French merger control: The Competition Authority agrees to approve the prospective acquirer of assets sold by the purchaser
On May 15, 2015, the Competition Authority authorized, subject to certain conditions, the acquisition of Totalgaz by UGI France, Antargaz’ parent company, in a case referred by the European Commission for examination by France due to the local markets affected.
The Authority analyzed the French bulk LPG market and considered that the takeover transaction would significantly strengthen Antargaz’s position. The Authority notably underlined the strong integration upstream of the new entity due to an unrivalled logistical infrastructure in the sector. UGI France controls the main supply infrastructures in France through the import depots and refineries in Donges, Norgal and Cobogal. Thanks to a supply agreement with the Total group, Antargaz would benefit from almost full exclusivity for the purchase of the raw materials necessary for the production of propane.
In order to maintain competition on the market in question, UGI undertook to limit the duration of the agreement entered into with the Total group for access to the production of its refineries and to transfer part of the capital of the Norgal and Cobogal installations. With regard to the Norgal depot, UGI implemented a so-called “fix-it-first” solution, which involves validation of the prospective acquirer by the Authority. In the case at hand, it is Butagaz which will thus become a third shareholder of the depot alongside the merged entity and Vitogaz, minority shareholder. This measure will preserve competition by maintaining three competing LRG distributors on the site. The Authority verified that the prospective acquirer presented all the characteristics of an appropriate prospective acquirer, by verifying that this sale to the prospective acquirer thus identified did not give rise to competition concerns given the position of the prospective acquirer on the market and that this takeover was not likely to result in delays in the implementation of the purchaser’s undertakings.
This is a first in France, given that the European Commission has, in practice, been hesitant when it comes to “fix-it-first” solutions (in particular in the RyanAir / AerLingus and UPS / TNT cases pending before the Court).
The takeover of indebted companies by creditors is a merger which must be notified
In its decision of May 5, 2015, the Competition Authority recalled that when a lender, due to the enforcement of various pledges, becomes a shareholder in an indebted company and thus acquires control thereof, this constitutes a merger transaction which must be notified and approved.
In the case at hand, in 2011, the investment fund Fondations Capital acquired, via GPA Courtepaille, the Courtepaille group. In order to finance this acquisition, GPA Courtepaille borrowed €160 million from ICG. In order to guarantee this loan, GPA Courtepaille’s shareholders granted several securities, including a pledge on the shares and securities held by the main shareholders. Following the increase in the Courtepaille group’s debt levels at the end of 2014 and in accordance with securities granted to it, ICG took exclusive control of GPA Courtepaille by enforcing the pledges and therefore notified the merger transaction. The transaction was challenged by a third party, which considered that the Authority was not competent, as the share pledge transaction was the subject of an ongoing dispute before the Luxembourg and French courts. Consequently, the third party considered that the transaction was not a “sufficiently mature project” to be notified.
The Authority replied that a pledge transaction materialized the effective takeover by a creditor and constituted a “sufficiently completed project”. In the case at hand, this was a firm undertaking by ICG to carry out the transaction by identifying the purpose, target and terms and conditions, despite the pending recourses. In other words, the decision adopted by the Authority to authorize a takeover according to the merger control regulations does not in any way prejudge the result of possible judicial or extrajudicial proceedings.
The Paris Court of Appeal has rejected EDF’s claim for damages for a cartel in the context of public procurement
In this case in 2000, EDF, as a public entity, had launched two calls for tenders for the supply of cables. The Competition Council (now the French Competition Authority), before whom EDF referred the case in 2001, imposed sanctions on Nexans, Prysmian, Safran, Draka and Grupo for agreeing on the amount of their tenders to EDF. In 2011, EDF summoned Nexans and Prysmian before the Paris Commercial Court in order to obtain cancellation of the contracts entered into with them and have them ordered to pay damages as compensation for the harm suffered due to the anti-competitive practices sanctioned.
In an order dated July 2, 2015, the Paris Court of Appeal firstly clarified the matter of the time limit for an action for a declaration of invalidity on the grounds of deceit (dol) by deciding that the five-year statute of limitations did not start when the cartel was suspected by the public purchaser but when the cartel was observed and established in terms of the facts and the law. Consequently, the Competition Council’s decision marks the start of the five-year statute of limitations for the invalidity.
On the merits, the Court found that the public purchaser did not, in the case at hand, provide evidence of deceit. While EDF strongly suspected the existence of a cartel between the tenderers, it nonetheless completed its call for tenders. Moreover, the volumes were not all attributed to the lowest-priced tenderer and the prices were close to the targets that EDF had set for itself.
With regard to EDF’s claim for damages for anti-competitive practices, it had stated that the harm suffered by it corresponded to the difference between the price actually paid for the cables and the price at which it would have purchased the cables had the suppliers not exchanged information on the prices proposed and therefore found themselves in conditions of full competition.
The Court of Appeal dismissed this argument on the grounds, in particular, of the prices proposed by a candidate not involved in the anti-competitive cartel and which could be considered as reference prices. The Court acknowledged that, for each batch for which the candidate in question made a tender, at least one of the prices proposed by another tenderer having participated in the cartel was lower. Accordingly, the Court of Appeal dismissed EDF’s claim for indemnification due to lack of evidence of harm suffered.
Therefore, despite the decision sanctioning the cable-makers handed down by the Competition Authority, said cable-makers managed to avoid their third party liability. This is further evidence of the difficulty facing French judges when it comes to assessing damages arising from anti-competitive cartels.
The end-of-year rebates granted to Leclerc by its suppliers constitute a significant imbalance
In an order dated 1 July 2015, the Paris Court of Appeal qualified the end-of-year rebates (RFA) obtained by the Groupement d’Achats des Centres Leclerc (Galec) as a significant imbalance and thus overturned the ruling of the Paris Commercial Court of 24 September 2013.
In 2011 the Minister of Economy had summoned Galec as, under the special terms and conditions of sale of 118 agreements, RFAs were granted to Galec by its suppliers without any real consideration in return. Certain agreements unconditionally granted RFAs. In those agreements where the RFA was subject to conditions, said conditions were in reality fictitious as they were based on an economic uncertainty which was inexistent when the contract was concluded, or on a minimum turnover which was much lower than the actual turnover generated, while the monthly payment of the RFA was calculated based on a provisional turnover very close to that actually generated.
The Court of Appeal therefore ruled in favor of the Minister, considering that these RFAs and their implementation constituted a significant imbalance in the parties’ rights and obligations. Although the parties have been free to negotiate the terms and conditions of sale since the Economic Modernization Law of 2008, any obligation made by the co-contractants, in the case at hand a reduction in the price, must be justified by consideration.
Galec is therefore ordered to reimburse €61.3 million in undue rebates to 46 of its suppliers and pay the French Treasury a €2 million fine. However, this case is not closed. Leclerc criticizes the interference of the judge in the free negotiation of the terms and conditions of sale and is lodging an appeal.