French competition law applies to any entity having an “economic activity”, which therefore is not limited to corporations and includes entities such as trade unions, professional orders, and associations.
Pursuant to Article L464-2 of the French Commercial Code, the French Competition Authority (the “FCA”) may impose different penalty amounts for anti-competitive practices depending whether the entity in breach is a corporate entity or not:
- For corporations, the maximum level of penalties is equal to 10% of the corporation’s net annual global turnover (the highest figure since the financial year preceding the breach is taken into account); and
- For non-corporations, the maximum level of penalties is 3 million euros.
By decision of 7 January 2016, the French Constitutional Court validated this dual sanction regime. Further to this decision, the French Supreme Court issued a ruling on 8 February 2017 whereby it elaborated on the rationale and criteria to apply such differentiated penalty regime.
In the case concerned, the FCA had imposed sanctions on an association created by the French professional order of accountants for abuse of a dominant position by implementing measures to discourage competing online tax and accounting declaration sites. The association in question which was ordered to pay a penalty of 1.17 million euros – amounting to 17% of its turnover - challenged the application of the 3 million-euro ceiling on the following grounds:
- Considering that the penalty was issued for abuse of a dominant position, which legal basis refers to “corporations or a group of corporations”, the association argued that it ought to be considered a corporation for the purposes of the penalty, and therefore the 10% turnover limit should have applied rather than the 3 million-euro ceiling;
- The association argued that the 3 million-euro ceiling is applicable only to those non-corporate entities which do not realize a turnover; and
- The association argued that the penalty is unfair as it contravenes the principles according to which penalties must be proportional and non-discriminatory.
The French Supreme Court rejected the above arguments and ruled that French lawmakers introduced a dual penalty regime to take into account the differing economic capabilities between for-profit corporate entities and non-corporate entities. Accordingly, the French Supreme Court validated the FCA’s decision to apply the 3 million-euro ceiling to the association, without regard to whether the association made a turnover or not.
Of particular interest is the fact that the French Supreme Court – despite having noted differing economic capabilities between corporations and non-corporations – did not pay greater attention to the fact that the penalty imposed on the association was indeed disproportionately higher than that which a corporate entity could have been ordered to pay.