All questions

Introduction

i Merger control authority and regulatory frameworkExclusive jurisdiction of French Competition Authority

Since 2008, the French Competition Authority (FCA) has been the only authority responsible for merger control in France.

As an independent administrative authority, the FCA replaced the Ministry of Economy. However, the latter has retained some residual powers pursuant to Article L430-7 of the French Commercial Code (FCC), including the right to request, at the end of Phase I, the initiation of an in-depth review (the FCA has total discretion on whether to act on this request) and the right to use its power, regardless of the final decision at the end of Phase II, to overturn the FCA's decisions on public interest grounds (notably, preservation of employment).

Regulation and guidelines

French merger control is regulated by:

  1. Articles L430-1 to L430-10 and R430-1 to R430-10 of the FCC; and
  2. the FCA's merger control guidelines, which are not binding but are usually applied by the FCA except in exceptional circumstances.

The FCC and the FCA's guidelines refer to the EU Merger Regulation (EUMR)2 and to its consolidated merger control notice from 2008. In the context of modernisation and simplification of the merger control procedure in France, the FCA's guidelines were revised in July 2020, replacing the 2013 version.3

ii Transactions that require prior approval

All concentrations that meet the applicable thresholds require a filing to the FCA.

Definition of a concentration

Pursuant to Article L430-1 of the FCC, a concentration occurs when:

  1. two or more previously independent undertakings merge;
  2. one or more persons, already holding control of at least one undertaking (or one or more undertakings) acquire, directly or indirectly, control of the whole or parts of one or more other undertakings; or
  3. a joint venture that performs all the functions of an autonomous economic entity, on a lasting basis, is created.

A notifiable concentration may result from an acquisition of control but also from the change of the quality or structure of control (e.g., a change from joint control to exclusive control and vice versa).

The notion of control is similar to the definition under the EUMR (i.e., exercising decisive influence on the activity of another undertaking).4 An undertaking is deemed to have a decisive influence when it can either adopt (positive control) or block (negative control) strategic decisions (e.g., approbation of a budget or business plan, or nomination of board members). Control can be exercised either individually (exclusive control) or jointly (joint control).

Rights, contracts or other elements can confer control, either separately or in combination, when they provide the possibility of exercising decisive influence on the activities of an undertaking. This is the case in particular for:

  1. rights of ownership or use of all or part of the assets of an undertaking; and
  2. rights or contracts that confer a decisive influence on the composition, deliberations or decisions of the organs of an undertaking. However, the FCA has indicated that it will require additional factual or legal elements if control is acquired by way of a contract only.5
Thresholds

The FCC provides the applicable thresholds. The turnover to be considered depends on the types of undertakings concerned: merging entities, acquirer or target in the case of acquisition of exclusive control, or parent companies and target in the case of joint control.

To calculate the turnover of the undertakings concerned, Article L430-2 of the FCC refers to the rules set out by Article 5 of the EUMR, which provides that the relevant turnover is that of the last audited fiscal year (excluding internal turnover). Specific turnover calculation rules are set out for certain sectors, such as the financial sector. Adjustment of turnover must take into account the effect of permanent changes in the economic situation of the undertakings concerned if these changes are not reflected in the latest audited accounts (e.g., acquisition or divestment).

General thresholds

Article L430-2 of the FCC provides three cumulative conditions:

  1. the total worldwide turnover of all the undertakings concerned exceeds €150 million;
  2. the aggregate turnover in France of at least two of the undertakings concerned is more than €50 million; and
  3. the transaction does not fall within the European Commission's jurisdiction.

There are no specific rules for foreign-to-foreign transactions, which are reportable to the FCA if they meet the above thresholds.

Specific thresholds in retail sector and French overseas territories

Article L430-2 of the FCC provides alternative thresholds if (1) at least two undertakings concerned operate in the retail sector or (2) at least one undertaking concerned operates a part or all of its business in French overseas territories (i.e., Guadeloupe, French Guiana, Réunion Island, Martinique, Mayotte, Saint Pierre and Miquelon, Saint Martin and Saint Barthélemy) and the total worldwide turnover of all the undertakings concerned exceeds €75 million; the aggregate turnover in France of at least two of the undertakings concerned exceeds €15 million (€5 million if it relates to the retail sector and is located in French overseas territories); and the transaction does not fall within the European Commission's jurisdiction.

French Polynesia and New Caledonia now have their own merger control regimes.

Mandatory notification and failure to notify

Notifications to the FCA are mandatory and suspensive (i.e., the parties cannot implement the transaction prior to the approval of the FCA). The acquirer is the merging entities, the notifying party in the case of an acquisition of exclusive control, or both parent companies in the case of an acquisition of joint control.

Pursuant to Article L430-8 of the FCC, the failure to notify or the implementation of a transaction before its authorisation is illegal (gun-jumping). The applicable penalties include a fine of up to a maximum of 5 per cent of the notifying party's turnover in France during the last closed and audited financial year, an order to file with penalties or an order to unwind the transaction.

The FCA fined the Compagnie Financière Européenne de Prises de Participation (Cofepp) €7 million in 2022 for both failure to notify and implementing the transaction before clearance.6 Cofepp notified its acquisition of sole control of Marie Brizard Wine and Spirits (MBWS) to the FCA in 2019 while it was increasing its shareholding in the company from close to 30 per cent to close to 50 per cent. A clearance decision subject to remedies was adopted on 28 February 2019.7 Shortly thereafter, the FCA raided the premises of the merged entity. The FCA concluded that Cofepp had breached the standstill obligation by acquiring de facto control over MBWS well before the notification and had implemented the transaction both before the capital increase and between the date of notification and the clearance by appointing the chair of MBWS. In line with the European Commission,8 the FCA considered as aggravating circumstances that the clearance was subject to remedies (i.e., divestiture of brands) and the infringement was intentional.

