COMPETITION • FRENCH LAW • ABUSE OF DOMINANT POSITION
Article L. 420-2, paragraph 1 of the Commercial Code prohibits “under the conditions set forth in Article L. 420-1 [on cartels] the abusive exploitation of a dominant position in the domestic market or in a substantial part of it”. The dominant position may be individual or collective, since the provision specifies that it is held “by an undertaking or a group of undertakings”.
Originally, the Competition Commission recognized that, even in the absence of any affiliation or concerted action, undertakings could find themselves collectively in a dominant position simply because of the structural interdependence of their behavior. But, from its first report, the Competition Authority adopted a much more conservative position as regards the concept of collective dominance, insisting that for several undertakings simultaneously present on the same market to be considered as a group that holds a dominant position, there must be an actual link between them. This link could be either structural, financial or commercial. At the same time, the Competition Authorities seemed to deprive the reference in article L. 420-2 to a group of undertakings of some of its usefulness, insofar as a group of companies can be considered as a single undertaking within the meaning of this text, whereas consultation between undertakings is already prohibited by article L. 420-1. Moreover, while the link between undertakings seemed to be a necessary condition for collective dominance, it was not a sufficient condition insofar as the authorities required that, in addition to this structural condition, which could be embodied in a financial or commercial link, there should be a behavioral condition, such as the shared willingness to pursue a coordinated commercial or purchasing policy. In laying down these conditions, the French authorities were departing from the position adopted by the European authorities, which consider, at least in the field of merger control, that economic links in the broad sense, i.e., a market situation, may in some cases suffice to characterize a collective dominant position. This classical case law has evolved under the influence of European law.
The French supervisory authority then relaxed its position. Citing the judgment of the European Court of First Instance, Gencor, it considered that a restricted oligopoly could suffice to characterize a collective dominant position. This solution is comparable to the one adopted by the General Court in the Airtours ruling, which states that collective dominance can be inferred from the market structure alone under three conditions: (i) there must be sufficient market transparency for all members of the dominant oligopoly to know, sufficiently precisely and quickly, how the other members are behaving in order to monitor whether or not they are adopting the common policy; (ii), there must be an incentive for them not to depart from the common policy; and (iii), the anticipated reaction of current and future competitors, as well as of consumers, would not jeopardize the results expected from the common policy. Although the Competition Authority continues to apply the traditional criteria of collective dominance, it seems ready to accept that a collective dominant position can be inferred just because of the structure of the market and, in the absence of any agreement or capital ties between undertakings, when the conditions laid down in the Airtours judgment are fulfilled. This exceeds the position of the EU authorities, which, for the time being, have limited the Airtours doctrine to matters of merger control.
As the courts were not satisfied with the criteria used so far, a new criterion was established which is not unlike the condition of absence of competition between undertakings in a position of collective dominance laid down in the second indent of Article 19 (2) of the German law on restraints of competition (GWB). The Paris Court of Appeal disapproved a decision of the Competition Authority which was based at the same time on the Airtours ruling and on the more usual conditions of structural links and common commercial strategy. To establish collective dominance, the Court of Appeal said, it was not only necessary to establish structural links, a common strategy or oligopolistic market characteristics, but also to show that the undertakings at issue could, to an appreciable extent, collectively behave in an independent manner on the market in respect of competitors, customers and consumers.