France: Competition Newsletter August 2018

Last Updated: 2 September 2018
Article by Emmanuelle van den Broucke

The Minister of Economy intervenes to authorize the takeover of William Saurin by Cofigeo without divestment of assets

For the first time since the reform of the merger control system in 2008, the Minister of Economy used his evocation power to overrule the French Competition Authority's decision and required from Cofigeo commitments intended to preserve employment.

In this case, the context is doubly unusual since the French Competition Authority was referred to for authorization after Cofigeo's effective takeover of the "ready meals" pole of the Agripole group (William Saurin, Panzani, Zapetti, Garbit, etc.) For the record, the Financière Turenne Lafayette group, which headed the Agripole group, had been placed in great difficulty following the death of its president and main shareholder revealing the falsification of the group's accounts. Following the dismantling of the group, Cofigeo asked to benefit from the concession for companies subject to insolvency proceedings. When a target is experiencing serious economic difficulties, the French Commercial Code provides for a derogation from the suspensive effect of the notification which allows the companies to complete effectively all or part of the transaction without having to wait for the French Competition Authority's authorization.

However, this derogation does not deprive the French Competition Authority from the possibility to refuse or provide conditions for the takeover a posteriori. As the new entity would become the market leader in canned ready meals, the transaction was deemed to raise competition concerns. After conducting an in-depth examination of the transaction, hearing all the parties and market players, the French Competition Authority cleared the takeover subject to conditions. In order to protect consumers from price increase risks, the French Competition Authority ordered Cofigeo to sell its brand Zapetti and a production site to a third-party operator. This type of post-transaction measure is very rare, as this is only the second time the Authority has used its power of injunction in the context of a merger authorization and has forced a divestment of assets.

Even rarer, the Minister of Economy decided to use his evocation power. Since the analysis of the merger control was taken away from him and given to the French Competition Authority in 2008, the Minister of Economy has retained the possibility to rule on the transaction in issue when it has a strategic nature, for reasons of public interest other than maintaining competition. The notion of public interest covers in particular industrial development, the competitiveness of businesses in terms of competition and the creation or maintenance of employment. For the first time, the Minister overruled the French Competition Authority's decision authorizing Cofigeo to take sole control over the companies without the divestment of assets imposed by the Authority. Cofigeo thus becomes a major player in the ready meals sector by concentrating the major brands in this sector, with very high market shares, amounting to 80% for Italian ready meals and 70% for Asian ready meals.

The Minister indicated in his statement that "the industrial strategy which includes this merger, indispensable to revitalize this sector, would have been jeopardized by the obligation to sell assets." In return for the Minister's intervention, Cofigeo is required to maintain employment in the group for at least two years. The group's other activities have been taken over by Pastacorp and a Brittany-based agricultural cooperative Cooperl.

The French Competition Authority recalls the importance of respecting the commitments undertaken by companies and fines Randstad €4.5 million for non-compliance with its commitments

The French Competition Authority imposes a joint fine on several companies of the Randstad group of €4.5 million for non-compliance with a number of commitments made mandatory by a 2009 decision of the French Competition Council.

In its 2009 decision, the French Competition Council had fined three companies of the temporary employment sector (Adecco, Manpower and VediorBis) €94.4 million for colluding in order to limit competition between their "key account" clients. In this procedure, VediorBis, now Randstad since 2009, had chosen not to contest the charges and had undertaken on its own initiative two categories of commitments designed to guarantee the training of personnel on competition law rules and regulate reports of anticompetitive practices, reduce market transparency and ensure the effective implementation of these two categories of commitments. More specifically, VediorBis had undertaken to market its eflex tool (online outsourced temporary employee management services software for key account clients) through an independent subsidiary of the group with its own personnel and a separate technical support unit (Advisio Services which became Randstad Sourceright in 2012). The marketing of these type of services implied a risk of confidential information relating to competitors being circulated and exploited.

Following investigations conducted in 2011 by the French Competition Authority's investigating services on the activity of subsidiaries of major temporary employment groups in the context of which inspections were carried out in 2013, the French Competition Authority reviewed on its own motion the compliance with the commitments undertaken by Randstad.

It then noted that only two months after the entry into force of its commitments, and despite the warning issued by the Deputy General Case handler of the French Competition Authority, VediorBis had not complied with this commitment. The French Competition Authority considered that Randstad had seriously breached the commitments which it had undertaken itself by appointing simultaneously for over one year the director of strategy and development of Group Randstad France as director of Advisio Services. It added that Randstad had only informed it of the appointment of the director of the subsidiary nine months after his assumption of duty. It also stressed that the appointment in issue fell within a context likely to increase the risk of information circulating since several executives had been transferred from Advisio Services to Randstad and that there was cross-selling of services between those offered by this subsidiary and the other subsidiaries of the group.

The French Competition Authority thus recalled that the non-compliance with commitments constitutes in itself a serious practice, especially as the companies fined had proposed the commitments at their own initiative.

The General Court of the European Union partially cancels the Commission's inspection decision owing to its purpose being too broadly defined

The General Court of the European Union recalled that the purpose of an inspection decision has to be defined in a sufficiently precise manner in relation to the evidence on which this decision is founded and consequently limited the purpose of the appealed authorizing decision.

In 2016, at the same time as a procedure opened by the Czech Competition Authority, the Czech historical rail operator (České dráhy) underwent two successive series of inspection by the European Commission owing to suspicions of abusive practices (predatory pricing) on the Prague-Ostrava route. The operator then lodged an appeal against each of these decisions contesting their legality.

Regarding the first inspection, the General Court partially accepted the operator's application for annulment on the grounds of the overly broad nature of its purpose in relation to the evidence held. The General Court confirmed that this evidence was not sufficient to extend the inspection to routes other than the Prague-Ostrava route, or to search for proof of competitive practices other than predatory pricing practices. However, the General Court validated the temporal scope of the decision in light of the elements held by the Commission.

Annulments of decisions authorizing inspections are sufficiently rare for this decision to be noted. This decision is welcome especially since competition authorities tend to define a disproportionately wide purpose for their inspections. However, and rather disappointingly, this decision once again validates the fishing expedition practice whereby a second authorizing decision can be founded validly on elements "incidentally" seized during a first inspection.

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