This article first appeared in the second edition of The International Comparative Legal Guide to: Cartels & Leniency; published by Global Legal Group Ltd, London www.iclg.co.uk
1 The Legislative Framework of the Cartel Prohibition
1.1 What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal?
Anticompetitive agreements and practices are prohibited by Article L. 420-1 of the French Commercial Code (the "Code"). It applies to any undertakings, in the form of either companies or individuals, and may lead to civil/administrative and, in certain cases, to criminal sanctions (see the answer to question 3.2).
1.2 What are the specific substantive provisions for the cartel prohibition?
The cartel prohibition applies to any concerted practices, agreements and alliances, express or tacit, which have as their object or may have as their effect to prevent, restrict or distort competition in a market, and in particular with the aim to:
- limit access to markets by, or competition from, other firms;
- interfere with price setting by market forces, by artificially increasing or decreasing prices;
- limit or control production, markets, investment or technical development; or
- share markets or sources of supply.
However, under the so-called "de minimis" rules, the French competition authority may decide not to instruct cases concerning agreements or practices:
- between actual or potential competitors ("horizontal agreements") whose combined market share does not exceed 10 per cent; or
- between companies that are not actual or potential competitors ("vertical agreements") whose respective market shares do not exceed 15 per cent.
1.3 Who enforces the cartel prohibition?
The competition authority in charge of generally enforcing anticartel measures is now the French Competition Authority (Autorité de la concurrence) (the "Competition Authority").
The law on the modernisation of the economy (the "LME"), enacted on 4 August 2008 and implemented by an ordinance of 13 November 2008, creates the Competition Authority to replace the Competition Council (Conseil de la Concurrence) (the "Council"), an independent authority set up in 1986.
Investigations may be carried out either by the Competition Authority or by the Directorate General for Competition, Consumer Policy and Repression of Fraud (Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes) ("DGCCRF"), an administrative agency under the authority of the Ministry of Economy.
The Competition Authority has wider means and powers than the Council, in particular as regards investigations, while the Minister of Economy is now entitled to settle and order measures as to socalled "micro anticompetitive practices" (see the answer to question 6.1).
The members of the Competition Authority have not been appointed yet and the Competition Authority is thus not yet active at the time of drafting this article. The first meeting is planned to be held at the very beginning of January 2009.
1.4 What are the basic procedural steps between the opening of an investigation and the imposition of sanctions?
The Competition Authority may be in charge of a case following either a referral from the Minister of Economy, or a complaint from a company or even acting ex officio, at the instigation of the head reporting officer (rapporteur général).
Pursuant to Article L. 463-2 of the Code, if it results from the investigation that the practices at stake may be anticompetitive, the head reporting officer issues a statement of objections, by letter with acknowledgment of receipt, to the complainant, the ministers concerned by the affected sector of activity, the concerned parties and the State Commissioner (Commissaire du Gouvernement). The notified parties can then consult the file and present any observations within two months.
An official report is then sent to all notified parties, along with the documents which the head reporting officer relies on and the observations, if any, made by said parties. Each party can in turn submit its observations in reply within two months. Finally, the matter is brought before the Competition Authority which will issue:
- a decision declaring that there are no grounds for prosecution;
- a decision adjourning the proceedings in case another national competition authority is dealing with the same facts; or
- a decision pronouncing on the anticompetitive nature of the facts and possibly imposing a sanction.
1.5 Are there any sector-specific offences or exemptions?
Article L. 420-4 of the Code provides for a specific exemption in the agricultural sector. Practices consisting for undertakings in organising agricultural or agriculturally-based products under a single trademark or trade name, setting common production volumes and quality as well as common business policy, including agreements on a common sale price, may be exempted, provided they (i) ensure economic progress, (ii) provide users a fair share in the resulting profit, (iii) do not allow the undertakings involved to eliminate competition for a substantial part of the products concerned, and (iv) are indispensable to achieve said economic progress.
In addition, certain agreements, especially when their purpose is to improve the management of small or medium-sized enterprises may be exempted by decree, upon obtaining the Competition Authority's approval.
