The Paris Court of Appeal overturns almost entirely the French Competition Authority’s Sanicorse decision on excessive pricing

On November 14, 2019, the Paris Court of Appeal overturned the French Competition Authority’s decision No. 18-D-17 on practices implemented in the sector of infectious clinical waste disposal in Corsica. The judges on the merits considered that it was not established that Sanicorse as author, and SAS Groupe Cesarini as parent company, had abused their dominant position in the context of their pricing policy towards Corsican hospitals and clinics.

As we commented in October 2018, the French Competition Authority had fined Sanicorse €199,000 for the sudden and significant increase of the prices applied to Corsican healthcare establishments from 2011 to 2015. Sanicorse and SAS Groupe Cesarini appealed the French Competition Authority’s decision to contest the definition of the geographical market and the characterization of exploitative and exclusionary abuse.

The Court of Appeal easily confirmed the definition of the relevant market adopted by the French Competition Authority but ruled that it had not demonstrated any exclusionary abuse or exploitative abuse.

Concerning the exclusionary abuse, the Court noted that proof had not been produced that the increase in prices had as an object or effect, actual or potential, to discourage or squeeze out potential competitors. On the one hand, Sanicorse never acknowledged, or claimed, to have used the pricing lever to discourage the healthcare establishments from developing or seeking an alternative. On the contrary, it indicated that the price increase was linked to the fear of seeing a new competitor emerge before the investments made were depreciated. On the other hand, no Corsican healthcare establishment, or even the Regional Health Authority, stated that following the price increase it had abandoned an alternative waste disposal project, so that no actual exclusionary effect is established. The Court found on the contrary that the price increase was intrinsically likely to persuade the Corsican healthcare establishments and the Regional Health Authority of the need to create competition, rather than have them abandon potential projects in that respect, so that no potential exclusionary effect is demonstrated.

Furthermore, the Court examined whether the practice in issue was likely to constitute an exploitative abuse, in particular, via the imposition of unfair trading conditions, as claimed by the French Competition Authority. It then recalled that two elements are necessary for trading conditions to be characterized as an exploitative abuse. First, it has to be the dominant position of the company in issue that allows it to obtain the advantages examined and secondly, these advantages must be unfair.

Sanctioning the levity of the French Competition Authority’s reasoning, the Court recalled that it is not up to the Authority to substitute itself for the governing bodies of the company in a dominant position to determine its policy, notably in terms of pricing. It is only if the trading conditions can be objectively characterized as unfair that the Authority is entitled to intervene. In this case, the Court noted that although the price increases were made possible by Sanicorse’s de facto monopoly, it has not been demonstrated that the prices resulting from these price increases were without a reasonable relationship with the economic value of the service rendered. In addition, Sanicorse had not breached any of its contractual obligations when implementing these price increases.

Sanicorse can congratulate itself for having refused to settle with the French Competition Authority since it has today won its case before the Court of Appeal that sanctioned a standard of proof ruled insufficient.

Publication of the directive protecting whistleblowers

The European Directive on the protection of persons who report breaches of Union law was published on November 26. This minimum harmonization system ensures, within the European Union, a uniform protection of whistleblowers, individuals who, in a professional or recruitment context, report breaches of Union law committed by a public organization or a private company. The Member States have until December 17, 2021 to transpose the directive.

The Directive covers a wide range of fields, notably competition and State aid rules, public procurement, financial services, money laundering, product safety, the protection of the environment, consumer protection and personal data protection. Concerning competition law, the protection of whistleblowers completes, at Member State level, the whistleblowing system already implemented by the Commission.

The Directive provides for the obligation to set up two types of reporting channels. Firstly, it imposes the establishment of effective, confidential and secure internal reporting channels in private and public legal entities, managed either internally by an impartial person or by a service appointed for this purpose, or by a third party. Anonymous reporting will potentially be accepted depending on domestic law. These rules are automatically applicable for private entities of over 50 workers and all public entities, but Member States can decide to extend them to private entities of less than 50 workers or exempt municipalities of less than 10,000 inhabitants or less than 50 workers. Secondly, the Directive imposes the establishment of independent external channels managed by the authorities appointed by the Member States.

The entity receiving a report has seven days to acknowledge receipt and three months (even six months for external channels) to provide follow-up. When no appropriate measure is taken within this timeframe, or when a breach represents an imminent or manifest danger for public interest, the whistleblowers will have the possibility to disclose the information publicly.

Finally, the text introduces rules aimed at protecting whistleblowers, as well as any person helping them, against any form of retaliation, such as suspension, dismissal, withholding of promotion, or financial penalties. Moreover, they are protected in the context of judicial procedures initiated against them for defamation, copyright infringement, business secrecy and data protection rules.

In France, where protection already exists since the Sapin II law, the Directive makes a few changes (extension of the definition of a whistleblower, deletion of the report escalation procedure, deletion of the disinterested nature of the whistleblower) which should increase the number of reports.

Access to telephone records in the context of investigations: publication of the implementing decree of the PACTE law

The French Competition Authority’s investigation powers have been increased following the publication of the implementing decree of the PACTE law that now allows it to access the telephone records of companies in the context of investigations. This new weapon will be useful to detect cartels that are, by essence, secret and for which companies do not hesitate to use sophisticated means to conceal their exchanges.

New Article L.450-3-3 of the French Commercial Code thus authorizes the French Competition Authority and DGCCRF agents to access, with prior authorization of an independent judge named “Controller of requests for connection data”, the data kept and processed by telecommunication operators. These detailed bills will give them access to a mine of precious information such as the telephone numbers called, the date, the time and the duration of the calls.

The decree specifies that the authorization is subject to the demonstration of factual and legal elements justifying this request, without however specifying concretely these elements. Finally, the text does not provide for any autonomous appeal by the companies against the authorization decision, which can only be contested with the merits of the case.

The vigilance that companies must have vis-à-vis their employees’ conduct is becoming an increasingly difficult task, as anticompetitive behavior can take place by telephone, SMS or even by chat. Training and awareness-raising measures of the teams constitute an effective tool for companies.