French Competition Law provides a comprehensive review of the French rules relating to competition: restrictive agreements, commercial negotiation, abuses of a dominant position, procedure and merger control.

French Competition Law

The phenomenon of buyer power does not easily fit within competition law. Buyer power is generally but not exclusively applicable to distributors and concerns mainly the upstream market, i.e. relations between distributors and suppliers, whereas price theory is mainly of interest to the suppliers  of products or services and is primarily of concern to the downstream market where distributors and c …

Competition law and buyer power

Broadly speaking, competition law seeks to ensure both freedom and fairness in the market place. Most of its rules aim to protect the market by preventing cartels, abuses of dominant position, and mergers which stifle or reduce competition among businesses. These rules include in particular Articles 101 and 102 TFEU, and the law on anticompetitive practices in France (Articles L. 420-1 et seq. of the French Commercial Code). Other types of rules protect competitors, not competition, by trying to prevent businesses from acting in a way that is harmful to their partners or competitors, if not to the market itself. According to the French classification scheme, such behavior may amount to unfair competition or restrictive practices. 

Strictly speaking, competition law does not concern itself with the fairness of competition. Inspired by the example of American antitrust law, its only object is to control monopoly or market power, i.e. the capacity of an undertaking or group of undertakings who possess significant market share to provoke price increases by reducing supply, inciting customers to turn to other goods, and thereby wasting scarce economic resources. Thus, beyond the proper functioning of the market, competition law seeks to ensure both economic efficiency and the well-being of the consumer. Indifferent to the distribution of resources between economic operators, traditional competition law is devoid of any equitable aim. It does not seek the just distribution of wealth; rather it only looks to increase economic efficiency. Neither does it endeavor to promote one type of operator over another - for example, small outlets over large distributors. The premise of classic competition theory is that optimal market conditions result from the pure and simple application of price theory and its legal corollary, the struggle against monopoly power. Thus, only the rules laid down in Articles 101 and 102 TFEU, Articles L. 420-1 et seq. of the Commercial Code, or in the merger control regulation are, strictly speaking, competition law provisions. 

Unlike US law, neither French nor European Union law views the objectives of competition law, even when understood as the rules against anticompetitive practices, exclusively in terms of economic efficiency. Relying instead on the notion of workable competition, both systems have, when necessary, readily discarded price theory doctrine. For example, in the Metro ruling  , the court declared that “The requirement contained in Articles 3 and 85 [now Article 101 TFUE] of the EC Treaty that competition shall not be distorted implies the existence on the market of workable competition, that is to say the degree of competition necessary to ensure the observance of the basic requirements and the attainment of the objectives of the Treaty...”. Thus EU and French authorities sometimes prefer competition based on quality rather than on price, as they do not consider environmental protection, employment, small business, or the abuse of distributor buying power as external concerns. The divergence between the French approach and that of classic economic theory is not, however, as absolute as it might first appear, since objectives falling outside the purview of strictly competitive logic include cost factors that should be taken into consideration in any comprehensive economic analysis.

Case 26/76 - Metro v Commission - ECR I-1875, LawLex200400002802JBJ.

Objectives of competition law

The phenomenon of buyer power does not easily fit within competition law. Buyer power is generally but not exclusively applicable to distributors and concerns mainly the upstream market, i.e. relations between distributors and suppliers, whereas price theory is mainly of interest to the suppliers  of products or services and is primarily of concern to the downstream market where distributors and consumers come together. The rules of competition law were originally developed to address the market power of producers alone, even though concentration in the mass retail distribution sector and the strengthening of the economic power of buyers have, since the 1970s, become an ever more marked economic reality.

The existence of market power is, in practice, deduced principally from the market share held by the dominant undertaking. However, buyers (e.g. in the mass retail sector), generally only have a relatively low share of any product market and therefore rarely fall foul of traditional competition law offenses, unless a specific distribution service market can be characterized. In addition, purchasing concentration tends to be in line with competition policy, since it leads to lower prices to the benefit of consumers, even if it is also likely to result in negative effects for both consumers (standardization of products, disappearance of specific offerings, no product development etc.) and producers, who are the weaker contracting parties and often victims of abuse of buyer power.

The control authorities have nevertheless attempted, with varying degrees of success, to use the classic tools of competition law to combat the buyer power phenomenon .

1) Inefficiency of the law on restrictive practices and dominance 

Under the rules on anticompetitive agreements, the control authorities consider that joint buying agreements do not in principle have an anticompetitive object, unless they relate to prices and create a situation of buyer power. According to the Commission, it is unlikely that market power exists if the parties to the joint purchasing arrangement have a combined market share not exceeding 15% on both the purchasing and the selling markets. A market share above the 15% threshold does not automatically indicate that the joint purchasing arrangement is likely to give rise to restrictive effects on competition. An effect on competition depends on factors such as the degree of market concentration and the countervailing power of suppliers .