Finally, pursuant to Article 90 of Act No. 82-652 of 29 July 1982, agreements between cinema enterprises to ensure programming of films in cinema houses can be allowed by the director of the National Cinematographic Industry (Centre National de la Cinématographie) under certain conditions.
1.6 Is cartel conduct outside France covered by the prohibition?
The French cartel prohibition covers any anticompetitive agreements and practices which may distort competition in a market located in France, regardless of the place of signature of the agreement, the head office of the parties, or even their nationality. In addition, in decision No. 04-D-45 of 16 September 2004, the Council held jurisdiction to examine anticompetitive agreements entered into by French firms acting in France, but with effects outside of France.
2 Investigative Powers
2.1 Summary of general investigatory powers.
Table of General Investigatory Powers
Please Note: * indicates that the civil/administrative investigatory measure requires the authorisation by a court or another body independent of the competition authority.
2.2 Specific or unusual features of the investigatory powers referred to in the summary table.
French civil/administrative procedure comprises ordinary and judicial investigations.
In ordinary investigations, the officers of the Competition Authority or the DGCCRF may access business premises to request copies of business documents, while judicial investigations enable said officers to conduct searches and seize any documents from either business or domestic premises under the warrant of a judge.
2.3 Are there general surveillance powers (e.g. bugging)?
This is not applicable under French civil/administrative procedure rules.
2.4 Are there any other significant powers of investigation?
The investigators may ask the authority to which they are answerable (i.e. either the Competition Authority or the DGCCRF) to appoint an expert to conduct any necessary expert assessment involving all the parties, such as an analysis of the relevant market or a study of documents.
2.5 Who will carry out searches of business and/or residential premises and will they wait for legal advisors to arrive?
Ordinary searches inside business premises are carried out by (i) investigators of the Competition Authority, or (ii) by authorised public officers under the supervision of the Ministry of Economy, while judicial investigation inside residential premises may be performed by both types of officers under the supervision of the judge who authorises such measures.
The ordinance implementing the LME (see the answer to question 1.3) allows companies subject to unannounced investigations to call an external lawyer, whose presence was previously merely tolerated. However, investigators remain under no obligation to wait for legal advisors to arrive.
2.6 Is in-house legal advice protected by the rules of privilege?
Only communications between a member of the Bar and its client, such as legal opinions sent by an attorney to its client or exchanges of correspondence between them, are covered by attorney-client privilege, and do not thus have to be surrendered to investigators. Therefore, in-house legal advice is not protected by the rules of privilege, even if an internal memorandum merely restates an advice given by the company's attorney.
2.7 Other material limitations of the investigatory powers to safeguard the rights of defence of companies and/or individuals under investigation.
Investigators are subject to a duty of loyalty. First of all, investigators must indicate the subject of the investigation to the company and/or the individual(s) concerned. Investigators cannot force any person to testify against him or herself or even to plead guilty.
In addition, investigators must not use unfair means to obtain evidence of the alleged anticompetitive agreement or practice. For instance, in a decision issued on 3 June 2008, the French Court of Cassation held that sound recordings made by the claimant without the participant's knowledge amount to disloyal evidence which are not admissible before courts, even if they have not been made by an investigator or a
reporting officer and each party is given access to them.
2.8 Are there sanctions for the obstruction of investigations? If so, have these ever been used?
Obstruction of investigations, such as refusal to submit certain documents, destruction of documents, or provision of false and/or misleading information, may be subject to fines of up to €7,500 and up to six months' imprisonment. These sanctions have already been used in connection with cartel investigations.
In addition, the ordinance implementing the LME (see the answer to question 1.3) gives the Competition Authority, at the instigation of the head reporting officer, the power to impose a fine, after hearing the undertaking concerned and the State Commissioner. The maximum fine may amount to 1 per cent of the highest worldwide turnover realised by the undertaking concerned in any financial year during the period in which the practices took place.
