French competition law, like its European counterpart, is based on fundamental pillars designed to ensure healthy and fair competition on the markets. Central among these pillars is the prohibition on anti-competitive agreements, set out in Article L. 420-1 of the French Commercial Code. This provision prohibits concerted actions, agreements, express or tacit understandings or coalitions which " have as their object or may have as their effect the prevention, restriction or distortion of competition on a market ". This apparently simple formulation conceals a fundamental distinction: that between anti-competitive object and effect. Understanding this nuance is not just a matter for legal experts; it has very practical implications for any company operating in France, as it determines how a practice will be analysed by the Autorité de la concurrence and, above all, how proof of its unlawful nature will have to be produced. Why is this distinction so important, and what are the practical consequences? This article sets out to decipher these two essential concepts.
Cartels with an anti-competitive object: restriction by nature
The concept of anti-competitive object refers to agreements or practices which, by their very nature, are considered harmful to the proper functioning of competition. It could be said that harm to competition is written into the very DNA of the agreement. The Autorité de la concurrence, largely inspired by European jurisprudence, considers that these practices reveal a sufficient degree of harmfulness to competition for it not to be necessary to demonstrate their concrete effects on the market.. The objective pursued by the companies is sufficient to characterise the offence.
In a way, for those practices deemed to be the most serious, the law presumes that they restrict competition.. The mere implementation of the agreement or practice is sufficient to establish fault, considerably simplifying the task of the prosecuting authorities. You may be wondering what types of agreements fall into this category. Case law, both national and European, has identified several "restrictions by object".. These are mainly :
- Horizontal agreements (between competitors) to fix prices This is undoubtedly the most classic example and the most severely punished. Any agreement between competitors on sales prices, margins, discounts or pricing conditions is prohibited by its very nature.
- Distribution of markets or customers Agreements by which competitors share geographical territories or customer segments are also considered anti-competitive by object. They are directly aimed at eliminating competition between the participants. For a more detailed analysis of these practices, see our article on the main types of hearingtprohibited.
- Limitations on production or sales Restriction by object: Agreeing to reduce the quantities produced or sold in order to maintain artificially high prices is a restriction by object.
- Collective boycotts Organising a concerted refusal to contract with an economic player (supplier, customer, competitor) is typically a restriction by object.
- Exchanges of strategic information as part of public procurement contracts Communicating with a competitor prior to the submission of tenders on the intention to tender, the prices envisaged or to organise cover bids distorts the tendering procedure and is anti-competitive.
In the context of vertical relations (between suppliers and distributors), certain practices are also considered to be restrictions by object:
- Setting a minimum resale price (floor price) Restriction by object: Prohibiting a distributor from selling below a certain price threshold is a restriction by object.
- Certain absolute territorial restrictions Restriction by object: Totally preventing a distributor from selling outside a defined territory, in particular by banning exports or passive sales (responding to unsolicited requests from customers outside the territory), can be qualified as a restriction by object.
- A general and absolute ban on online sales Case law has held that a total ban on authorised distributors selling products over the internet constitutes a restriction by object.
To determine whether an agreement has an anti-competitive object, it is not enough to read the clause in isolation. The analysis must take into account the content of the agreement, the objectives that it is objectively intended to achieve (independently of the subjective intentions of the parties), and above all the economic and legal context in which it is set.. It is necessary to examine the actual functioning of the market concerned and the real role of the agreement in this context.
It is important to note that the intention of the parties to restrict competition is not, in principle, an element required to qualify as an agreement by object.. However, in practice, the willingness to join an agreement with an anti-competitive object often reflects this intention.. There is a nuance concerning the attempt: attempting, without success, to conclude an anti-competitive agreement is not punishable in itself, in the absence of an agreement.. On the other hand, an agreement entered into with the aim of harming competition, even if it has not yet produced all its effects, does fall within the scope of the prohibition as an agreement by object..
Classification as a cartel by object has a major consequence in terms of proof The Competition Authority does not have to demonstrate the concrete negative effects of the practice on the market (reduced diversity, higher prices, etc.). The existence of the agreement and its intrinsically restrictive nature are sufficient.