The rules relating to abuse of dominant position do not generally address buyer power: on the downstream services market distributors' market power is exercised in respect of consumers not producers; on the upstream product market, even very large distributors are rarely in a position to dominate a specific market insofar as they sell a wide variety of substitutable and complementary products. Where there is no domination, the rules relating to abuse of a dominant position are not applicable.

This legal vacuum has motivated a search for alternative solutions.

In the Kesko/Tuko decision , the European Commission refused to clear the notified concentration on the grounds that it would increase Kesko's buying power and thereby strengthen its dominant position on downstream markets. Likewise in Rewe/Meinl , it identified the risk of a “spiral effect” by which the strengthening of the buyer power of the retail chain leads to the strengthening or the creation of a dominant position on the downstream market, and created a risk of foreclosure of some small distributors. In some decisions, the control authorities have directly tackled the market power of distributors on the upstream market and not merely by analyzing its effects on the downstream market. The Commission has thus referred to a “rate of threat” to characterize a distributor's buyer power in relation to a supplier . It asked suppliers to indicate from what percentage of their turnover they considered that the loss of a customer would represent a threat to the very existence of their businesses: the average of the responses obtained revealed a threshold of 22%. Using that mechanism, the Commission has been able to directly assess the buyer power on the upstream market: the success of this method has, however, remained  moderate.

Finally, the joint purchasing groups usually fall outside the scope of merger control which, by definition, focuses on structural changes (merger between independent undertakings, takeover of an independent undertaking by others, creation of a joint venture) which are only rarely relevant in the case of joint purchasing groups.

The classic analysis, which perceives the producer/distributor relationship as a form of delegation whereby the distributor is a mere agent of the producer, has in fact given rise to the underestimation of the services provided by distributors and the market power they possess. However, the service that the distributor adds to the product contributes greatly to its valorization by consumers. The control authorities tend now to regard the downstream market not as a product market but as a services market. Distributors therefore provide services to consumers but also to producers. If we accept the existence of a supply market, the producer must be regarded as not confronted by a homogeneous market, but rather a diversified market according to the specificities of marketing . The services rendered by the various types of distributors such as hypermarkets, supermarkets, specialized stores, small retail stores and discount retailers, are not the same in terms of packaging, presentation of products or communication. A specialist store offers a narrow but deep product assortment. The width and depth of the product range on offer is significantly greater in a hypermarket than in a supermarket, which itself has a wider and deeper assortment than a neighborhood convenience store. Likewise, a small retailer cannot use end aisle displays or organize trade events to promote products. Moreover, those types of practices are on completely different scale in hypermarkets as opposed to supermarkets. The various service offers are not therefore substitutable with each other. In order to comprehend the actual buying power of a distributor, the upstream market should be considered  as a service market rather than a product market and be broken down in exactly the same way as is implemented on the downstream market in order to take account of the services rendered by distributors. Abuse of buyer power would no longer be perceived as an abuse of economic dependence but as the expression of a market power, in accordance with the classic notions of competition law.

According to traditional theory, the distributor is transparent.

The Guidelines on the assessment of horizontal mergers takes an indirect approach stressing that countervailing buyer power may compensate for a significant impediment to effective competition as a result of a merger of two undertakings, even where they have very high market shares (pt. 64).

Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal cooperation agreements, pt. 208.

See Commission Decision No M.784 of 19 February 1997, Kesko/Tuko, LawLex200400002561JBJ.

Commission Decision No M.1221 of 3 February 1999, Rewe/Meinl, LawLex200400002627JBJ.

Commission Decision No M.1684 of 25 January 2000, Carrefour/Promodès, not available in English; Commission Decision No M.1221 of 3 February 1999, Rewe/Meinl, cited above.

E.g. supermarkets, hypermarkets, discount stores, cash and carry stores etc., see Commission Decision No M.784 of 19 February 1997, Kesko/Tuko, LawLex200400002561JBJ; Decision No M.1221 of 3 February 1999, Rewe/Meinl, LawLex200400002627JBJ.

Competition law has been undergoing profound changes for a number of years now. Economists want to see an increasingly efficient  competition regime, which for them, means an increasingly economic approach and the progressive “economization” of competition law is undeniable. Lawyers are resisting this approach as although it may be increasingly efficient, it is also increasingly unpredictable.

Historically, the influence of the economy on competition law has followed two successive movements. First of all, the competition authorities afforded less and less significance to operators' conduct in order to focus their attention on the effects of that conduct on the market. With that approach, it did not matter whether the conduct was unfair or wrong; all that mattered were the consequences of the conduct. However, the conduct still played a role insofar as it was possible to assume that a given practice would always produce the same consequences on the market. Behavior continued to be the intermediary through which the effects could be established. Such was the case, for example, of price cartels or boycotts or loyalty rebates or coupling for abuse of dominant position cases, the effects of which were presumed to be anticompetitive. Progressively however, the competition authorities have reached a new level by rejecting any prohibition per se and in each case checking whether the behavior was actually creating anticompetitive consequences. Instead of reducing the significance of the behavior, they directly defined that behavior by reference to its effects.