3 Sanctions on Companies and Individuals
3.1 What are the sanctions for companies?
Penalties: pursuant to Article L. 464-2 I and II of the Code, the main penalties for breach of the cartel prohibition are fines of up to 10 per cent of the highest worldwide turnover realised by the undertakings that took part in the anticompetitive practice in any financial year during the period in which the practices took place, bearing in mind that the notion of undertaking extends to all group undertakings regardless of their actual participation in the anticompetitive practice.
In addition, the Competition Authority may impose periodic penalty payments of up to 5 per cent of the daily average turnover, generated during the latest closed financial year, for every day of delay in the implementation of either a decision of the Competition Authority or an injunction imposed by the Competition Authority. As a result, the total amount of fines imposed by the Council in anticompetitive agreement or practice cases has been as follows for the last three years:
- 2005: €662.69 million (22 decisions).
- 2006: €128.24 million (11 decisions).
- 2007: €221 million (24 decisions).
The Council has not issued any sentencing guidelines, but generally applies the European Commission notice on immunity from fines and reduction of fines in cartel cases of 8 December 2006. In addition, the Council has published a non-binding document reflecting the general principles shared by the European Competition Authorities for the determination of pecuniary sanctions imposed on undertakings for infringements of substantive antitrust provisions.
Other sanctions: the Competition Authority may also order that its decision be posted in whole or in part at locations it specifies, and that the decision or an extract thereof be inserted in the report drawn up by the managers, the board of directors or the managing board of the company concerned. The related publication costs are borne by the company in question.
3.2 What are the sanctions for individuals?
The Competition Authority may impose fines on individuals engaged in economic activities amounting to a maximum of €3 million for breach of Article L. 420-1 of the Code. This provision is designed to cover sole traders who engage in cartel-type behaviour.
In addition, according to Article L. 420-6 of the Code, individuals may be subject to criminal penalties amounting to fines of up to €75,000 and terms of imprisonment of up to four years where they have fraudulently taken a personal and decisive action in the conception, organisation and/or implementation of the anticompetitive practices. These penalties are not imposed by the Competition Authority itself, but by criminal courts following referral by the Competition Authority to the Public Prosecutor (Procureur de la République) for further investigation. While the criminal provisions are rarely applied, guidance was given in decision No. 04-D-07 of 11 March 2004 of the Council requesting the Public Prosecutor to examine the possibility of bringing a criminal prosecution against the chairman of the bakeries trade association in the Marne region of France, as a result of his active and decisive role in the establishment and implementation of a cartel among members of the association. In its decision, the Council explained the content of the three cumulative elements to be proven to impose criminal charges:
Personal participation: it is not sufficient for the purposes of the criminal offence that the accused is a director of the undertaking concerned. There must be an active and personal role on the part of the accused in the conception, planning and implementation of the cartel.
Decisive participation: the behaviour of the accused must be shown to have been decisive, and a causal link established in putting the anticompetitive behaviour into practice.
Fraudulent participation: the accused must have intentionally breached the relevant competition rules, which may be inferred as a result of a breach of other criminal practices, such as breach of trust, corruption, etc.
3.3 What are the applicable limitation periods?
Pursuant to Article L. 462-7 of the Code, facts or circumstances dating back more than five years may not be referred to the Competition Authority, unless steps were taken to investigate, establish or sanction them during that period of time.
However, no anticompetitive agreement or practice can be referred to the Competition Authority, after a ten-year period of time from the end of such anticompetitive agreement or practice has elapsed with no ruling by the Competition Authority on said agreement or practice.
3.4 Can a company pay the legal costs and/or financial penalties imposed on a former or current employee?
French criminal law provides for the principle of personality of penalties, i.e. the sanctions can only be imposed on their author and in particular the payment of fines can only be made by the convicted person. However, this does not prevent employees from negotiating compensation with their company of any fines paid.
4 Leniency for Companies
4.1 Is there a leniency programme for companies? If so, please provide brief details.
The French leniency programme is governed by Articles L. 464-2 IV and R. 464-5 of the Code. Further guidance on the practical implementation of the programme can be found in the Council Procedural Notice of 17 April 2007.
