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 LME law of 4 August 2008 put in place a specific merger control regime for the distribution sector by adapting the thresholds for control. In effect, there is a very high level of concentration in the sector in France with four groups sharing 66% of the market share and 5 groups occupying 80% of the selling space, giving them considerable sway in commercial negotiations. The freedom to negotia …

Concentrations in the distribution sector

After first adopting a control system combining a traditional threshold in relative value calculated by reference to market share, and an alternative threshold in absolute value evaluated on the basis of turnover, French merger control law aligned itself with EU legislation in this area renouncing the market share threshold. In order to come within merger control, a transaction must satisfy three conditions:

-the whole of the undertakings or groups  of individuals or legal entities party to the concentration must have a pre-tax worldwide turnover of over EUR 150 million;

-at least two or more of the undertakings or group of individuals or legal entities involved must have a pre-tax turnover within France of over EUR 50 million ;

-the operation must not be subject to EU merger control regulation (Art. L. 430-2 of Commercial Code).

The adoption of absolute value thresholds seems justified not so much because it matches EU practice, but because it improves the effectiveness of control. Originally, these thresholds were introduced in addition to the market share thresholds in order to make merger control easier in the distribution sector. The former “Commission de la concurrence” had stressed in its opinion of 14 March 1985 that thresholds were too high to make control efficient, especially given the concentration of that demand . Indeed, it was the recognition that large distribution outlets only have weak market shares in each product sold, but instead get their strength from the combined force of their operations, that had led the group of experts working on the 1986 ordinance to recommend an alternative threshold in absolute value. Today, exclusive recourse to the turnover criteria is justified on the more general grounds that the uncertainties inherent in the definition of the market share are excluded from the first phase of control, which decides whether merger law is applicable, and the question of market share is instead considered later when the law is in fact applied. The contours of the control mechanism are thereby clarified.

In contrast with EU law, the new text does not specify whether the national turnover applied is the one that is realized “individually” by at least two of the undertakings taking part in the operation. A literal interpretation would lead one to consider that the threshold could be reached by the sum of the turnovers of at least two undertakings or groups of undertakings concerned by the operation. A second interpretation, closer to the spirit of the law, requires that each of the two undertakings or groups of undertakings must realize a turnover exceeding EUR 50 million.

On definition of group by reference to the decisive influence criterion see Competition Council opinion No. 98-A-09 of 29 July 1998, LawLex200200001963JBJ and Minister of the Economy, letter of 7 October 1998 (BOCC 7 Oct 1998, 555).

Article 25 of Ordinance No 2004-274 of 25 March 2004, JO No 74 of 27 March 2004, 5871.

Competition Commission opinion of 14 March 1985 on central purchasing bodies and the pooling thereof, LawLex200300001300JBJ; Report for 1985, 19.

Turnover threshold based on absolute value

The LME law of 4 August 2008 put in place a specific merger control regime for the distribution sector by adapting the thresholds for control. In effect, there is a very high level of concentration in the sector in France with four groups sharing 66% of the market share and 5 groups occupying 80% of the selling space, giving them considerable sway in commercial negotiations. The freedom to negotiate terms of sale granted to the sector by the new law is counterbalanced by a reduction in the merger control thresholds to a level lower than under the general regime in order to combat local monopolies. In order to be caught by Article 430-2 of the Commercial Code, the transaction must be between at least two operators of one or more retail outlets and the following conditions must be fulfilled:

- the combined aggregate worldwide turnover exclusive of tax of all the undertakings or groups of natural persons or legal entities involved in the merger is greater than EUR 75 million,

- the combined aggregate turnover exclusive of tax achieved in France by at least two of the companies or groups of natural persons or legal entities concerned is greater than EUR 15 million ,

- the operation does not come within the scope of Regulation No 139/2004 .

Article 41 of Law 2010-853 of 23 July 2010, OJ, 24 July 2010.