1) Pre-eminence of effects in relation to behavior

The growing role of effects in relation to behavior affects all competition rules. The supervisory authorities no longer take action against certain cartels where the parties are not sufficiently powerful, i.e. the effects of their behavior do not exceed a minimum threshold. Conversely, agreements that only result in themselves in a very minor restriction of competition are nevertheless prohibited where they fall within a set of similar parallel agreements entered into by third party operators. Overall market structure may therefore be the reason that an agreement that, in itself is not particularly harmful, will be sanctioned. The undertaking's conduct may only be a factor that triggers an investigation the object of which may in fact relate to the competitive structure of the market on which this conduct takes place: the undertaking may be punished due to the acts of others. The legal principles of equality before the law and foreseeable sanctions are losing out to efficiency of control, which is increasing. Likewise, relative to the rules on abuse of dominance, the notion of “abuse” has been progressively interpreted in a more and more objective way, and now, almost any conduct, regardless of its intrinsic characteristics, is deemed abusive, where its object or effect is to maintain or strengthen the undertaking's dominant position. In fact, it is no longer the abuse that is reviewed by the authorities but the dominant position. Quite legitimately from an economic perspective, the focus of control has shifted from the assessment of the undertaking's conduct to the assessment of its market power, i.e. to the effects of such conduct on the market. For lawyers, this evolution means that the sanction is no longer the consequence of a wrongful act (which can be avoided by complying with the rules), but of the structure of the market, which may be unavoidable.The most recent case law goes even further.

The development of the rule of reason in cartel law and the new definition of abuse in dominance law clearly show the progressive absorption of conduct by anticompetitive effects. Initially, European and French competition law did not import the cost-benefit analysis that the US case law had progressively developed further to the adoption of the Sherman Act. Quite to the contrary, it integrated the “rule of reason” into a fixed legal structure by defining once and for all the conditions of prohibition and of exemption. Soon, however, the competition authorities were no longer satisfied with this strict system which obliged them to carry out a generally unnecessary twofold assessment . Restrictive agreements were no longer regarded as unlawful from the outset but were accepted or sanctioned only after an assessment of whether their positive effects, in particular from the point of view of efficiency, outweighed their negative consequences on competition. The European Commission has published a guidance paper  on abusive exclusionary conduct. For the Commission, the overly abstract per se approach may ensure legal certainty but can also discourage undertakings from adopting a pro-competitive conduct. The new doctrine of the Commission in fact leads to an assessment, in each case, of the effects of the behavior before coming to any conclusion as to whether it is abusive. These new approaches, which are no doubt more polished, more realistic and even more sensible, do create great legal uncertainty: if they were applied literally, undertakings would never know in advance whether their acts are sanctionable or not. This lack of foreseeability has resulted in the emergence of a number of safeguards now forming the last legal bastion against a total “economization” of the rules.

See the development of out-of-court settlements or leniency programmes and damages actions.

In spite of the fact that this was refuted in the Métropole television case: See Case T-112/99 M6 and others v Commission [2001] ECR II-2459, LawLex200500003906JBJ.

Communication from the Commission of 3 December 2008, guidance on the Commission's enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ C 45, 24.02.2009, p. 7-20

The "economization" of competition law

The limits of “economization” may vary depending on its form. Where economization is achieved by substituting effects for behavior, the law may sometimes lead to the resurgence of a condition of behavior within the effects-based approach. Where it leads to a purely economic definition of anticompetitive behavior, the law re-emerges in a more limited way, and fixes this definition into a more legal mould.

1º) Re-emergence of the concept of behavior

The French authorities have progressively, yet ineluctably, reduced the scope of the theories which seemed to eliminate all reference to the intrinsic characteristics of anticompetitive behavior. Thus, an appreciability threshold may not be applied where the anticompetitive behavior in question is too serious, i.e. in cases of price-fixing agreements, agreements for the limitation of production, market-sharing agreements or the prohibition of passive sales. Likewise, the Court of Justice and the French authorities have reintroduced a condition of behavior in the assessment of the cumulative effect. As a result, a restricted agreement will be penalized only if it significantly contributes to the causal effect . Lastly, in order to be qualified as “abusive”, behavior must not only maintain or strengthen the undertaking's dominant position but also be “abnormal”, i.e. go beyond the necessary protection of the legitimate interests of the undertaking in question . Although no actual wrongful act is required, the EU authorities have thereby reintroduced a reference to the undertaking's behavior through the abnormality criterion. Even if that behavior is no longer the object of the control by the competition authorities, it still constitutes a condition of that control. This is no longer the case where the rule only sets out the purely economic conditions of the offense.