Undertakings may be exempted from financial penalties either in full or in part where they have contributed to the establishment of the reality of a prohibited practice and helped to determine its authors, by providing elements which the Competition Authority or the DGCCRF were previously unaware of.
(i) Full immunity from fines
In cases where the Competition Authority or the DGCCRF (the "Authorities") have no information about the alleged anticompetitive agreement or practice, the Competition Authority can grant total immunity from fines to any firm that is the first to submit information enabling the Authorities to carry out investigations and establish the existence of the anticompetitive agreement or practice.
In practice, in addition to its name and address, the applicant must, at least, provide the following information:
- the names and addresses of the other alleged members of the anticompetitive agreement or practice;
- a detailed description of the markets concerned and the anticompetitive arrangement;
- information about any leniency application relating to the alleged anticompetitive agreement or practice which it has submitted or intends to submit to other competition authorities; and any evidence in its possession at the time of its application.
If the Authorities already have certain information on the alleged anticompetitive agreement or practice, full immunity can be granted if the three following conditions are met:
- the applicant is the first to submit evidence which, in the Competition Authority's view, is sufficient to establish the existence of the anticompetitive agreement or practice;
- at the time of the application, the Authorities did not have sufficient evidence to establish the existence of an infringement; and no other firm has obtained a conditional opinion granting full immunity with respect to its participation in the alleged anticompetitive agreement or practice.
(ii) Partial immunity from fines
Undertakings that do not meet the basic conditions for full immunity can benefit from reduced fines by providing the Authorities with evidence of the alleged breach. Such evidence must represent significant added value taking into account the evidence already in the Authorities' possession.
In order to determine the level of reductions in fines from which a firm may benefit, the Competition Authority will take into consideration the chronological order in which leniency applications were filed, the time when the evidence was submitted, as well as the extent to which the information submitted by the firm brought significant added value to the case against the cartel members.
In addition, if the undertaking applying for leniency provides substantial or material evidence which enables the Competition Authority to establish additional facts having a direct link with the amount of the fine to be imposed on the participants to the anticompetitive agreement or practice, this additional contribution will be taken into account in setting said undertaking's fine and may give rise to partial immunity.
In principle, partial immunity cannot exceed a fine reduction of more than 50%.
(iii) Additional conditions attached to leniency
When an application for leniency is made, a hearing is held during which the State Commissioner and the applicant present their views to the Competition Authority. If the Competition Authority is prepared to consider granting leniency, it sets out conditions for the grant in a leniency notice, which is not published and is notified only to the company concerned and the Minister of Economy. These conditions usually require that the applicant:
- cooperates fully and throughout the investigation by providing the Authorities with all evidence in its possession;
- stops participating in the anticompetitive practice at the latest from the notification of the leniency notice, although the Competition Authority can decide to postpone this date;
- did not coerce other members of the anticompetitive practice to take part in that practice; and
- does not inform other members of its application for leniency or of investigations conducted by the Authorities.
The Authorities are not obliged to accept an application for leniency and can reject it, in particular if they already possess the information offered. After the publication of its Procedural Notice of 17 April 2007, the Council indicated that only 25% out of approximately 30 leniency applications were refused since the introduction of the French leniency programme. However, there are no provisions for withdrawing leniency once it has been granted.
In principle, a corporate leniency application does not prevent current and former employees and directors from any personal sanctions, especially criminal ones. However, in its Procedural Notice of 17 April 2007, the Council undertakes not to refer to the Public Prosecutor a matter involving an employee or a director of an undertaking that has been granted leniency.
4.2 Is there a 'marker' system and, if so, what is required to obtain a marker?
The French marker system, which did not exist when the leniency programme was initiated, was implemented under the Council Procedural Notice of 17 April 2007.
It consists in assigning a number to a leniency applicant upon receipt of its application to guarantee that its order of application is maintained until the end of the procedure, provided that the applicant produces all the necessary information and evidence supporting its application during the specific timeframe set by the Authorities.
