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

Article L. 420-5 of the Commercial Code prohibits excessively low prices. The rule is aimed at completing the legislative arsenal as it covers situations where neither resale below cost, nor predatory pricing applies. Actions under this heading follow the pattern of civil liability; it is necessary to show the existence of an actual fault (offering goods for sale at an abusively low price), of har …

Definition

Article L. 420-5 of the Commercial Code prohibits excessively low prices. The rule is aimed at completing the legislative arsenal as it covers situations where neither resale below cost, nor predatory pricing applies. Actions under this heading follow the pattern of civil liability; it is necessary to show the existence of an actual fault (offering goods for sale at an abusively low price), of harm (actual or potential elimination from or entry barrier to the market), and a causal link between the fault and the alleged harm.

Abusively low pricing practices are not eligible for exemption as Article L. 420-4 only provides for the granting of exemptions for agreements and abuses of dominance or economic dependence.

The provision is situated on the margins of rules on domination, as it does not actually require that the undertaking committing the offense enjoy a position of dominance on the market, nor that the victim be in a position of dependence . Abusively low pricing only applies to sales to consumers. The wording of the provision also left doubt as to whether the provisions applied merely to goods or to services as well. A literal interpretation would seem to limit it to goods; however, a ruling of the Competition Authority has spoken of both goods and services in this context. The concept of “sales to consumers” lacks definition. Traditionally, French consumer law has grouped consumers and professionals contracting outside their professional capacity together, by contrast with professionals operating as such. As the intent of the law was to curb certain abuses by mass retailers, it would not seem to apply to professionals at all, an interpretation supported by case-law. The Paris Court of Appeal has defined a consumer as a natural person or legal entity without any professional experience in the field in which it is contracting and who aims to satisfy personal needs . A municipal authority is therefore not considered as a consumer where it delegates a public service contract and is not acting in its own interest but in the interest of inhabitants of the municipality . Les entreprises auxquelles sont vendues des prestations d'hébergement,  c'est-à-dire des infrastructures immobilières et diverses prestations  leur permettant d'exercer leur activité professionnelle au sein d'un  centre de services mutualisés, ne sauraient revêtir la qualité de  consommateurs au sens de l'article L. 420-5 du Code de commerce . On the other hand, a municipal authority acts in a consumer capacity when it is meeting its own needs, and has no particular experience in the area in which it enters into an agreement . Moreover, excluded from the scope of the text is the resale of goods in their original state, with the exception of sound recordings, i.e. compact disc. The notion of “processing” has also raised questions as to what actions are to be included. For example, although it is accepted that cutting up a product is a transformation for the purposes of the provision, it is not clear whether the same is true of defrosting or repackaging. While the sale of a product in its original packaging undeniably represents a sale in its original state, the actual construction of the product or the supply of items necessary for the functioning of the product can constitute a transformation . According to the Competition Authority, the concept of abusively low pricing should be interpreted “along the same lines as EU and national case-law on predatory pricing” . A predatory price is a price lower than average variable costs or lower than the average total costs where a predatory intention is shown to exist . Selling at cost however does not necessarily imply an attempt to exclude a competitor from the market, but must be corroborated by other elements.

See Competition Council decision No 00-D-70 of 16 January 2001, LawLex200200002429JBJ, reiterating that it is not necessary to establish the existence of a dominant position. See however Competition Council decision No 02-D-66 of 6 November 2002, LawLex200300000590JBJ, specifying that very low prices charged by operators with a mere 3% market share cannot have a foreclosure effect.

CA Paris, 3 July 1998, LawLex200200002597JBJ, upholding Competition Council decision No 97-PB-02 of 27 May 1997, LawLex200200002536JBJ.

Competition Council decision No 99-PB-01 of 21 December 1999, LawLex200200002395JBJ, upheld by CA Paris, 14 November 2000, LawLex200200002392JBJ; 01-D-10 of 30 March 2001, LawLex200200002421JBJ.

Décision Aut. conc. n° 21-D-13 du 22 juin 2021, LawLex202100004407JBJ.

Competition Council opinion No 03-A-14 of 25 July 2003, LawLex200300004214JBJ.

Competition Council decision No 98-PB-01 of 13 January 1998, LawLex200200002396JBJ, 13 January 1998.

Competition Council opinion No 96-A-05 of 2 May 1996, LawLex200200000040JBA.

See Competition Council opinion No 97-A-18 of 8 July 1997, LawLex200200002393JBJ; Competition Council opinion No 97-375 of the DGCCRF; Competition Council decision No 98-PB-06 of 15 September 1998, LawLex200200002483JBJ.

Condition for application

The burden of proving that a competitor is practising abusively low prices falls to the undertaking claiming to be the victim thereof. The applicant must therefore “provide evidence relating, for example, to its purchasing costs, production costs for the products at issue, its financial situation, the link between that situation and the alleged practices and any proof that could establish the objective of a competitor to eliminate that undertaking” . As the Competition Authority has emphasized , merely advertising prices is manifestly insufficient to establish that the required conditions for an infringement have been met.

Competition Council decision No 98-PB-02 of 27 January 1998, LawLex200200002487JBJ.

Proof

Selling at an abusively low price must have an anticompetitive object or effect for it to incur sanctions. According to the Competition Authority, “low prices will only be held to be abusive if the practice is sufficiently permanent and widespread such as to deduce a deliberate strategy to lure away a competitor's customers and eliminate him from the market” . The extent of the practice is evaluated with regard to the difference in prices, the importance of the products concerned in the respective activity of the undertakings, and possibly the combined effect that could ensue from several undertakings pursuing the same commercial policy. A promotional operation over a short period (6 days) concerning only a limited number of products (31 appliances)  or advertising prices and issuing an announcement of a reduction in activity  do not meet the stipulated conditions. Likewise, an object of eliminating a competitor is not established where, for the period concerned, the complainant undertaking has undergone a more positive progress than its competitor and sales of the product at issue - not a major part of its activity - have not fallen to an extent such as to compromise the undertaking's ability to remain on the market .

Competition Council decision No 98-PB-01 of 13 January 1998, LawLex200200002396JBJ.

Competition Council decision No 00-D-70 of 31 January 2001, LawLex200200002429JBJ.

French Competition Law

373. Definition

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Les notions juridiques connexes

373. Definition

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Les notions juridiques connexes

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