Economic analysis should logically lead to a purely casuistic approach. How will undertakings be able to predict the legal consequences though? Within a rule of law, operators must be able to know in advance the conditions for prohibition in order to adjust their behavior and avoid sanctions. From a legal perspective, an assessment which depends on the facts and is carried out ex post facto is insufficient. To guarantee a minimum amount of legal certainty, the supervisory authorities have formalized the economic theory, either by setting forth presumptions, or by stating conditions.

The French legislator has developed a framework for the theory of the appreciability threshold by adopting texts defining precise thresholds below which prohibition does not apply . Legal certainty however remains limited as such thresholds are not binding on the courts and are thus devoid of prescriptive value.

Above all, the economic reasoning is reflected in the way in which the thresholds are implemented: they do not pose any absolute presumption but are interpreted in the light of the principle of proportionality. According to the supervisory authorities, “the greater the margin by which those thresholds are exceeded, the more the values will be indicative of competition concerns”, which means that exceeding the threshold does not necessarily trigger the application of the rule . 

In its guidance paper on abusive exclusionary conduct, the Commission uses the “equally efficient operator” test. There is abuse of a dominant position where an operator that is as efficient as the dominant operator (i.e. an operator having the same costs), is prevented from entering or expanding on the market. More precisely, the dominant operator abuses its position where it charges prices for its services which are less than its costs and therefore less than the costs of an equally efficient operator. The Commission defines abuse only by its effects, but those effects are grouped together within a rule that undertakings could use as guidance to adjust their behavior. The proposed rule is in fact halfway between the classic per se approach (which only takes behavior into account) and a full economic approach (which would only take account of effects but all the effects) .

For the General Court and the French authorities, the oligopolistic structure of a market alone may now be sufficient to establish a collective dominant position . If nothing further had been done, the law would have been extremely uncertain since there is no legal definition of an oligopolistic market and an oligopoly, which is an economic concept, is assessed in respect of the facts. For that reason the courts have had to define the conditions under which they find a market to be oligopolistic .

Thus, the objective of ensuring legal certainty constantly reappears within the economic assessment itself. That approach rigidifies and distorts the analysis on a case by case basis. But such formality is characteristic of the law. The supervisory authorities have reintroduced it almost unconsciously, due to the conviction that the legitimacy of their decisions depended on it. In the permanent struggle between the legal and economic approaches, in spite of appearances, the law has never been totally defeated.

See Case C-234/89 Delimitis v Henninger Bräu [1991] ECR I-935, LawLex200500003931JBJ. Under French law see CA Paris, 10 October 2013, LawLex201300001484JBJ.

Case 85/76/EEC Hoffmann-La Roche v Commission [1979] ECR 461, LawLex200400002971JBJ.

Case T-405/08 Spar Österreichische Warenhandels AG, Judgment of 7 June 2013, not available in English. Also see , under French law, Competition Authority Decision No 13-DCC-101 of 26 July 2013, LawLex201300001258JBJ.

Under French law see e.g. Competition Authority Decision No 09-5-03 of 15 May 2009, LawLex201100001477JBJ.

Case T-102/96 Gencor v Commission [1999] ECR II-753, LawLex200500004258JBJ. In French law, see Competition Council decision No 02-D-44 of 11 July 2002, LawLex200200002118JBJ.

Case T-342/99 Airtours v Commission [2002] ECR II-2585, LawLex200500004265JBJ. Also see Competition Council decision No 06-D-02 of 20 February 2006, LawLex200600000745JBJ.

Current limits of "economization"

Conscious of the importance of the digitalization of the economy in the fight against climate change and for a successful ecological transition, the Commission is pursuing its strategy to build a digital Europe. After the adoption of the regulations on the free movement of personal data and on cybersecurity, the Open Data Directive and the General Data Protection Regulation, on 19 February 2020 it presented its strategies for data and artificial intelligence. Reaffirming Europe's desire to become a world leader in the development of artificial intelligence systems conducive to secure uses and applications, as well as a model and a major player in the data economy, the Commission aims, on the one hand, to set up a single market for data, with a regulatory framework for the governance, accessibility and re-use of data business to business, between businesses and governments, and within administrations, and on the other hand, to facilitate the development of new generation infrastructures enabling the full potential of the data economy to be exploited.

Competition law must also respond to the challenges of digital technology. The rise of global digital platforms offering intermediation services in the daily lives of consumers and businesses, as well as the advent of new digital tools with very powerful functions (algorithms, cloud, artificial intelligence, blockchain) have created a veritable revolution. The supervisory authorities have endeavored to respond to them with the means available to them. But given the scale of the phenomenon, their reaction has been highly inadequate.