4.3 Can applications be made orally (to minimise any subsequent disclosure risks in the context of civil damages follow-on litigation)?
The undertaking can require that its application be filed entirely orally so as to minimise any possible subsequent disclosure or discovery risks under foreign laws, given that such type of procedure does not exist under French law. The date when a statement is made is electronically recorded by the relevant authority to ensure that applications are considered in the order that they were submitted.
4.4 To what extent will a leniency application be treated confidentially and for how long?
Subject to the Competition Authority's national and European obligations, the identity of an applicant under the leniency procedure and the information provided may remain confidential during the investigation period, until the statement of objections is issued to all the parties concerned.
4.5 At what point does the 'continuous cooperation' requirement cease to apply?
Once the application for leniency has been submitted, the applicant must fully, continually and promptly cooperate with the Authorities throughout the enquiry and the investigative procedure. The Competition Authority will verify that all the specified requirements set out in the leniency notice have been observed and will then issue its final decision to give full or partial immunity. At that point, the continuous cooperation process comes to an end.
4.6 Is there a 'leniency plus' or 'penalty plus' policy?
French law does not provide for a "leniency plus" or a "penalty plus" system. It can nevertheless not be excluded that, in practice, the Competition Authority grants further fine reductions to a leniency applicant that allows the discovery of another cartel.
5 Whistle-blowing Procedures for Individuals
5.1 Are there procedures for individuals to report cartel conduct independently of their employer? If so, please specify.
Under French law, there is no procedure for individuals to report cartel conduct independently of their employer.
Nevertheless, in the recent decision No. 08-D-13 of 11 June 2008, the Council approved, for the second time, the implementation of a whistle-blowing procedure to enable employees to report acts or behaviours in breach of any competition rules. Two undertakings undertook such commitment to put an end to the procedure before the notification of the statement of objections (see the answer to question 6.1 below).
The Council acknowledged that the French Data Protection Agency (Commission Nationale de l'Informatique et des Libertés) (the "CNIL") does not object, in principle, that anticompetitive practices be covered by whistle-blowing procedures, but companies wishing to implement a whistle-blowing system must nonetheless file a company-specific request seeking the CNIL's authorisation.
6 Plea Bargaining Arrangements
6.1 Are there any early resolution, settlement or plea bargaining procedures (other than leniency)?
(i) In addition to leniency, before the notification to the parties of the statement of objections, undertakings can offer commitments to remedy the situation and avoid a decision ruling on the existence of an infringement. Once said commitments are considered sufficient by the Competition Authority, and after receiving the observations of interested third parties, if any, the commitments will form part of the binding decision of acceptance issued by the Competition Authority. On 3 April 2008, the Council published a procedural notice intended to provide guidelines to undertakings on how to use the commitment procedure. It states that this mechanism should not be applied to the most serious infringements such as cartels. In addition, the commitments submitted have to be relevant, credible and verifiable. They, furthermore, have to be necessary and sufficient to address the competition concerns.
(ii) After the notification of the statement of objections, undertakings may also benefit from fine reductions, as a result of a party's not contesting the existence of the alleged practices. The maximum fine which may be imposed is reduced by half and, under this reduced fine ceiling, the Competition Authority may grant a further reduction of the actual fine. A further reduction could also be granted if commitments are offered.
(iii) The ordinance implementing the LME (see the answer to question 1.3) also provides for the right of the Minister of Economy to settle or order measures as regards so-called "micro anticompetitive practices". The Minister will have jurisdiction over such practices where (i) the combined turnover in France of all the undertakings involved does not exceed €100 million, (ii) the turnover of each of the undertakings in France does not exceed €50 million and (iii) the practices do not fall within the scope of Articles 81 and 82 of the EC Treaty. If the parties agree to a settlement, the amount of fine imposed will not exceed €75 million or 5 per cent of the parties' latest turnover achieved in France, if this amount is of lesser importance. Adecree relating to the Minister's powers in this area is to be published at the time of drafting this article.
