By a controversial decision, the Constitutional Council ruled that so-called “simple” investigations comply with the constitution
The investigation services of the French Competition Authority made several requests for Brenntag to communicate information and documents on the basis of Article L.450-3 of the French Commercial Code concerning so-called “simple” investigations as part of the examination of the chemical commodities case.
Brenntag was notably asked to set up Excel spreadsheets covering its activity over a period of 16 years. These spreadsheets could reach up to 120,000 lines and, according to the company’s lawyer, this required strongly mobilizing its personnel for the French Competition Authority’s agents.
Let us not be misguided by use of the term « simple » referring to this type of investigation because, in actual fact, there is absolutely nothing simple for the investigated companies, on the contrary. Article L.450-3, al. 4 of the French Commercial Code grants agents of the French Competition Authority, of the Directorate-General for Competition, Consumption and the Prevention of Fraud and any officer authorized by the Ministry of the Economy, the unrestricted power to demand that a company communicate any professional document (such as for example contracts, invoices or bank statements), to obtain a copy thereof on any medium and by all means and to gather on site or upon convocation any information, document or justification.
These investigations can be put in place at any moment without the need for a prior authorization from the judge. The request for documents and information can concern any of the company’s activities and any type of practice in terms of competition, business cooperation, invoicing, payment terms, commercial relationship terminations or any practice suspected of being restrictive. The investigators do not need to substantiate their request: the agents in question do not need to give any justification to the parties on why the investigation is being carried out, even if the company in question asks them. In fact, they expressly refused to explain the reasons for requesting documents from Brenntag.
Yet, while Article L.450-3, al. 4 of the French Commercial Code leaves the door open to potential abuses by investigation services and no text provides for direct means of recourse, the Constitutional Council, before which an application for a preliminary ruling on constitutionality was brought by the French Supreme Court at Brenntag’s request, states, in its decision of July 8, 2016, that this Article complies with the constitution. For the Council, the Article complies with the constitution due to the fact that the text in question, while it “imposes” the disclosure of the requested documents to these agents, does not give them a power of compulsory enforcement to obtain these documents, a general power to audit or a power to search. The Council states that requests to communicate information are not in themselves acts likely to be prejudicial.
This conclusion concerning the voluntary nature of disclosing documents is very surprising when you consider that refusing to communicate the requested information and documents exposes the company to an injunction under penalty (of up to five percent of the average daily turnover per day of delay), an administrative fine of €300,000 and a criminal sanction of two years’ imprisonment for obstructing the investigation!
Even if a company could establish a channel for appeals by refusing to respond to abusive requests for information disclosure in order to obtain a decision prejudicial to it (periodic penalty or fine) to then lodge an appeal and challenge the illegal information requests, it would still have to pay the periodic penalty or fine because its appeal would not have suspensory effect. This makes the voluntary nature of disclosing documents rather theoretical. It is regrettable that the Constitutional Council did not hear the legitimate concerns of the companies on the lack of an effective remedy against requests for information that may be abusive or disproportionate.
The French Supreme Administrative Court partially cancels the decision of the French Competition Authority authorizing a merger
In 2015, the French Competition Authority (FCA) authorized the purchase by UGI Bordeaux Holding (UGI), active in the sector of liquefied petroleum gas (LPG) distribution, of Totalgaz, subject to certain commitments from the purchaser.
The main competitors of these companies appealed before the French Supreme Administrative Court (CE) against the decision by the FCA to have it cancelled. In its decision of July 6, 2016, the CE recalled that it was for the FCA before which a merger was brought to take into account all the relevant data to characterize the anti-competitive effects of a merger. According to the CE, concerning the market of distribution of small bulk combustible LPG, the FCA analyzed the merged entity’s capacity to exclude access of competing distributors to storing infrastructures only on the local markets where the entity occupies a dominant position resulting from the merger. For the CE, the FCA should have extended its analysis of anti-competitive effects to local markets in which either UGI or Totalgaz already had a dominant position before the merger. The CE cancels the decision of the FCA on this issue, and the latter will therefore have to complete its competitive analysis on the other markets in question.
Furthermore, concerning the commitments conditioning the merger authorization, the CE recalls that these commitments must be sufficiently certain and measurable to prevent the anti-competitive effects of the merger. In the present case however, the CE holds that certain commitments accepted by the FCA are not sufficient. This is the case of a commitment to transfer a disposal site and to renew contracts of exchange of LPG volume with competitors, although the site poses serious industrial risks and its sustainability was therefore not guaranteed.
Consequently, the CE also cancels the decision of the FCA on aspects related to commitments deemed insufficient, which will lead the FCA to impose for its authorization new commitments or requirements or injunctions.
Thus, while the decision of the CE does not cancel the purchase that was already made by UGI of Totalgaz, it may partly affect the overall economics of the merger as it was initially expected by the purchaser. Appeals by competitors against authorization decisions can, in some cases, prove to be efficient.
The parent company remains liable for the anticompetitive practices committed by a subsidiary which did not comply with the group compliance program
In its judgment dated June 16, 2016 in the cartel of reagents, the Court of Justice of the European Union (CJEU) confirms the imputation of anticompetitive practices to the parent company following a violation by its subsidiary of the instructions given by the parent company not to participate in such practices.
In the case at hand, Evonik Degussa was fined €4,680,000 on July 22, 2009 for anticompetitive practices between steel and gas sector reagent suppliers carried out by its subsidiary SKW Stahl-Metallurgie.
It therefore appealed to the General Court of the European Union explaining that, as the subsidiary violated its explicit instructions not to engage in anticompetitive practices, it had no decisive influence on the subsidiary and could thus not be held liable for its practices.
The CJEU confirmed the analysis of the General Court that ruled that when a subsidiary disregards its parent company’s instructions not to participate in an unlawful agreement on a one-off occasion rather than constituting a generalized act of insubordination, this circumstance alone is not sufficient to prove the absence of a decisive influence by the parent company on its subsidiary.
A one-off non-compliance with an instruction was therefore not sufficient for anticompetitive practices carried out by the subsidiary not to be imputed to the parent company whose conviction was confirmed.