Characterized by the apparition of new tools, the digital revolution has given rise to the emergence of an economic sector with specific structural fetures. Among the new digital tools, the use of algorithms and blockchain are likely to involve significant anticompetitive risk.

The Competition Authority defines an algorithm as a set of rules applied in a specific order to perform a specific task: an algorithm is a logical sequence making it possible to obtain a certain result from a given input. Algorithms are used for the automatic execution of repetitive tasks involving data processing and complex calculations . Today, a growing number of businesses are using algorithms to collect large volumes of data in order to monitor the market and modify their pricing policy in real time, taking into account the latest developments in the supply identified by the machine. Algorithms can therefore be a vehicle for collusion between competing operators, be provided by a third party facilitating collusion or be the driver for the collusion themselves. In the first case, companies agree beforehand on the principle of common pricing before using the algorithms as a tool for implementation, monitoring and concealment. Algorithms can thus constitute the vehicle for collusion between competing operators, or be provided by a third party facilitating collusion or carry out this collusion themselves. In the first case, companies agree beforehand on the principle of common pricing before using the algorithms as a tool for implementation, monitoring and concealment. In its study on algorithms, carried out jointly with the Bundeskartellamt , the Competition Authority describes them as “cartel facilitators”. In the second case, the competing companies use the same pricing algorithm provided by a third party (software developer) which leads to a price alignment without any contact between the competitors themselves. The Guidelines on horizontal cooperation cover information exchanges where data can be shared indirectly through a common agency or a third party (pt. 55). However, for such behavior to fall foul of antitrust law, competitors must know that they are using the same algorithm . Competing undertakings active in oligopolistic markets may, in parallel and without any communication with each other, use algorithms, which, by their ability to self-learn, devise pricing strategies likely to lead to market alignments without any human intervention. The understanding of such a practice with regard to competition law is more delicate as the concurrence of wills criterion is harder to characterize. 

Algorithms can also be used in the context of a vertical agreement, to allow suppliers to monitor the prices charged by the competition and to send new instructions to their distributors in real time or monitor the effective application of such instructions. The Commission has sanctioned this type of practice in its decisions in the area of online sales of consumer electronic products . 

On the demand side, algorithms make it possible to adopt two types of pricing strategies i) personalized pricing, determined with regard to the client's willingness to pay a certain price level, which is itself identified by collecting information on their consumption habits, their place of residence, the use of loyalty schemes, etc.; ii) dynamic pricing, adapted in real time to current market conditions (e.g. yield management) . These discriminatory practices nevertheless remain very marginal, as the Commission showed in its final report on electronic commerce.

The use of algorithms can also constitute, in certain circumstances, an abuse of a dominant position insofar as it may, in itself, confer a market power on an undertaking, firstly, because the development of such a tool involves large investment costs and any business using it must have sufficient resources to overcome such a  barrier to entry; secondly, because an algorithm makes it possible to collect a very large volume of data, control of the access to it can lead the dominant company to adopt certain abusive behaviors (refusal of access or provision of essential information, threat of de-listing, unfair trading conditions, etc.). Another abusive behaviors that may arise include imposing excessive, predatory or discriminatory prices fixed by algorithm.

Blockchain constitutes a mode of recording data produced continuously, in the form of blocks linked to each other in chronological order of their validation, in which each of the blocks and their sequence are protected against modification. Once integrated into a chain, the data are immutable: they are dated and can no longer be modified. Their reliability is guaranteed by their verification by the community of computers connected to the network and not by an external entity, whether a State entity not. The data stored in a blockchain can notably be used to support a “smart contract”, which is software programmed to automate the different stages of the life of a contract, on which it is superimposed.

By magnifying market transparency, blockchain inevitably conceals a risk of coordination of behavior by its users. In horizontal relationships, smart contracts could be used by competitors who have previously agreed to the terms of a price agreement to ensure its execution and prevent any attempt at deviant behavior. Like algorithms, of which they are merely a variant, smart contracts are reduced in this hypothesis to drivers of a prior agreement, and may, when the latter aims to coordinate the behavior of its participants, be sanctioned. Smart contracts can also be used to ensure the execution of a vertical price agreement by guaranteeing the supplier that distributors will not deviate from the programmed prices. By depriving distributors of any autonomy in setting their prices, they clearly fall under Article 4 of the Vertical Restraints  Regulation.

Although blockchain facilitates the implementation of cartels, it can by boomerang effect, also be a very useful tool for the investigation services of competition authorities. By definitively fixing the elements of the price agreement and giving them a specific date, blockchain makes it easier to flush out and establish anticompetitive behavior particularly as, in the case of closed blockchains, Article L. 450-3, paragraph 5, of the Commercial Code allows the Authority to order the decryption of data. In addition, blockchain can be used by the competition authorities to share information on current or already processed cases, in the spirit of collaboration recommended by Regulation No 1/2003. Finally, blockchain can be implemented to monitor compliance with commitments made by undertakings in the context of negotiated procedures or injunctions issued by the Competition Authority.