See e.g. Competition Authority decision No 09-DCC-01 of 8 April 2009, LawLex200900001567JBJ; No 09-DCC-04 of 29 April 2009, LawLex200900001824JBJ, specifying that merger control is applicable to the acquisition by a retail group of a food retail store when the thresholds are exceeded; No 09-DCC-27 of 24 July 2009, LawLex200900002990JBJ; No 09-DCC-59 of 26 October 2009, LawLex200900003636JBJ, on the acqusition of sole control of the fuel sales activity of 37 service stations; No 10-DCC-141 of 25 October 2010, LawLex201000001435JBJ, ruling out the application of the thresholds defined in Article L. 430-2, II to the acquisition of control of an activity of distribution of domestic fuel and lubricant insofar as this activity is not through stores, but by direct delivery to users via fuel tanker; No 17-DCC-223 of 22 December 2017, LawLex201800000248JBJ, holding that the operation is not subject to merger control when only one of the parties to the concentration exceeds the monitoring thresholds for retail trade pursuant to Article L. 430-2, II; No 19-DCC-142 of 17 July 2019, LawLex201900001086JBJ, holding that the transaction must be notified to the Competition Authority insofar as even if the notification thresholds of Article 1(2) of Regulation No 139-2004 are exceeded, each undertaking concerned achieves more than two third of its EU turnover in France and where the thresholds for retail control mentioned in II of Article L. 430-2 of the French Commercial Code are exceeded.

Merger control in the French overseas territories (DOM/COM - Overseas departments / Overseas communities) is now wider in scope. It is no longer only limited to operations predominantly concerning the retail sector and now applies to all operations which fulfill the following conditions:

- the combined aggregate turnover exclusive of tax achieved in France by at least two of the companies or groups of natural persons or legal entities concerned is greater than EUR 15 million or EUR 5 million in the retail sector , without any requirement that the threshold be reached by all the undertakings concerned in the same department or the same territorial collectivity ;

- the operation does not come within the scope of Council Regulation No 139/2004.

This new threshold was laid down by Law 2012-1270 of 21 November 2012 in order to lower the merger control threshold for concentrations in the distribution sector.

See Law 2015-990 of 6 August 2015 for growth, activity and equality of economic opportunities (known as the "Macron Law") (Commercial Code, Art. L. 430-2, III, para. 3).

Overseas concentrations

 The small impact of the operation on competition given the shares held and the position of the parties on the various markets is not relevant insofar as the controllability of the concentration depends only on the thresholds expressed in terms of turnover of the undertakings concerned . The method of calculating turnover was previously determined by Article R. 430-1 of the Commercial Code, according to which turnover was calculated only in accordance with the provisions of Article 5 of EU Regulation No 139/2004 on the control of concentrations between undertakings. That provision was removed by decree  although the principle still remains.

According to Article 5(4) of the Regulation, the turnover of concerned undertakings is calculated by adding together the respective turnovers of the undertakings directly concerned by the operation, the turnover of those undertakings controlled by or controlling the parties to the merger, the turnover of all other undertakings controlled by the undertakings just mentioned, and the turnover of undertakings in which the parties to the merger have joint control . Control of an undertaking results from the direct or indirect possession of more than half of its capital or business assets, the power to exercise more than half the voting rights, the power to appoint more than half the directors or the right to manage the undertaking's affairs . Turnover consolidation takes account of the “decisive influence” factor, and not in accordance with the rules of ordinary accounting consolidation . Thus the actual amount of financial participation is of little importance where control is unified. The turnover of the undertaking under the decisive influence must be 100% consolidated. In cases of joint control, consolidation of data is done proportionally to the number of undertakings having control (50% if they are two, 33% if three).

Article 5(2) of the Regulation provides “where the concentration consists in the acquisition of parts, whether or not constituted as legal entities, of one or more undertakings, only the turnover relating to the parts which are the subject of the transaction shall be taken into account with regard to the seller or sellers.” Applying this principle to a partial cessation of one of the merging party's operations, the General Court considers that only the turnover of the actually acquired undertaking(s) should be taken into account in evaluating the size of the proposed transaction. In order for the turnover of such operations to be deducted, they must have been left off prior to the concentration . This rule is frequently applied in the context of French merger control .

For accounting purposes, the calculation of turnover - in the absence of exceptional circumstances such as transfers or acquisitions after the audit of the accounts or plant closures - means that only the official audited accounts relating to the last financial year can be used for the determination of the total turnover of the parties to a concentration . Where there is a significant discrepancy between the turnover of the last financial year for which the accounts have been closed, but which have not been audited and the previous year which has been audited, account may be taken of the turnover of the most recent year .