7 Appeal Process
7.1 What is the appeal process?
Article L. 464-8 of the Code provides that appeals of the Competition Authority's decisions should be brought before the Paris Court of Appeal, within one month after the decision has been served on the concerned parties.
7.2 Does the appeal process allow for the cross-examination of
witnesses?
Cross-examination, consisting of the parties directly asking questions to the witness, is prohibited by French civil proceeding rules. The judge can, however, ask questions, submitted to him by the parties, after examination of the witness.
8 Damages Actions
8.1 What are the procedures for civil damages actions for loss suffered as a result of cartel conduct?
Any undertaking party to an anticompetitive agreement, any competitor of those engaged in anticompetitive practices, or any other party who suffered a loss such as customers, can claim damages on grounds of civil liability rules before civil or commercial courts. Since decree No. 2005-1756 of 30 December 2005, only the courts of Marseille, Bordeaux, Lille, Fort-de-France, Lyon, Nancy, Paris or Rennes have jurisdiction.
8.2 Do your procedural rules allow for class-action or representative claims?
French law does not recognise class-action claims for the time being, despite the Council's opinion of 21 September 2006 relating to the introduction of group actions as regards anticompetitive practices and the recent French parliamentary debates on that subject.
Consumer associations are, nevertheless, entitled to claim damages, under certain conditions, for any damage caused to the collective interest of consumers they defend and not on behalf of all consumers.
8.3 What are the applicable limitation periods?
Since Act No. 2008-561 of 17 June 2008, the limitation period has been generally reduced to a five-year period that runs from the day the holder of a right knows or should have known the facts enabling him or her to exercise such right.
8.4 What are the cost rules for civil damages follow-on claims in cartel cases?
The French Civil Proceeding Code lists a number of legal costs that will be borne by the unsuccessful party. However, the judge can, by a reasoned decision, impose all or part of such costs to another party. As regards the sums disbursed for lawyers' fees, the judge can take into account fairness and the financial situation of the parties to order the unsuccessful party to pay an amount that the judge will determine.
8.5 Have there been any successful follow-on or stand alone civil damages claims for cartel conduct?
There have been successful civil damages claims. For instance, in a decision of 28 June 2002, the Paris Court of Appeal granted damages amounting to about €300,000 to a company sponsoring sports events, which had been victim of an anticompetitive agreement between the sports events manager and its main commercial partner, on grounds of the company's eviction from the event, and all the related pecuniary and non-pecuniary damage.
Another interesting decision in this regard, which however resulted in an unsuccessful claim, should be noted. In a decision of 26 January 2007, the Paris Commercial Court dismissed the claim of the pharmaceutical companies Juva Santé and Juva Production for damages resulting from the anticompetitive behaviours of their suppliers, the company Hoffmann La Roche and its subsidiaries. The plaintiffs argued that they could not have passed the vitamins' price increase on to their customers since such an increase would have resulted in a loss of their market shares. The court rejected their argument, on the basis of a broad interpretation of the passingon defence, and ruled that they could have passed the raw material increase on their own price on the grounds that, as the raw material constituted a small part of the final products sold, a slight increase in their selling price would have been sufficient to balance the significant increase in the vitamins' price.
9 Miscellaneous
9.1 Provide brief details of significant recent or imminent statutory or other developments in the field of cartels and leniency.
The LME, enacted on 4 August 2008, has significantly modified French rules on anticompetitive practices and agreements (see the answer to question 1.3).
9.2 Please mention any other issues of particular interest in France not covered by the above.
There is a set of competition rules specific to French law called unfair trade rules. Such rules apply to all commercial relations between professionals and do not require competition to be adversely affected.
Infringement of these rules is sanctioned by civil or commercial courts and the Competition Authority has no jurisdiction over these questions. However, if the Competition Authority observes the existence of such practices within the framework of a case brought before it, its president is entitled to bring an action before the relevant court. This power has been used in the past.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.