Regarding abuse of a dominant position, blockchain could allow a dominant company to impose unfair or discriminatory pricing conditions on its customers by using “personalized pricing” techniques which, thanks to algorithms, makes it possible to modulate the price of a product, depending on the income and consumption habits of internet users - depending on their income, one person will pay less for a product while another, identified as usually paying more for online purchases, will pay more for the same product so as to compensate for the shortfall. Another risk could arise from the fact that some digital platforms create their own private blockchain to store their data in order to better refuse access to their competitors.

Going beyond the anticompetitive risks linked to the use of these new tools, the structure and characteristics of the digital sector also raise specific questions. 

The highly innovative digital sector is characterized by the presence of the US web giants, GAFAM, which are digital platforms with a global dimension, which, through their technological expertise, the size of the network effects and the massive data collection and economies of scale they benefit from, have considerable market power leading to situations of ultra-dominance , and even monopolies . Able to take advantage of those convergence effects, the platforms, active on several, often two-sided markets, have created ecosystems due to the complementarity of their services, network externalities and  loyalty-building strategies which allow them to implement abusive practices - likely to eventually render consumers captive  - most often in markets separate from the monopolized market. These structural specificities, the dynamic and evolving substitutability of the services offered, but also the fact that they are free of charge  have caused the Commission to question its criteria for defining relevant markets . Concerning the geographic dimension of the market, the Commission recommends a differentiated assessment carried out on a case-by-case basis depending on the products or services. As regards the market for products or services, its preference is an enhanced examination of the potential competition from operators not located on the relevant market but likely to influence the market power of the undertaking concerned . This pragmatic approach, taking account of the interdependencies between the different services, is justified particularly in the innovative digital sector where the delimitation of the market can prove difficult or quickly obsolete and where too narrow a definition of the reference market leading to findings of automatic dominant positions could lead to overly systematic sanctioning.

The specificities of the digital sector also impact merger law and the realization by the digital giants of numerous merger-acquisition transactions, which most often escape the control of the competition authorities because they target innovative entrants or which have not yet monetized their innovation. In practice, the digital platforms in question use this intensive hostile takeover policy, either to kill the target where the growing community of users is liable to quickly create a serious  competitor (killer acquisitions), or more frequently to integrate into their ecosystem young start-ups and develop their activity in order to increase their own community of potential users and strengthen their position in the dominated market or on neighboring markets. In all cases, potential competition is limited without these acquisitions being subject to merger control since they do not exceed the national or European thresholds for compulsory notification, although in the first case, a source of innovation which could have boosted the competitive functioning of the market and benefit the consumer is eliminated, while in the second, it is confiscated by the dominant operator who collects the benefits by depriving consumers of an alternative offer. Furthermore, the competitive analysis of concentrations carried out in the digital sector presupposes a prospective assessment of potential conglomerate effects, which proves to be complex in emerging, innovative and evolving markets.

2) Response of the regulatory authorities

Up to now, the classification of abuse of a dominant position has proven appropriate in respect of the behaviors of GAFAM i.e. refusal of access, tied sales, the establishment of insufficient interoperability with the products. or competing services or the imposition of unfair trading conditions. On the basis of Article 102 TFEU, the Commission forced Microsoft to open its operating system to allow third-party software publishers to offer software compatible with Windows  and sanctioned Google for favoring its own online price comparison site, Google Shopping , and later its Google Search application and Google Chrome browser . The Commission is soon to examine the complaint for abuse of a dominant position brought by Spotify which accuses Apple of favoring its music streaming service, Apple Music, on the App Store to the detriment of the Spotify application. The Competition Authority, for its part, very recently imposed a fine of EUR 150 million on Google for having defined in a non-objective or transparent manner the contractual rules of operation of its Google Ads service and for having imposed them on advertisers in random, unfair and discriminatory conditions . In its contribution to the debate on competition policy and the challenges raised by the digital economy published on 21 February 2020, the Authority was in favor of making the decision-making practice previously implemented in high innovation sectors - and marked by interoperability issues and denial of access to non-replicable data - applicable to the digital sector, in particular to the behavior of large digital platforms. The Authority thus imposed on Nespresso which had ensured that incompatibility of its coffee machines with capsules from competing manufacturers, the interoperability of its products with those of its competitors  and forced Engie to give its competitors access to its client database which was considered as non-replicable, whereas the incumbent gas operator refused to do so at the strategic moment of the opening of the gas supply market to competition .

