For the first time the French Competition Authority blocks a merger in the market for the distribution of predominantly food products

On The French Competition Authority recently published the decision by which it prohibited a merger for the first time on August 28, 2020.

This operation concerned the acquisition of a joint control over Géant Casino hypermarket in the Troyes agglomeration by the Association des Centres Distributeurs E.Leclec and Soditroy.

After an in-depth analysis (or “phase 2”) procedure, the Authority found that the operation, which would have led to the demise of Casino and the creation of a duopoly between E.Leclerc and Carrefour in the Troyes agglomeration, raised significant risks from a competition law perspective, which could not be remedied by the commitments proposed by the parties.

The Authority’s analysis covered (i) upstream, the markets for procurement of consumer goods, and (ii) downstream, the markets for retail distribution of predominantly food products in hypermarkets, here, in the Troyes agglomeration. It is precisely on this second market that the Authority identified competition concerns.

On the upstream market, after recalling that the operation in issue only concerned one hypermarket, whose total purchases represented a very marginal share of the procurement market, the Authority excluded any risk of creation or reinforcement of buying power, and of economic dependency of the suppliers on the parties.

On the other hand, the Authority ruled that the operation raised significant risks to competition downstream. According to the Authority, the operation would have led to the disappearance of the alternative presented by Casino, and would have resulted in the creation of a duopoly. The new entity’s market share would have been nearly [40-50]% in terms of turnover, and [50-60]% in terms of surface area on the market considered (only considering hypermarkets). The operation would thus have resulted in a reduction in diversity of the products offered to consumers. Moreover, it would have generated a risk of price increases in the current E.Leclerc hypermarket in Saint-Parres-aux-Tertres.

For this analysis, the Authority notably took into account the results of consultations conducted with local operators and surveys of consumers of the Casino and E.Leclerc hypermarket in the relevant area. It also noted the existence of barriers to entry at local level, limiting the entry of competitors on the market. It did not accept the argument presented by the notifying parties on the competitive pressure exercised by discounters and especially by supermarkets and small hypermarkets present in the same catchment area. But the new entity would have had on a market extended to supermarkets and equivalent commercial outlets a market share of between [30-40]% with the competition Carrefour, ITM, Lidl, Casino, Leader Price and Système U, as it notes in §137 of its decision.

The Authority also looked at the coordinated effects of the operation. In this respect, it ruled that after the operation, E.Leclerc and Carrefour would have been able to tacitly coordinate their behavior in the relevant catchment area.

The Authority found that the parties had not sufficiently demonstrated how the operation would have generated efficiency gains likely to offset its anti-competitive effects. Finally, it considered that the remedies proposed by the parties (consisting in reducing the target’s sales surface area) did not address the competition risks identified.

As the Authority recalled, this is the first prohibition decision since it has jurisdiction to rule on mergers, i.e. since 2009.

Google forced to negotiate with publishers and news agencies on neighboring rights

For the record, the law of April 24, 2019, enshrining a neighboring right for publishers and news agencies, is intended to enable these companies to negotiate compensation for the total or partial reproduction of the content of their press articles by search engines and social networks.

In September 2019, Google announced in a press release that it refused to comply with the provisions of this law. The US giant specified on this occasion that it would no longer display excerpts from articles, photographs, infographics or videos in its different services such as Google Search, Google News and Discover unless the publishers authorized it to do so for free. Thus, the latter were required to accept the conditions unilaterally imposed by Google at the risk of seeing their publications de-referenced by the search engine and losing public visibility. The Union of Magazine Publishers, the APIG press alliance and Agence France-Presse began proceedings before the French Competition Authority against Google’s practices.

In its decision of April 9, 2020, the Authority ruled that the practices in issue were likely to constitute an abuse of a dominant position and caused serious and immediate damage in the press sector. Pending a decision on the merits, the Authority issued urgent interim measures, ordering Google to negotiate in good faith with publishers and news agencies for the display of their contents.

Upon referral by Google, the Paris Court of Appeal dismissed on October 8, 2020 all the means invoked by it, and confirmed the interim measures imposed by the Authority, while confirming that there is no obligation to purchase the content but only to negotiate suitable compensation in good faith. Mrs. Isabelle de Silva, Chairman of the French Competition Authority, called this decision historic and significant in that it “will constitute a reference that will guide the transposition of neighboring rights in other countries”.

On November 19, Google announced that it had already signed agreements with a number of publishers of daily newspapers and magazines concerning the neighboring rights of excerpts from articles referenced in its search engine. To be continued...

The French Competition Authority issues first decision on control of joint purchasing agreements since the Egalim law

In 2018, the brands Casino, Auchan, Metro and Schiever concluded various cooperation agreements and created a purchasing office whose purpose was notably to organize the invitation for bids for the joint manufacturing of many distributor-brand products.

These agreements, concluded between competing companies upstream (purchasing markets) and downstream (sale of products), were sent to the Authority in accordance with the provisions of Article L.462-10 of the French Commercial Code. The Authority then instituted proceedings on the merits ex officio, followed by interim measures on the grounds of the specific mechanism of purchasing offices resulting from the Egalim law.

During its review, the Authority identified competition concerns with respect to the cooperation agreements for the purchase of distributor-brand products, vis-à-vis both suppliers and consumers. Casino, Auchan, Metro and Schiever then proposed commitments aimed at reducing the scope of the agreement by excluding several product families from the cooperation or by capping the volume of joint purchases. By its decision of October 22, 2020, the Authority accepted these commitments and made them mandatory.

This is the Authority’s first decision on purchase regrouping since the Egalim law of October 30, 2018, which allows the Authority to control alliances of purchasing offices and order interim measures and, for the most serious cases, the suspension of the agreements in issue.