The French Competition Authority departs substantially from its method for calculating fines in the poultry cartel cases

In its poultry cartel decision of May 6, 2015, the French Competition Authority was forced to bend severely its “notice on setting sanctions” to impose a total fine limited to €15.2 million on the 23 companies and professional associations involved.

In this case, these companies were accused of having prevented the free fixing of prices during the period 2001-2007 by colluding on the prices observed on the market, on the cost prices of the poultry meat sector and on their customer price objectives. Given the duration of the practices and their nature, usually characterized as very serious by the Authority, the fines should have been very significant.

However, the Authority decided to derogate from its standard method for calculating fines, motivating its decision by reasons of general interest, and more specifically by the fact that the collective undertaking made by the majority of industry stakeholders to set up an inter-branch organization was likely to have greater efficiency with regard to compliance with competition rules than heavy financial penalties. According to the Authority, the poultry sector is a particularly fragmented sector, a field of sterile competition between professional organizations. Therefore, the Authority concluded that there is a need to set up an extended inter-branch organization, integrating the mass distribution sector if possible.

Accordingly, the Authority completely departed from the “notice on setting sanctions” to impose the fines. Even though it examined the damage caused to the economy and the gravity of the practices, the Authority did not specify the base of the sales value used or the coefficients of seriousness and duration, but imposed lump-sum fines on the companies depending on their degree of involvement in the practices and their position on the market. The fines were then weighed depending on each company’s financial situation.

Thus the fines imposed by the Authority range from €350,000 to €5 million for the companies and from €10,000 to €40,000 for the professional associations. These amounts show that the Authority was undoubtedly receptive to the senators’ request for indulgence made on May 5, 2015 during the parliamentary discussions on the Macron law concerning the amount of the fines, notably when compared to the Authority’s recent decisions (for instance €192.7 million for the dairy product cartel, €95.5 million for the flour cartel, or €345.2 and €605.9 million for the cleaning and hygiene products). Hopefully this situation, as exceptional as it may be, will be echoed in the future in damaged sectors likely to collude to survive.

Although departing from the “notice on setting sanctions” meant reverting to the non-transparent method for setting fines which this notice corrected, the companies in this case will hardly complain.

The commitment procedure before the French Competition Authority does not prevent an action for damages before commercial courts

On March 30, 2015, the Paris Commercial Court rendered a decision ordering jointly Valorplast and Eco Emballages to pay €350,000 in damages to DKT for anticompetitive practices in the household waste market.

The Competition Authority had a few years earlier, in a decision of September 27, 2010, accepted the commitments proposed by Valorplast and Eco Emballages to put an end to the competition concerns it had expressed. These commitments allowed the procedure against them to come to an end without any sanctions.

However, DKT, at the origin of the complaint before the Authority, brought the dispute before the commercial courts to obtain compensation for its harm caused by the anti-competitive practices committed by Valorplast and Eco Emballages.

Even though the Authority’s decision to accept the commitments does not establish any anti-competitive offense as such, the Court based itself nearly exclusively on the elements observed by the Authority to decide that Valorplast and Eco Emballages had in actual fact committed a fault by abusing the dominant position which they occupy respectively in the markets of plastic household waste recovery and collective organization and collection of household waste in France.

According to the Court, the abuse resulted from blocking DKT’s access to the waste recovery market, particularly by (i) setting-up a system lacking in objectivity and transparency based on “non objection” letters, without which a prospective acquirer such as DKT had little chance of successfully canvassing public authorities and (ii) by the conclusion of rigid and long term agreements with public authorities, making it difficult for them to change recovery method during six years.

The Court then found three types of prejudice sustained by DKT to be indemnified:

• economic prejudice of €50,000 for the losses recorded by DKT during the implementation of the anticompetitive practices;
• lost opportunity to enter into agreements with local authorities valued at €200,000, based on the profit margin which DKT could have generated on these markets; and
• harm to reputation sustained by DKT compensated by €100,000.

Although the commitment procedure before the Competition Authority presents a great advantage for a company to guarantee itself against a fine and limiting complaints going forward, this case confirms that it does not protect this company from actions for damages initiated by the victims before commercial courts, provided however that these victims have sufficient elements to convince the courts that the practices were actually anticompetitive.

Overseas exclusivity agreements under the radar of the French Competition Authority

In 2009, the Authority observed in an opinion (No. 09-A-45) that competition in the overseas departments was insufficient, particularly due to exclusive import and distribution agreements granted to local companies which increased, without justification, the price gap observed between metropolitan France and the overseas departments for consumer products.

The Lurel law of December 20, 2012 then introduced an Article L. 420-2-1 of the Commercial Code which prohibits “agreements or concerted practices whose purpose or effect is to grant exclusive import rights to a company” in the overseas territories. The Authority has already applied this provision in cases concerning overseas agreements, in particular in its decisions concerning yoghurt in the Antilles (decision No. 14-D-18) or the telephone industry in the Reunion Island (decision No. 14-D-05).

In the context of an investigation on the distribution of consumer products in the overseas departments opened in 2014, the Authority noted that the distribution of brands and products from a same supplier was ensured by a single wholesaler importer per overseas territory, which prevented new players from entering the market. The four major industrial groups concerned, Danone, Bolton Solitaire, Johnson & Johnson Santé et Beauté France and Pernod Ricard, proposed commitments to put an end to the Authority’s competition concerns. The industrials proposed (i) the conclusion of written agreements with distributors recalling the absence of exclusivity of the commercial relation, and (ii) the organization of competitive public tenders every two or four years implementing objective and non-discriminatory criteria when selecting their distributors.

If they are accepted by the Authority, these proposed commitments will put an end to the procedure before any finding of infringement.