French decision-making practice in merger control cases has already adapted to the specificities of the digital sector. When exercising its control over a concentration carried out on the two-sided market for online classified real-estate listings , the Authority took into account the potential competition from “structuring” digital platforms, such as Google, Amazon and Facebook. In the Darty/Fnac decision concernning the retail distribution sector , it reversed the accepted definition of the relevant market by henceforth including online sales and focused its competitive analysis on the impact of the concentration on the interest of  consumers holding that the merging of networks of physical stores, to which distance selling is added would cause a deterioration of the quality of the suppy to consumers in stores, in particular in terms of services (conditions of reception, advice, after-sales service and opening hours).

3) Do the competition rules need to change?

If recent experience shows that the competition authorities have been able to make use of existing tools to deal with new issues posed by digital development, it does appear that adaptations or changes to the existing law are needed to improve the reactivity of regulators without hampering the development of new or innovative offers.

With regard to adaptation, and more specifically the rules on cartels, the Commission has announced its intention to revise the guidelines on horizontal cooperation  on data sharing and pooling arrangements. In the area of abuse of a dominant position, the Competition Authority, in its contribution to the debate on competition policy and challenges raised by the digital economy, proposes to broaden the concept of a dominant position to “include certain players in a situation of quasi-dominance “or” on the verge of tipping the market”, which it describes as “structuring platforms”, and which have considerable market power not only in the dominated market but also in related markets, in particular in because of their status as “gate keepers”. The amendement of the Commission Communication on the definition of the relevant market is part of the same trend. Due to the unavoidable nature of “certain databases, user communities or ecosystems”, the Competition Authority is considering either relaxing the concept of essential infrastructure in general, which is currently interpreted very narrowly to take digital infrastructures into account , or applying it in a more flexible way to the digital sector, to make it easier to classify those infrastructures as “essential” by establishing the indispensable nature of the data. To prevent irreversible situations from arising, recourse to interim provisional measures, even before the application for such measures are brought by the victims, is available. Union law established this procedure in the ECN + directive , but has not yet been enacted into French law. The Authority would also like undertakings to be able to apply to it for interim relief even before regularizing the referral to the merits.

In matters of merger control, the Authority proposes to update the criteria for competitive analysis so that the impact of a merger in the digital economy is examined with regard to various parameters relevant to the consumer, such as pluralism, diversity or the quality of the service offered, without being limited to the effects on prices alone. It recommends improving the tools for measuring the market power of the merged entity when it results from the possession of large data or large user communities as well as making greater use of  behavioral commitments which are more flexible and adaptable than structural commitments, to restore the conditions for effective competition. Furthermore, to fill the legal vacuum concerning hostile takeovers, the Authority is proposing more frequent use of the referral mechanism provided for in Article 22 of Regulation No 139/2004, which allows a national competition authority to refer to the Commission a non-notifiable concentration, whether relative to national or European thresholds, where it threatens to significantly affect competition on its territory.

Besides these changes to existing law, another possibility is to supplement competition law with rules specific to the digital sector.

The Competition Authority has suggested introducing new provisions specific to “structuring digital platforms” into national and European competition law. Starting from the premise that those platforms must first be identified in order to understand their behavior, the ARCEP (telecoms regulator) proposes a general definition of the concept of “structuring digital platform” in three stages, which could then be framed by guidelines. Falling within this classification would be: 1) undertakings which provide online intermediation services with a view to exchanging, buying or selling goods, content or services, and 2) which has structuring market power a) because of its size, its financial capacity, its community of users and/ or the data they hold, b) allowing it to control access or significantly affect the operation of the markets in which it operates, 3) with respect to its competitors, users and/or third-party operatord which depend for their economic activity on access to the services it offers. The Authority suggests establishing a list of practices raising competition concerns, while specifying that they should not be subject to an automatic prohibition but should be assessed on a case-by-case basis. Among the practices targeted, would be the discrimination of competing products or services using the platform's services, hindering access to markets in which they are not dominant or structuring, the use of data on a dominated market to make access more difficult, making the interoperability of products or services or data portability more difficult or preventing multi-domiciliation.

In matters of merger control, the Authority is in favor of introducing a “merger control in the digital economy”, which would be based on a dual mechanism, with, on the one hand, the establishment of a obligation to inform  the Commission and/or the competition authorities concerned, of any concentration operation implemented by a structuring digital platform on the territory of the European Union and, on the other hand, the addition of new notification thresholds  which may be implemented ex-ante, but also ex-post, at the request of a competition authority following competitive intelligence, provided that three conditions are met: “all undertakings or groups of natural or legal persons parties to the concentration have a total worldwide turnover of more than EUR 150 million, the operation raises substantial competition concerns identified in the territory concerned and, if applicable, the concentration does not fall within the jurisdiction of the European Commission”. The Authority argues, in support of its proposal, that such a system is already in place in Estonia, Hungary, Ireland, Lithuania, Norway, Sweden, the United States and Japan.

