The French Competition Authority’s new Notice on Fines of 30 July 2021

The French Competition Authority’s new Notice on Fines of 30 July 2021: what will change for undertakings and associations of undertakings

1. The Competition Authority undertakes to state the reasons for its decision not to follow the methodology of its notice, in particular when the characteristics of the alleged offenses, the activity of the parties concerned, the economic and legal context of the case, or reasons of general interest justify it.
2. This methodology will not apply to fines incurred in cases of obstruction, non-compliance with commitments or injunctions, in the context of the settlement procedure or to breaches found during merger control.

I – Setting the basic amount of the fine

3. The key criterion of harm to the economy, not found in European law, has been removed, while the duration of the infringement has been made a factor in its own right in determining the basic amount.

A –Seriousness of practices

4. The seriousness of the offenses will be assessed objectively and specifically, taking into account all the relevant elements of the case, including:

• type of infringement and the facts used to characterize it, as well as the type of competition parameter(s) involved (price, volume, diversity, quality, cost, innovation, production, environment, etc.);
• type of activities, sectors or markets involved (public service activity, health, public procurement, sector recently opened to competition, innovative market, etc.);
• type of persons affected (SMEs, vulnerable consumers, captive buyers, etc.);
• objective characteristics of the infringement (secrecy, degree of sophistication, knowledge of illegality of the practice in question, existence of enforcement or retaliation mechanisms), perverting legislation, geographical scope, etc.

5. For the most serious restrictions (horizontal price-fixing, market-sharing and output restrictions), the Competition Authority will apply a proportion of the value of sales of between 15% and 30%, and not necessarily the top end of the scale, as it initially envisaged.
6. Based on the European model, an “entry ticket” of between 15% and 25% of the value of sales is introduced. It will only apply to undertakings that have committed abuses of a dominant position or participated in the most serious horizontal agreements.

B – Duration of infringement

7. The amount fixed based on the value of sales will be multiplied by the number of years of participation in the infringement.
8. Whereas the former 2011 notice counted the duration of the infringement as having a coefficient of 1 in the first year and 0.5 in the following years, the draft of the new notice provided for a multiplier coefficient for the number of years of the infringement, which results in a near doubling of the potential amount of fines in France. Fortunately, the Competition Authority heeded the concerns expressed by stakeholders during the public consultation and finally decided that periods of less than one year will be taken into account on a pro rata basis depending on the duration of the participation of the undertaking or associations of undertakings in the infringement.

C – Value of sales to which the infringement relates

9. The 2021 Notice on Fines identifies four non-exhaustive situations in which the value of sales or the way in which it is taken into account is not an appropriate criterion and indicates the substitute value. This is the case when the infringement:

• consists of agreeing on commissions by which undertakings are remunerated for the sale of certain products or services; the Authority may use these commissions as a reference;
• consists of an agreement by undertakings to refrain from making sales in France. The Authority may take into account sales made elsewhere in the EEA;
• involves a two-sided or multi-sided market; the Authority may take into account the value of sales made by the undertaking concerned on the upstream, downstream and related markets, where these are directly or indirectly related to the infringement;
• relates to one or more occasional calls for tender and is not of a complex and continuous nature. The basic amount of the financial penalty will be determined by applying a coefficient, based on the seriousness of the facts, to the total turnover in France of the association of undertakings or the undertaking in question, or of the group to which the undertaking belongs, in principle during the full accounting period in which the infringement took place, or the last full accounting period, if there is more than one.

II – Individual company situation

10. The 30 July 2021 notice adds new mitigating circumstances to the list in the former notice:

• the discontinuation of the anticompetitive conduct as soon as the Authority intervenes (but this circumstance will not apply in the case of cartel members);
• the effective cooperation of the undertaking with the Authority, beyond its legal obligations and outside the scope of the leniency procedure;
• the compensation measures implemented during the course of the procedure, with respect to the victims of the practice, in particular the payment of an indemnity due in execution of a settlement within the meaning of Article 2044 of the Civil Code.

11. The new provision also stipulates that the unlawful gains derived from the infringement will henceforth justify an increase in the fine when they exceed the amount of the fine incurred.

III –The ceiling of the fine and the ability of associations of undertakings to contribute

12. The former bodies (organismes), now referred to as associations of undertakings (associations d’entreprises) have seen the amount of the penalty increase considerably, since instead of a maximum fine of EUR 3 million, they now face a fine of up to 10% of the highest worldwide turnover (excluding tax) achieved during one of the financial years closed since the financial year preceding the one in which the practices were carried out.
13. Where the infringement by an association of undertakings relates to the activities of its members, the maximum amount of the financial penalty is 10 % of the sum of the total worldwide turnover of each member active on the market affected by the infringement of the association (pt 50). However, the financial liability of each undertaking with respect to the payment of the fine may not exceed 10% of its worldwide turnover. Moreover, where the Authority decides to sanction both the association and its members, the turnover of the latter is not taken into account when calculating the fine imposed on the association.
14. In addition, where the association of undertakings is not solvent, the Competition Authority may order it to issue a call for contributions from its members to cover the amount of the fine (pt 59). If the required contributions are not paid in full to the association within a time-limit set by the Competition Authority, the latter may directly require payment of the fine by any undertaking whose representatives were members of the association’s decision-making bodies at the time of the infringement.
15. Where necessary to ensure full payment of the fine, after requiring payment from such undertakings, the Competition Authority may also require payment of the outstanding amount from any member of the association that was active in the market in which the infringement was committed. However, such payment may not be imposed on undertakings that can show that they did not implement the contested decision of the association and were unaware of its existence or actively disassociated themselves from it prior to the initiation of the procedure.
16. The transitional provisions of the Ordinance of 26 May 2021 provide that those amendments are not applicable to anticompetitive practices that ended before its entry into force, unless their application would have the effect of reducing the maximum amount of the penalty incurred, in which case they may be applied immediately to ongoing infringement proceedings.