COMPETITION • FRENCH LAW • ABUSE OF ECONOMIC DEPENDENCE
In order to combat abuses of purchasing power, the French competition authorities decided to set up a system that would make it possible to “control discriminatory supply and demand practices by undertakings or groups of undertakings which, without holding a dominant position, are, by virtue of their market power, unavoidable trading partners either for their suppliers or their customers”. Article L. 420-2, paragraph 2, of the Commercial Code accordingly prohibits “the exploitative abuse by an undertaking or group of undertakings of the state of economic dependence in which a client undertaking or supplier is placed”. An undertaking’s conduct towards a dependent undertaking is only prohibited if “on the one hand it restricts competition on a market and if, on the other hand, it is abusive, i.e. it is behavior that would not have been possible were it not for the undertaking’s domination of another”. Thus, only behavior that is abnormal from the viewpoint of competition can fall within Article L. 420-2(2). The non-exhaustive list of prohibited conduct in the last paragraph of Article L. 420-2 includes refusals to sell, tied sales or discriminatory practices as referred to in Article L. 442-6, as well as range agreements. In practice, the abuse takes different forms depending on whether the dependent undertaking is a distributor or a supplier. In the first case, generally complaints are related to refusals to sell or deliver, discriminatory practices, or breach of contract. In the second case, the dependent undertaking often claims that it is the victim of discrimination, de-listing or the threat of de-listing. Denying access to essential facility also constitutes an abuse of economic dependence where the monopoly operator sets an unjustified or discriminatory price for that facility even though access to it is essential to its potential competitors.
In the case of distribution networks, distributors sometimes complain about specific behaviors. The Competition Authority considers that the reorganization of a network does not in itself constitute an abuse of economic dependence. It is only if this reorganization is accompanied by discriminatory practices that it is caught by Article L. 420-2, paragraph 2, of the Commercial Code. It has also been argued that the unilateral modification of the terms of the contract could constitute an abuse of economic dependence when the distributor does not have an equivalent solution for its supply due to the supplier’s commercial policy and the need to hold sufficient stock to meet the needs of customers. However, in order to be unlawful, the modification of contractual terms must have an anticompetitive object or effect. Finally, interference by the supplier in the distributor’s management constitutes an abuse of economic dependence when the latter has no alternative solution.
The provision has proven to be ineffective because it is rare that conduct occurring in the context of business-to-business relationships outside of any market power will be “likely to affect the operation or structure of competition”.