The French Competition Authority’s decision of March 20, 2012 sanctioned NPPF (Nestlé group), Royal Canin (Mars group) and Hill’s (Colgate-Palmolive group) for an agreement with their wholesale distributors to apply various specific vertical restrictions, such as customer restrictions, territorial exclusivities and resale price maintenance. NPPF and Royal Canin chose not to contest the objections, whereas Hill’s contested them. The Paris Court of Appeal judgment of October 12, 2013 dismissed all the appeals of the undertakings involved.
The judgment is interesting first for the arguments relating to the Authority’s guidelines published in 2011 on the method used to determine fines (the fining guidelines), which was applied here to events going back to 2004-2008. Based on the argument that the fining guidelines constitute a simple directive which only restates the law as it stands on how fines are determined, the Court of Appeal considered that its application to facts which occurred prior to its publication was not contrary to the principle of non-retroactivity under criminal law. The Competition Authority could in any case have imposed the same sanctions using the same method, since the fining guidelines are merely the material expression of the legal provisions on the determination of fines. A somewhat legalistic argument, if one considers the impact of the fining guidelines on the amount of the fines.
As regards the determination of the amount of the fines, the Court of Appeal first indicated that it was not controlling the correct application of the fining guidelines, but rather that of Article L.464-2 of the Commercial Code, although it then validated one after the other the various stages in the calculation of the sanctions set out in the release. Right from the start the Court of Appeal issued a warning to the undertakings which had not contested the objections: they could not use the pretext of discussing the factors used to determine the fine to challenge the existence and characterization of the infringements. Unfortunately the judgment fails to identify which defence arguments this message is referring to. Nevertheless we do learn that for undertakings which opt not to contest the objections, the definition of the products concerned by the offence cannot be challenged during the process of determining of the fine if they were defined in the statement of objections.
Although on the face of it the Court of Appeal answered the various arguments on the calculation of the fine, namely regarding the seriousness of the practices and the extent of the damage caused to the economy, it actually merely adopted as its own the Competition Authority’s arguments in the appealed decision. The Court of Appeal confirmed the duration of the offence factor to determine the seriousness of the offences and consequently approved the duration coefficient in the calculation of the fine. For the extent of the damage caused to the economy, the judges upheld the criterion of intra-brand competition, noting in passing the low level of inter-brand competition (consumers’ loyalty to “their” brand, absence of any new entrants).
It is also interesting to note that there is no point in the parties invoking prior decisional practice in any respect (legitimate trust, legal security, level playing field): according to the Court of Appeal, the sanctions depend on the circumstances of each case. In the end, it found that an undertaking cannot seek equal treatment for its own sanction compared to the sanction imposed on another undertaking in the same decision.
In short, the Paris Court of Appeal decision illustrates a certain self-restraint to challenge the sanctions determined by the Competition Authority, which is regrettable, since the stakes do indeed deserve a more decisive jurisdictional control.