Competition Authority opinion No 18-A-03 of 6 March 2018, LawLex201800002009JBJ on the exploitation of data in the online advertising sector.

Algorithms and Competition, published on 6 November 2019. -https://www.autoritedelaconcurrence.fr/sites/default/files/algorithms-and-competition.pdf

Commission decision No 2007-53 of 24 March 2004, Microsoft, LawLex200500004763JBJ. See also Commission decision of 16 December 2009, Microsoft, LawLex201700001169JBJ, in which it forced Microsoft to provide Windows with a mechanism allowing Original Equipment Manufacturers (OEM) and end users within the EEA to activate or deactivate Internet Explorer and pre-install any web browser(s) of their choice and set it as the default web browser on the PCs they supply, and to distribute to users of PCs equipped with Windows within the EEA, via Windows Update, a software update consisting of a multi-choice screen offering them different web browsers, in order to remedy the competition problems caused by the tied sale of its “Internet Explorer” web browser, to that of its “Windows” client PC operating system. 

Commission decision No AT.39740 of 27 June 2017, Google Search. 

Commission decision No AT.40009 of 18 July 2018, Google Android. 

 Competition Authority decision No 19-D-26 of 19 December 2019, LawLex202000000177JBJ.

Competition Authority decision No 14-D-09 of 4 September 2014, Nespresso, LawLex201400000847JBJ.

See Competition Authority decision No 14-MC-02 of 9 September 2014, LawLex201400001345JBJ, finding the use of the commercial infrastructure and customer files, as is, to be unrelated to competition on its merits insofar as a significant part of the commercial infrastructure was developed while GDF Suez had a monopoly on the supply of natural gas and that customers' lack of adequate knowledge about the competitive functioning of the energy market, as well as the inability for competitors to replicate that infrastructure, constituted special circumstances, likely to reinforce the potential foreclosure effect of new entrants to the gas and electricity markets.

Competition Authority decision No 18-DCC-18 of 1 February 2018, LawLex201800000450JBJ.

Competition Authority decision No 16-DCC-111 of 27 July 2016, LawLex201700000147JBJ, distribution of brown and gray electronic goods. Also see Competition Authority decision No 19-DCC-65 of 17 April 2019, LawLex201900000638JBJ, retail distribution of toys and No19-DCC-199 of 28 October 2019, LawLex202000000024JBJ, retail distribution of internet access and No 19-DCC-132 of 16 July 2019, LawLex201900000995JBJ, retail sale of new books. 

Communication on a European strategy for data, 19 February 2020, COM(2020) 66 final).

Directive No 2019/1 of 11 December 2018, to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market, called “ECN+”, OJEU L 11 of 14 January 2019, 3, Art. 11.

Case C-74/14 “Eturas” UAB, Judgment of 21 January 2016, LawLex201600000155JBJ.

According to the Authority, it would constitute a fairly basic obligation which would avoid subjecting the companies concerned to a disproportionate constraint and would only concern a list of player which are well defined according to objective criteria.

EU Commission decision No 40181, Philips, 24 July 2018.

Yield management is for a service provider whose offering is by it nature non-stockable and limited (i.e. perishable) to maximize revenue using a variable pricing strategy for the same service, based on criteria such as consumer demand or fill rate e.g. airline seats /hotel rooms etc.

Emphasizing that the degree of dominance is a criterion for assessing the particular responsibility incumbent on a dominant undertaking, the Competition Authority characterizes, for the first time, Google's dominant position as “extraordinary”, that it ascribes to the holding of a market share of more than 90%, to the significant network effects on the search advertising market, as well as to its power to regulate with regard to advertisers, which expands its market power  [because, by establishing the rules allowing them to interact, Google is able to guide the economic model of advertisers and influence the quality and diversity of the supply available to internet users], see Competition Authority decision No 19-D-26 of 19 December 2019, LawLex202000000177JBJ.

In its contribution to the debate on competition policy and digital issues, published on 21 February 2020, the  Competition Authority specifically warns in particular about the “tipping” or “winner takes all” phenomena which reflect a shift towards a monopoly or “gatekeeper” situation, in which certain players control access to the market for multiple users.

In Commission decision No AT.40009 of 20 September 2019, Google-Android, the Commission considered that the SSNIP test was not relevant in the case of free services, as is often the case on the internet, so it replace it with an SSNQD test (small but significant non-transitory decrease in quality), ther outcome being that in the event of a decline in the quality of the Android system, consumers would would not necessarily switch to Apple.

Speech on 9 December 2019 at the Chillin' Competition Conference.

See aforementioned Google-Android decision, in which the indirect pressure exerted by closed mobile operating systems, deemed not substitutable for licensed operating systems (Android), was measured to assess whether it constituted a serious countervailing power to the dominant position held by Google in the Android operating systems market.

French Competition Law

11. Competition law and buyer power

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11. Competition law and buyer power

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