According to Article 5(2) of the Merger Regulation (139/2004), to which Article R. 430-1 of the Commercial Code expressly refers, “two or more transactions within the meaning of the first subparagraph which take place within a two-year period between the same persons or undertakings shall be treated as one and the same concentration arising on the date of the last transaction”. Applying the principle of consolidation set out in the regulation, the Minister of the Economy held that transactions between the same parties taking place within a two-year period shall be considered as one and the same concentration arising on the date of the last transaction .

Competition Authority decision No 13-D-22 of 20 December 2013, LawLex201300001897JBJ.

Decree No 2009-139 of 10 February 2009, Art. 1.

These rules are also valid for calculating the turnover of investment funds. The turnover of the controling bank or insurance company must be added to that of the corporate venture capital management company: see Econ. Min. letter of 2 August 2002, LawLex200300000574JBJ; 31 July 2002, LawLex200300001087JBJ. Similarly where a management company exercises joint control over an undertaking, the turnover figure for the joint venture must be equally divided between the controling undertakings: Minister of the Economy, letter of 8 July 2002, LawLex200200006187JBJ. Account must be taken of the various interests held without including the turnover generated by investors in the fund in the absence of influence of the fund's unitholders on the decisions of the management company, see Minister of the Economy, letter of 18 July 2002, LawLex200200006190JBJ.

Minister of the Economy, letter of 23 November 2007, LawLex200800000120JBJ, which does not take account of the turnover of one of the parent companies of the absorbing entity when it does not have the right to manage its affairs in their entirety; Competition Authority decision No 09-DCC-35 of 6 August 2009, LawLex200900003042JBJ, which excludes from the calculation the turnover of the company in which the management powers it exerts over another do not extend to the whole of the activities of that company.

Minister of the Economy, letter of 8 July 2002, LawLex200200006187JBJ.

Case T-3/93 Air France v Commission [1994] ECR II-121, LawLex200500004246JBJ.

Competition Authority revised guidelines, pts 119 et seq; Minister of the Economy, letter of May 16, 2007, Barry Callebaut/assets of Nestlé, C-2007-66 but see Court of Cassation, social chamber, 13 November 2007, Nestlé France, 06-12.339.

Financial year (in French "exercice") means an entire year of activity: Competition Authority decision No 09-DCC-45 of 28 September 2009, LawLex200900003296JBJ.

Minister of the Economy, letter of 27 December 2004, LawLex200900002937JBJ.

Minister of the Economy, letter of 14 November 2002, LawLex200300001321JBJ.

Calculation of turnover

In order to calculate turnover, the text distinguishes between undertakings or groups that are “party to the concentration” or merely “concerned” by it. The first concept, which seems more limited, serves to calculate a worldwide turnover figure and only concerns the turnover of undertakings or groups that are signatories to the agreement. The definition of undertakings that are a party to the operation has led to differences of interpretation between the Authority  and the Minister . The guidelines on the control of concentrations have since clarified that the expressions “concerned undertakings” and “undertakings or groups of natural or legal persons party to the concentration” have the same objective. They only use the term “undertakings concerned” and, like the Commission's consolidated notice on merger control, interpret the concept according to the type of operation.

According to the revised Guidelines relative to the control of concentrations , concerned undertakings or groups are: 

- in the case of a merger, the undertakings which are merging;

- in the case of sole control, the acquiring undertaking and the target undertaking,

- in the case of joint control, the undertakings taking the control and the pre-existing acquired undertaking,

- in case of change from joint control to sole control, the acquiring undertaking and the target undertaking, with vendors is not considered as undertakings concerned,

- in the case of a newly created joint venture, the controlling undertakings with the newly created company not regarded as a concerned undertaking .

Where a joint undertaking is used merely as a vector for an acquisition by the parent companies, the latter must be regarded as undertakings concerned, rather than as the target and the joint venture .

Competition Council opinion No 93-A-16 of 9 November 1993, LawLex200200002022JBJ.

Minister of the Economy, letter of 3 December 1993, LawLex200200002018JBJ.

Competition Authority decision No 10-DCC-43 of 25 May 2010, LawLex201000000721JBJ.

Competition Authority decision No 10-DCC-12 of 27 January 2010, LawLex201000000263JBJ.

French Competition Law

540. Concentrations in the distribution sector

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540. Concentrations in the distribution sector

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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