The French Competition Authority has released its first guidelines setting a methodology to calculate fines imposed on companies participating to restrictive agreements and/or abuses of dominant position. These guidelines will increase transparency for companies and aim to affirm the Authority’s power to impose fines after court decisions challenging the lack of apparent methodology of the Authority.
Until last autumn, the Autorité de la concurrence (AdlC) used to set fines on the basis of a share of infringers’ total annual turnover in France. Under article L. 464-2 of the Commerce Code, this share was set according to the seriousness of the infringement, the importance of the damage to the economy, the individual situation of the undertaking concerned, and any taking into consideration any repeat offence. The decisions of the AdlC would discuss all these criteria but not their respective weight in the calculation of the fine.
At the end of the day, the apparent lack of scientific method led to regular challenges before courts. In January 2010, the Paris appeal court thus divided by 8 the fines imposed by the AdlC in the steel cartel case. After this judgment, an expert group was appointed by the Minister for the Economy in order to advise on the best options and the AdlC tackled the drafting of a notice which would describe precisely the way fines are calculated.
On this occasion, the AdlC completely reshaped its methodology to set fines and progressively started implementing and refining it in the cases handled from September 2010 up to the publication for comments of a first draft notice in January 2011. The final version of the Notice, published on 17 May 2011, shows that a number of significant improvements have been made on the basis of these comments.
A methodology largely consistent with the EU one
The Notice provides that the AdlC will now rely on the direct turnover achieved in France by the company concerned on the relevant market during the last full year of the infringement, with limited exceptions where the turnover and/or the last full year is not the most representative reference (points 33 and seq.). Thus, the AdlC retains the European Commission’s approach, also followed in a number of Member States as well as in the US Federal Sentencing Guidelines.
The basic amount of the fine is constituted by a share of this annual turnover, in principle between 0 and 30 % (and even between 15 and 30 % for hardcore horizontal restrictions) reflecting the seriousness of the infringement and the importance of the resulting damage to the economy (points 40 and seq.).
The Notice then provides that duration is integrated to this amount according to a methodology which is meant to be less inflationist than the European Commission’s one. The AdlC will apply a ratio of 1 for the first year, and then of 0.5 for each additional year. As a result, for a 10 year infringement, the basic amount will be multiplied by 5.5.
However, in bid-rigging cases, the AdlC has decided not to apply this method but rather to retain a proportion of the total turnover achieved in France by the entity concerned or the group to which it belongs. This proportion will be defined taking into account the seriousness of the facts and of the harm done to the economy (points 67 and 68).
Individualization and size of the group are likely to introduce major differences between companies
At this stage, the AdlC proceeds to the individualization of the fine, based on mitigating (maverick conduct, participation under constraint or with the encouragement of public authorities etc.) and aggravating circumstances (ring leader, constraint exercised on other companies, specific capacity of influence or moral authority such as entities entrusted with a public service mission etc.). Prior infringements are also considered and repeat offence may lead to an increase by 15 to 50% (points 50 and seq.).
The Notice also mentions an additional individualization factor the AdlC may consider: the size, the more or less significant economic power the company concerned enjoys, its overall resources, the group to which the undertaking belongs (points 47 and seq). The first decisions show that this factor – which may be used to increase or decrease the fine – is likely to introduce major differences.
This is a trend in the new fining policy, the AdlC being committed to lower the fines of singleproduct companies (not only in absolute value but also in the level of taxation of their turnover), while increasing those for larger and diversified groups.
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A f ter checking that the maximum fine level (10 % of the total annual consolidated turnover) is not met, reductions for leniency and settlement are applied. Finally, the inability to pay is also taken into account to reduce or annul the final fine.
Due process is also improved
A significant amendment to the first draft notice released in January 2011 lays in the introduction of the right to be heard on the principal elements to be used for the calculation of the fine. Comments made during the consultation process as well as announcements by the European Commission that they would now also disclose the elements to calculate a potential fine in the Statement of Objections1, have certainly weighed in the decision of the AdlC.
The Notice indeed provides that the Investigation Services will point out to the essential points of law or of fact that are likely to have an influence on the setting of the fine, in the Final Report which follows the Statement of Objections and the Answer of the company (points 17 and seq). Naturally, the setting of the fine remains within the sole competence of the Members of the AdlC but such a disclosure upstream in the process will improve the discussion between the parties and the AdlC in order to avoid situations where companies discover in the decision a calculation based on erroneous figures or taking into account factors against which they would have presented defense arguments.
Implications for businesses
The new fining policy is designed to set fines which are more adapted to the case specificities and to the situation of the entity concerned. It will also provide more transparency and foreseeability.
However, this approach should not either be applied too mechanistically. The first cases indeed show that even where the AdlC does not apply the maxima set in the Notice, the fines in value may reach unprecedented levels2.