In brief: the key features of merger control legislation in France

Legislation and jurisdiction

What is the relevant legislation and who enforces it?

French merger control rules are set out in the Commercial Code (the Code).

An independent administrative authority, the Competition Authority (the Authority), has jurisdiction over merger control cases in France; however, the Minister for the Economy holds residual powers in two circumstances:

• even if the concentration is cleared by the Authority at the end of Phase I, the Minister can ask that the Authority to open an in-depth Phase II review of the concentration (although the Authority has discretion on whether to act upon this request); and
• whatever the final decision of the Authority at the end of Phase II, the Minister can substitute his or her own decision based on public interest grounds.

In 2020, the Authority published its updated Merger Control Guidelines (the Guidelines), replacing the 2013 guidelines. Although non-binding, these should generally be followed by the Authority.

What kinds of mergers are caught?

The French definition of ‘merger’ is aligned with the definition set out in the EU Merger Regulation (EUMR). The French legislation thus applies to ‘concentrations’, which may occur when:

• two or more formerly independent undertakings merge; or
• one or several persons who already control at least one undertaking, acquire, directly or indirectly, control of all or part of one or several other undertakings.

What types of joint ventures are caught?

Joint ventures are treated under French law in the same way as they are under the EUMR. It follows that the creation of a joint venture performing, on a lasting basis, all the functions of an autonomous economic entity, constitutes a concentration. A concentration also occurs when a joint venture that was not initially full-function becomes fully fledged (DCNS/Priou, 2016) and in the case of a transition from exclusive control to joint control.

In Cosson/Ensis Group/Terzeo (2019), the Authority applied, for the first time, the Asphalt case law of the European Court of Justice (ECJ) in which the Court clarified how the concept of concentration should be analysed in the context of the transition from exclusive control to joint control with the maintenance of the historical shareholder (ECJ, 7 September 2017, C-248/16, Austria Asphalt).

The French Adrexo case (2008) involved an interesting scenario. There, it was considered that a shift from joint control to sole control over a joint venture could, even in the absence of any change in its shareholding, result solely from the change of control over another joint venture, independent from the first one, but owned by the same parent companies.

Is there a definition of ‘control’ and are minority and other interests less than control caught?

The notion of ‘control’ under French law is similar to that of the EUMR: control arises from rights, contracts or any other means that enable the party to exercise a decisive influence on the activity of an undertaking, be it on an individual or joint basis, and having regard to the factual and legal circumstances, in particular:

• ownership rights and possession of all or part of the assets of an undertaking; and
• rights or contracts that confer a decisive influence on the composition or the resolutions of the decision-making bodies of an undertaking.

De jure or de facto control is relevant to qualify a concentration (eg, the 2018 AG2R La Mondiale/Matmut case concerning a de facto merger). As is the case under the EUMR, joint control based on strategic veto rights is also caught by the French merger control regime.

Minority and other interests that do not reach the standard of negative sole control or joint control are not subject to merger control.

What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?

Three sets of turnover-based thresholds currently exist in France. 

Turnover calculations under French law are very similar to those set out in the EUMR, and the Code expressly refers to article 5 of the EUMR on this subject. The turnover of an undertaking is thus calculated by taking into account the whole group to which the undertaking belongs, and the seller is not taken into account.

First, French merger control applies where the following cumulative thresholds are met:

• all the undertakings that are party to the concentration achieved, during the previous financial year, a worldwide combined pre-tax turnover of over €150 million;
• at least two of the undertakings concerned each achieved, during the previous financial year, a pre-tax turnover in France exceeding €50 million; and
• the transaction is not caught by the EUMR.

Second, lower thresholds apply to concentrations involving undertakings in the retail trade (ie, where two or more parties to a concentration operate retail premises). French merger control is thus applicable where the following cumulative thresholds are met:

• all the undertakings that are party to the concentration achieved, during the previous financial year, a worldwide combined pre-tax turnover of over €75 million;
• at least two of the undertakings concerned each achieved, during the previous financial year, a pre-tax turnover in the retail trade sector in France exceeding €15 million; and
• the transaction is not caught by the EUMR.

Third, lower thresholds apply to concentrations involving undertakings operating in French overseas departments and French overseas communities (ie, where at least one party to a concentration is active in one or more French overseas departments, in the Mayotte department, in the Wallis-et-Futuna islands or in the French overseas communities of Saint-Pierre-et-Miquelon, Saint-Martin and Saint-Barthélemy). French merger control is thus applicable where the following cumulative thresholds are met:

• all the undertakings that are party to the concentration achieved, during the previous financial year, a worldwide combined pre-tax turnover of over €75 million;
• at least two of the undertakings concerned each achieved, during the previous financial year, a pre-tax turnover exceeding €15 million (reduced to €5 million in the retail trade sector) in at least one French overseas department or French overseas community concerned – these thresholds do not have to be achieved by all the undertakings concerned within the same overseas department or community; and
• the transaction is not caught by the EUMR.

