Competition is often described as the engine of the economy. It drives companies to innovate, improve their offerings and offer attractive prices. However, some companies may be tempted to circumvent this competition by entering into secret agreements with their competitors: these are known as anti-competitive agreements. These practices, which are heavily penalised under French and European law, represent a major risk for companies that engage in them, sometimes without even being fully aware of it.
Navigating the intricacies of competition law can seem complex. The aim of this article is to provide you with a clear overview of the rules governing cartels: what is a prohibited cartel? What forms can it take? How is it proven? Can it sometimes be justified? We will cover the essential points here, which you can expand on in our dedicated articles.
What is a prohibited agreement?
At the heart of the notion of agreement lies the idea of a agreement of wills between at least two entities considered to be "undertakings" within the meaning of competition law. This includes not only commercial companies, but also craftsmen, the professions, associations and even public bodies when they carry out an economic activity. These companies must be independent: in principle, agreements within the same group are not covered, unless the subsidiaries have genuine strategic autonomy. The agreement may take many forms: a written contract, an oral agreement, a gentlemen's agreement, or even a simple concerted practice in which the companies consciously substitute practical cooperation for the risks of competition. For a detailed analysis of what constitutes an agreement, see our article on the definition of an anti-competitive agreement in french law.
The main forms of agreement to be aware of
Cartels can cover a wide range of situations. Article L. 420-1 of the French Commercial Code provides a non-exhaustive list of prohibited practices. The most common and most severely punished include :
- Price agreements This may involve setting common prices, margins, discounts or exchanging information on future prices.
- Market allocation These include geographic sharing of sales territories, distribution of customers or sources of supply.
- Limiting production or sales Quota agreements to keep prices artificially high.
- The collective boycott agreement aimed at excluding a competitor from the market.
- Restrictions in distribution contracts These include the imposition of minimum resale prices, an absolute ban on online sales under certain conditions, and excessive non-competition clauses.
It is essential to know how to identify these practices to avoid falling foul of the law. Our article detailing different types of prohibited agreements will provide you with concrete examples.
Object or effect: why is this distinction important?
For a cartel to be prohibited, it must have a object OR a effect anti-competitive. This distinction is fundamental because it has a direct impact on the way in which the offence is established.
Certain agreements are considered to have a object anti-competitive in nature. This is the case for the most serious agreements, such as price fixing between competitors or the allocation of markets.. For these practices, the Autorité de la concurrence does not need to demonstrate their concrete effects on the market in order to sanction them; the intention to harm competition is presumed from the simple fact of the agreement..
For other agreements whose anti-competitive purpose is not obvious, it must be proved that they have had or are likely to have an impact on competition. effect significant negative impact on competition. This requires a more detailed economic analysis of the market concerned, the companies' market shares, etc. A practice may therefore be condemned even if its primary aim was not to restrict competition, if it nevertheless had this effect. Find out more about this essential nuance by reading our article on the difference between agreement by object and anti-competitive effect.
How do the authorities detect and prove a cartel?
As cartels are often secret, detecting and proving them is a challenge for the competition authorities. They have extensive investigative powers (visits and seizures, requests for information, etc.) and use a variety of methods..
Proof can be direct (a signed contract, explicit minutes of a meeting) but it is often indirect.. The Authority can rely on a a body of serious, specific and concordant evidence. This may include :
- Suspicious e-mails or messages.
- Testimonies (particularly as part of the leniency procedure, which encourages companies to denounce cartels in which they participate).
- Analysis of parallel and economically inexplicable behaviour (simultaneous price increases, abnormally stable market shares, etc.).
- Internal documents referring to pacts or common strategies.
Understanding how investigations are carried out and the evidence gathered is useful for risk assessment. Find out more about the methods used in our article dedicated to proof of anti-competitive agreements.
Can an agreement sometimes be justified?
Although cartels are prohibited in principle, there are exceptions. Article L. 420-4 of the French Commercial Code provides for cases where a restrictive practice may be justified and escape punishment.
The most controversial justification is that based on the economic progress. A cartel may be exempted if it meets four very strict cumulative conditions: it must generate objective economic progress (increased efficiency, innovation, etc.), a fair share of this benefit must be reserved for users, the restrictions imposed must be indispensable to achieving this progress, and the agreement must not eliminate all competition on the market.. Obtaining such an individual exemption is rare in practice.
Other justifications exist, such as practices resulting directly from the application of a law or regulation, or specific exemptions by decree for certain categories of agreement (particularly in agriculture or for certain agreements on payment periods). Find out more about these possibilities in our article on justification and exemptions for agreements.
Cartel law is a complex and evolving field. The financial and reputational risks associated with a conviction are considerable. A good understanding of the rules and constant vigilance are needed to secure your company's commercial practices.
For a personalised analysis of your agreements, or if you suspect that an anti-competitive practice is harming you, our team is at your disposal.
Frequently asked questions
What exactly is an anti-competitive agreement?
An agreement or concerted practice between independent undertakings which has the object or effect of preventing, restricting or distorting competition on a market..
Can my company be accused of collusion even if the agreement is not in writing?
Yes, a cartel can be the result of a verbal agreement, a concerted practice or even exchanges of strategic information, without the need for a formal contract..
What are the most closely monitored types of agreement between companies?
Agreements between (horizontal) competitors to fix prices, share markets or customers, or limit production are considered particularly serious.. Vertical restrictions such as resale price maintenance are also closely monitored..
What are the main risks if my company is involved in a cartel?
The risks include heavy financial penalties (up to 10% of worldwide sales), claims for damages from the victims, cancellation of the contracts concerned, and significant damage to the company's reputation.
How do the authorities (such as the French Competition Authority) prove a cartel?
They use all types of evidence: documents seized during investigations, emails, witness statements, confessions (sometimes via leniency), or a cluster of corroborating clues such as suspicious parallel behaviour, etc..
Is an agreement that brings economic progress always authorised?
No, it must meet four strict conditions to be exempted: it must generate real progress, users must benefit fairly from it, it must be indispensable, and it must not eliminate all competition..
What does the "de minimis" rule mean in competition law?
This is a threshold below which the Autorité de la concurrence may consider that a cartel does not have a sufficiently appreciable effect on the market to justify prosecution, except for the most serious restrictions (known as "by object")..
Can agreements between companies in the same group be considered as cartels?
In principle, no, unless the companies in the group have genuine autonomy to determine their behaviour on the market, in which case an agreement between them could be classified as a cartel.. Sources and related content
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