COMPETITION • FRENCH LAW • MERGERS

The French supervisory authorities have on several occasions verified whether a merger operation resulted in the creation or strengthening of a collective dominant position. Certain market conditions undeniably favor oligopolistic interdependence: high concentration of supply, low purchasing power, similar and stable market share, low innovation, inelasticity and stagnation of demand, homogeneous products, low transparency, etc. Until now the authorities have always tried to corroborate these signs with evidence of structural ties or collusion between firms before making a finding of collective dominance. However, perhaps the case-law developments relative to abuse of dominant position are signalling changes in the field of concentrations.

The Competition Authority appears to accept that a collective dominant position can be inferred solely from the structure of the market where there are no ties between the undertakings where the cumulative criteria laid down by the European Union court in Airtours are fulfilled: (i) there must be sufficient market transparency for all members of the dominant oligopoly to be aware, sufficiently precisely and quickly, of the way in which the other members’ market conduct is evolving in order to monitor whether or not they are adopting the common policy; (ii) there must be an incentive for the members of the oligopoly not to depart from the common policy; (iii) the foreseeable reaction of current and future competitors, as well as of consumers, would not jeopardize the results expected from the common policy. In its guidelines, the Competition Authority takes up the Airtours criteria as its test for coordinated effects. It also refers to the Impala ruling in which the European Court of Justice held that “Such tacit coordination is more likely to emerge if competitors can easily arrive at a common perception as to how the coordination should work, and, in particular, of the parameters that lend themselves to being a focal point of the proposed coordination”. To find out whether a merger presents a risk of coordinated effects, it is appropriate to review, within a prospective analysis of the relevant market, their probability, by assessing, without adhering to the application of each of the three criteria taken in isolation, the overall economic mechanism of a possible coordination.

The probability of coordination is even greater if the market is stable and not particularly complex. To analyze coordinated effects, the Authority therefore takes account of the number of operators on the market, the symmetrical nature of undertakings, product homogeneity, the stability of demand and the importance of innovation. Complexity and instability of the economic environment can however be disregarded where there exist structural links or joint tariff systems between undertakings, or where they have access to market data. For coordination to be effective, the undertakings must be able to monitor the way the market functions. Coordination can only take place where the market is sufficiently transparent. The Competition Authority assesses market transparency with regard to product homogeneity, the possibility of obtaining market data relative to the evolution of demand and of price, the existence of structural links likely to facilitate exchanges of information or whether there is a small customer base able to allow the transmission of information between competitors. The stability of coordination is ensured only if the undertakings are able to take reprisals against undertakings deviating from the common policy. The dissuasive power of any measures of retaliation depends on the size of the production capacity of the members of the oligopoly, the existence of multi-market contacts and the frequency of transactions. Finally coordination will only be profitable provided that it cannot be challenged by current or future competitors, or by customers. The stability of coordination can be disputed in the presence of a competitive fringe (maverick operators), the entry onto the market of potential competitors or the existence of a countervailing buyer power.