On January 26, 2011 the French Competition Authority (“FCA”) issued a decision in which it fined 14 undertakings a total of 10 million Euros for having participated in cartels and sharing markets relating to the restoration of historic monuments in the French regions of Basse-Normandie, Haute- Normandie and Picardie.
In fixing the amount of the fines, the FCA considered the severity of the practices in question, the scope of the damage to the economy as well as each company's individual situation. For three companies (Pradeau-Morin, Lanfry and Coefficient) which did not dispute the grievances and which undertook commitments destined to prevent the implementation of such practices in the future, the FCA granted the companies a reduction of the penalty (between 10 and 20%).
Nonetheless, despite a 20% fine reduction, Pradeau-Morin, the subsidiary of a large French construction group (Eiffage), was very severely fined (€4,500,000). Pradeau-Morin appealed the FCA’s decision to the Paris Court of Appeal.
The Paris Court of Appeal (Pôle 5 Chambre 7) upheld the FCA’s fine, considering that when a subsidiary belonged to a corporate group, even though the practices complained of were engaged in by the subsidiary alone, the turnover of the whole group was to be taken into account as a relevant indicator of its economic power in order for the fine to be proportionate and dissuasive. The Paris Court of Appeal thus considered that the mere fact the group did not participate in the prohibited practices was not relevant.
Such reasoning was overruled by the French Supreme Court in a recent decision rendered on February 18, 2014.
Based on Article L. 464-2 of the French Commercial Code, the French Supreme Court stated that “the financial penalties are determined individually for each company or entity sanctioned and are duly justified”. The French Supreme Court held that “the mere statement that the “subsidiary belongs to a powerful group” was not sufficient to increase the fine without first establishing that Pradeau-Morin’s belonging to the Eiffage group “had played a role in the implementation of the anti-competitive practices or was likely to exert an influence on the seriousness of these practices”, all the more so since the Paris Court of Appeal had considered that Pradeau-Morin conducted its affairs in an autonomous manner.
Another subsidiary fined by the FCA on January 26, 2011 also appealed against the amount of the fine, arguing that it had a weak financial capacity to contribute. This argument was rejected by the Paris Court of Appeal based on the fact that the subsidiary belonged to a group which had the financial capacity to contribute to payment of the fine.
This decision was also overruled by the French Supreme Court on the same day (February 18, 2014). The French Supreme Court considered that after having found that the subsidiary behaved autonomously, the Court of Appeal should have determined whether or not the subsidiary had the wherewithal effectively to muster the funds necessary to pay the fine from the group it belongs to.
In these decisions, the French Supreme Court strictly applied the principle of individualisation of penalties by considering that the mere fact to belong to a group is not sufficient to justify an increase in the amount of the fine or to reject elements of proof related to the financial capacity of the subsidiary to contribute. The FCA will now normally have to establish a link between the belonging to a group and the implementation of or the seriousness of the anti-competitive practices. However, certain authors tend to consider that in practice, since it is difficult to differentiate the imputability of a practice to a group and the “role played in the implementation of the anti-competitive practice”, the FCA might simply tend to impute responsibility for anticompetitive practices to the larger corporate group without reference to whether or not the subsidiary concerned acted autonomously.
In a related development, the same chamber of the Paris Court of Appeal, in a recent decision dated March 13, 2014, reduced a fine which had been issued by the FCA by nearly 99%.
This decision was the result of a long procedure initiated by the Minister of Economy in 2002 who complained to the French Competition Authority about anti-competitive practices in the hi-fi and home cinema selective distribution sector involving various companies including Bang & Olufsen France. The FCA found, in a decision of December 12, 2012, that Bang & Olufsen had engaged in an anti-competitive cartel to prohibit its authorized dealers to sell on-line and fined it EUR 900,000, due in particular to the seriousness of the offense. Bang & Olufsen France appealed the FCA decision.
The Paris Court of Appeal divided the amount of the FCA’s fine by 90, reducing the fine to EUR 10,000 in view of the relative gravity of the offense, its limited effect on the economy and the fact that the law and case law in regard to on-line sales was not clearly defined at the time of the complained of practices.
It remains to be seen whether the FCA will in future bear in mind the scrutiny of the Courts when issuing fines