The scope and interpretation of these tests are clarified by the Guidelines, which contain very specific additional rules and illustrations of how the thresholds should be applied and interpreted.

Retail trade is primarily defined in the Guidelines as the sale of goods to consumers for domestic use, including a number of non-exhaustively listed activities, such as the sale of second-hand goods and a number of handicraft activities, but excluding, among other things, banking, insurance or travel agency services and restaurants, as well as undertakings achieving all their turnover through online sales.

Premises qualify as retail premises where more than half of the turnover achieved in those premises (of which at least one must be located in France) is generated through such activities. The Guidelines take the view that if this 50-per-cent threshold is met, 100 per cent of the turnover achieved in the premises, both retail and non-retail, must be taken into account for checking whether the €15-million threshold is achieved. Presumably, the same approach should prevail with respect to the €5-million threshold.

Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?

Filing is mandatory, and no exceptions are provided for by the law.

Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?

Where the relevant turnover thresholds are met, mergers, including foreign-to-foreign mergers, fall under French merger control rules and must be notified and obtain clearance prior to completion. There is no need to conduct a ‘local effects test’ as such. Whether the parties are incorporated under French law or have subsidiaries in France is irrelevant.

Are there also rules on foreign investment, special sectors or other relevant approvals?

Under French Treasury rules, foreign investments in France are unrestricted; however, certain foreign investments must be declared, for administrative and statistical purposes, to the Minister for the Economy and the Banque de France.

Where the foreign investment concerns a ‘strategic’ French sector (eg, a sector that might affect public policy), prior authorisation may be necessary. Prior authorisation is required in a number of strategic sectors (eg, defence, security, cryptology and information systems security). All foreign investments in those sectors must be formally approved by the Minister for the Economy prior to implementation. For this purpose, ‘foreign investment’ means the acquisition of control in a French entity pursuant to article L233-3 of the Code or the acquisition of all or part of a branch of activity of a French entity.

Non-European investments fall under stricter requirements than European investments since prior approval of the Minister is also required for them when 25 per cent of the voting rights in a French entity is exceeded (directly or indirectly) or when 10 per cent of the voting rights in a French listed company is exceeded (applicable until 31 December 2022 as at the time of writing). To identify the ultimate controlling entity of an investor, the Decree of 31 December 2019 provides that where no control can be established on the basis of French corporate law concepts, control will be assessed under French merger control rules.

Following notification, the Minister of Economy has 30 business days to indicate whether the notified foreign investment falls outside the scope of control, is cleared unconditionally or requires further analysis. If further analysis is required, the Minister has an additional 45 business days to clear the foreign investment (with or without conditions) or to prohibit it. Such review entails a standstill obligation. Where an investment is deemed to threaten national interests, approval may be conditional upon the parties’ implementation of specific remedies, including divestments, set in proportion to the importance of the national interest at stake.

Failure to comply with the notification requirement entails very significant risks (in particular, a significant fine, nullity of the relevant agreements and an injunction to restore the status quo ante). The Law of 22 May 2019 strengthened and expanded the powers of the Minister for the Economy. In particular, it strengthened the power of injunction of the Minister and also empowers the Minister to impose interim measures if the protection of national interests is compromised or likely to be compromised (eg, suspension of the voting rights attached to the shares acquired by the investor without approval).

The Law of 22 May 2019 also expands the Minister’s powers to fine investors in the cases of acquisition without prior approval, approval obtained by fraud, non-compliance with remedies or breach of an injunction. In those cases, the Minister may impose a fine capped at the highest of the following: twice the amount of the investment, 10 per cent of the target’s annual turnover, €1 million for natural persons and €5 million for legal persons.

In March 2022, the Treasury launched a public consultation with a view to issuing guidelines for the control of foreign investments in France to clarify the administrative control doctrine and to provide guidance on the procedure.

In addition, there are a certain number of sectors in which specific merger rules apply, such as:

1. the audiovisual sector – unless otherwise agreed in international conventions to which France is a party, a foreign legal entity may not hold more than 20 per cent of the capital or voting rights of an audiovisual company that exploits an audiovisual communication system in French. There are also specific rules on cross-media ownership. If a concentration in the audiovisual sector is reportable to the Authority, the Authority must seek the opinion of the French Audiovisual Authority;
2. the press sector – a single individual or legal entity may not control daily publications that represent more than 30 per cent of the total circulation on the national market of similar publications; for publications in French, the 20 per cent rule as described in point (2) applies;
3. investment services and insurance – specific authorisation from the relevant French authorities is required; and
4. the banking sector – a non-binding opinion is requested from the Credit Institutions Committee during the Authority’s Phase II investigation.