The FCA had already imposed fines for failure to notify; the most significant fine (€4 million) to date was imposed in 2013 on Castel group, a company active in the wine industry.9 Following a third-party complaint, the FCA found that Castel did not notify the acquisition of six companies prior to closing the deal in May 2011. The transaction was ultimately notified and cleared after a Phase II examination period.10 The FCA justified the amount of the fine, in particular, by determining that (1) there was no doubt that the transaction was notifiable, (2) the sale agreement identified a mandatory notification that was expressly waived by Castel in the transaction's implementation agreement and (3) Castel was aware of the merger control rules, having filed a notification with the European Commission two months before signing the litigious sale agreement.

Similarly, the FCA sanctioned the violation of the suspensive effect of a notification with one of the highest fines to date (€80 million) for gun-jumping in Europe on Altice/SFR (2016).11 The FCA found that, during the suspension period, Altice (a multinational cable, fibre, telecommunications, contents and media company) (1) approved mobile operator SFR's submission to calls for tenders, (2) approved commercial conditions of a significant contract for SFR, which was renegotiated, (3) influenced SFR's pricing policy and (4) coordinated with SFR for the acquisition of OTL (a telecommnications distribution service). Altice also exchanged various pieces of commercially sensitive information and coordinated on common commercial actions with SFR and OTL before the authorisation. Altice was also fined for gun-jumping by the European Commission in 2018 (€124.5 million) in the context of the acquisition of Portugal Telecom under the EUMR and Article 101 of the Treaty on the Functioning of the European Union.

Year in review

FCA activity was 3 per cent lower in 2022 than in 2021 (257 merger control decisions compared with 268 cases).

Recent key developments concern the FCA's first acceptance of the failing firm defence,12 a new fine imposed on Altice13 for not complying with the injunctions conditioning the takeover of SFR14 and the abandoned transaction in the audiovisual sector caused by the stringency of the FCA.

i First application of failing firm defence by FCA: Mobilux/Conforama

In 2020, Mobilux notified the European Commission of its intention to acquire Conforama, a competitor of its BUT stores in the market for retail distribution of furniture. The Commission referred the case to the FCA, which in turn granted Mobilux a derogation from the standstill obligation owing to Conforama's serious financial difficulties and despite the competitive assessment not being straightforward. This led the FCA to open a Phase II investigation in September 2021. In April 2022, the FCA finally cleared the transaction without further conditions, despite the competition risks identified and the absence of any demonstration that the efficiency gains could offset those risks. To do so, the FCA relied on the failing firm defence, considering that (1) Conforama would have quickly exited the market if not taken over, (2) no other possible alternative transaction was any less anticompetitive and (3) the exit of Conforama would not be less harmful to consumers than its acquisition by Mobilux.

This is a rare application of the failing firm defence in Europe and the first by the FCA. However, given the particular aspects of the case in the context of the pandemic, this decision does not necessarily imply a softening of the FCA's stance towards this defence.

ii Financial penalty for non-compliance with certain injunctions: Altice/SFR

In October 2014, the FCA cleared the acquisition of SFR by Altice (formerly Numéricable) subject to structural and behavioural remedies.15 These included that the new entity would give access to its cable network to competitors and, in particular, to Bouygues Telecom, which had entered into a co-investment agreement with SFR in November 2010 to deploy fibre network in areas that were eventually already covered by Numéricable's cable network. In a decision dated 8 March 2017,16 the FCA found that Altice did not comply with its commitments: Altice failed to maintain the network and did not meet the expected requirements in terms of connections provided in the agreement with Bouygues. The FCA fined Altice €40 million and imposed several injunctions relating to the deployment and maintenance of the network. In its latest decision, dated 29 September 2022, the FCA found again that Altice had not complied with its obligations. The company decided not to challenge the alleged breaches, and was fined €75 million as part of a settlement procedure.17

iii Withdrawal of contemplated transaction to avoid prohibition decision: TF1/M6

In September 2022, the media group Bouygues (which controls the TF1 television network) dropped its bid to acquire M6 (a private channel owned by RTL Nederland) after extensive pre-notification discussions with the FCA and a seven-month review period. Formally notified in February 2022, the FCA opened an in-depth investigation one month later, after concluding that the transaction would have a negative effect on competition in the advertising market and, to a lesser extent, in the service distribution market. According to public information, the combined market share of the two major French groups, each controlling one of the most popular French television channels (TF1 and M6), would have reached 75 per cent of the audiovisual advertising market. For the FCA, the significant market power of the merged entity would have enabled it to raise the price of advertising. Withdrawal of the notification followed hearings in August 2022 before the FCA during which the commitments proposed by Bouygues were discussed. The parties concluded that the only commitment acceptable by the FCA to address its concerns would have been to divest either TF1 or M6, removing the strategic rationale for the transaction.

The outcome of this case suggests that the FCA is following the general trend for competition authorities to be more stringent. In particular, the FCA has rejected a broader definition of the advertising market, whereas the parties argued for the existence of a single market encompassing audiovisual and digital advertising, which would have drastically reduced their combined market share. The same goes for its analysis of the proposed commitments, which focused on structural commitments (divestment of M6) over behavioural commitments (separation of advertising agencies) to resolve the competition problems arising from the horizontal overlaps between the parties' advertising activities.