Cartels with anti-competitive effects: the need for a concrete analysis
What happens if an agreement or concerted practice is not considered to be anti-competitive in nature? Is it therefore automatically lawful? Not necessarily. It is then necessary to examine its concrete effects on the market. A practice will be condemned if the Competition Authority establishes that it has, or is likely to have, restrictive effects. sensitive on competition.
Analysis by effects requires a much more in-depth approach than for restrictions by object. It is no longer enough to simply note the nature of the agreement; it is necessary to delve into the economic reality of the market concerned. The Autorité must demonstrate, with supporting evidence, that the practice has a negative impact on competition. This may result in higher prices for consumers, a reduction in the diversity or quality of products and services, a slowdown in innovation, or a limitation in production.. The analysis covers both actual effects (those that have already occurred) and potential effects (those that are likely to occur with sufficient probability)..
The essential criterion: appreciable effect and the "de minimis" rule
A simple theoretical restriction is not enough. To justify intervention, the actual or potential anti-competitive effect must be sensitive. This requirement enables the authorities to focus their resources on the most significant breaches of competition law, by ruling out minor cases. This sensitivity criterion, inspired by European Union law, has long been applied in France. and has even been enshrined in law.
Article L. 464-6-1 of the French Commercial Code gives the Autorité de la concurrence the possibility of closing a procedure (the so-called "de minimis" rule) when the combined market shares of the companies participating in the agreement do not exceed certain thresholds:
- 10 % for agreements between competing companies (horizontal agreements).
- 15 % for agreements between non-competitors (vertical agreements, for example between a supplier and its distributors).
Please note that this is only an option for the Authority, not an obligation.. It may decide to pursue a case even if the thresholds are not exceeded, particularly if the particular circumstances justify it.
Above all, this de minimis rule includes some important exceptions, listed in Article L. 464-6-2 of the French Commercial Code. It does not apply to never to restrictions considered to have a object anti-competitive. For example, a price-fixing agreement between competitors, even if they have very small market shares, will never benefit from the de minimis rule.. Also excluded are restrictions on production or sales, the allocation of markets or customers, and certain restrictions in selective or exclusive distribution contracts.. In addition, a specific French feature excludes agreements relating to public contracts from the benefit of this rule.
The de minimis rule is applied at the stage of analysing the infringement (classification), and not at the stage of determining a possible penalty.. If an agreement benefits from the de minimis rule, it is considered as having no appreciable effect and therefore as lawful under Article L. 420-1. This is not an exemption that "redeems" an illegal practice through its positive effects..
The need for competition to affect
A final clarification is in order: for a practice to have an anti-competitive effect, there must be competition that is likely to be affected on the relevant market. If, for structural or regulatory reasons, competition is non-existent or very limited on a given market, an agreement between the players present might not be considered to have a restrictive effect within the meaning of Article L. 420-1.. For example, the Cour de cassation has ruled that the pricing practices of sector 1 doctors, whose fees are regulated, were not covered by the ban on cartels because there was no competition to restrict in this specific segment.. Similarly, an agreement between the holder of an exclusive intellectual property right and its sole licensee on the terms and conditions of sale of the product concerned was held to be irrelevant from the point of view of competition law, since only one operator was entitled to offer the product in any event..
In short, the distinction between object and effect is decisive. If a practice has an anti-competitive object, it is presumed to be unlawful, and no concrete impact on the market is required for it to be condemned. If the practice does not have an anti-competitive object, it will only be sanctioned if the Autorité demonstrates that it has or is likely to have an appreciable negative effect on competition, taking into account the specific context of the market and the market shares of the companies concerned. This effects-based analysis is more complex and depends heavily on the specific features of each case. For a overview of the rules applicable to agreementsFor more information, please consult our main article. Find out about precise definition of an agreement is also an essential prerequisite.
The classification of a practice as having an anti-competitive object or effect can have significant financial and reputational consequences for the companies involved. A prior legal analysis of your commercial agreements and practices is often recommended to assess the risks.
For a personalised analysis of your situation and your commercial practices with regard to competition law, our team is at your disposal.
Sources
- French Commercial Code, in particular articles L. 420-1, L. 464-6-1, L. 464-6-2.
- Case law from the Court of Justice of the European Union (CJEU) and the French courts (Cour de cassation, Cour d'appel de Paris).
- Decision-making practice of the French Competition Authority.
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