guidelines identify three theories of competitive harm associated with an acquisition or holding of a small but significant minority interest in a competitor.

  1. Minority ownership, and any associated rights, such as veto rights over the competing firm’s budget or strategic decisions, or representation on its board of directors, may allow the shareholder to forestall, delay or otherwise hamper the competing firm’s further development or marketing of competitive products
  2. The holder of a minority interest in a competing firm has diminished incentives to compete aggressively with the competitor firm because the holder obtains an economic benefit from the success of the competing firm through its partial ownership of that competitor.
  3. The holder of a minority interest in a competing firm may have access to non-public, competitively sensitive information of the competing firm, and thus may be better able to coordinate its business decisions—such as pricing, output, or research and development efforts—with those of the competing firm, thus diminishing competition.

These theories of potential antitrust harm from minority interest acquisitions are not unique to the United States; other competition agencies, including the European Union’s competition directorate, accept and apply these theories when considering the competitive impact of a firm’s actual or proposed partial ownership interest in a competitor. However, the United States applies a significantly lower threshold than the European Union (and other competition agencies) for the pre-acquisition notification of an entity’s acquisition of a minority, non-controlling interest in another firm.

Read the full article here.

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

As a general proposition, when the validity of a European Commission antitrust decision is challenged before the General Court of the European Union (GCEU), the procedure is one of judicial review, not a retrial on the merits (although the GCEU does have special jurisdiction to increase or reduce the amount of any fine). Thus there are only three possible outcomes: annulment of the Commission’s decision; variation in the amount of any fine, upwards or downwards; or rejection of the challenge altogether.

In the case of annulment, Article 266 of the Treaty on the Functioning of the European Union requires that the Commission “take the necessary measures to comply with the judgment” of the GCEU. Provided that the limitation period has not expired, the Commission may take a new decision on the case, taking care to avoid the illegalities identified by the GCEU in respect of the first decision. The new decision can be different from the first decision, as illustrated by the recent judgments in Mitsubishi Electric and Toshiba, but it can also be substantially the same, as illustrated by the recent judgment in Éditions Odile Jacob.

The Mitsubishi Electric and Toshiba cases arose out of the gas insulated switchgear cartel. Mitsubishi Electric and Toshiba were fined for their participation in the cartel. The companies challenged the Commission’s decision imposing the fines, and the GCEU annulled the fines imposed individually on Mitsubishi Electric and Toshiba on the ground that the Commission had infringed the principle of equal treatment by choosing, when calculating the fine, a reference year for Mitsubishi Electric and Toshiba which was different from that chosen for the European participants in the infringement.

Following the annulment, the Commission addressed a letter of facts to Mitsubishi Electric and Toshiba informing them of its intention to adopt a new decision remedying the unequal treatment criticised by the GCEU. Mitsubishi Electric and Toshiba submitted comments on the Commission’s letter of facts and had meetings with the Commission team responsible for the case. Subsequently the Commission adopted a new decision imposing lower individual fines on Mitsubishi Electric and Toshiba than in the first decision.

Continue Reading Recent Judgments Illustrate How the European Commission Can Correct Its Errors Post-Annulment

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

McDermott has published an EU Competition Annual Review for 2015. This 87 page booklet will help General Counsel and their teams focus on the most essential EU competition updates for 2015. Beyond being used to understand recent developments, this booklet is a great reference when dealing with complex issues of EU competition law.

Read the full Annual Review here.