The French Competition Authority aligns its method of calculating fines with the European Commission

On 26 May 2021, Ordinance 2021-649[1] transposed into domestic law EU Directive 2019/1 of the European Parliament. The Directive, known as "ECN+", aims at empowering the Member State competition authorities to be more effective enforcers, and to ensure the proper functioning of the internal market[2]. This Ordinance was the first act in strengthening the powers of the Competition Authority ("Authority") in France.

The second relevant act has just been published and it will have a major impact on companies operating in France: the Authority has published a new Communiqué on the method for setting fines, aligning its method of calculating fines with that of the European Commission ("Commission")[3]. Coming ten years after the first "Communiqué Sanctions" of 2011, this new text does not majorly change the methodology for calculating fines but introduces new factors that will have a clear inflationary effect on the level of fines imposed by the Authority[4].

In general, the steps in the methodology adopted by the Authority remain similar.

• The Authority will determine a base amount of fine, “taking into account the seriousness of the facts and the duration of the practices" (the prior reference to the importance of the damage to the economy has disappeared with the transposition of the ECN+ Directive).
• This amount is then re-evaluated to reflect the individual situation of the companies involved: if necessary, repeat offenders are taken into account.
• Next, this is checked against the legal maximum of 10% of worldwide turnover and leniency is taken into account.
• Finally, at the Authority's discretion, a company may be exempted from a financial penalty on the basis of financial difficulties or its ability to pay.
• In any event, the Authority reserves discretion to detail the steps in its calculation. It may also, subject to justification, decide not to apply its Communiqué when permitted by the circumstances of the case.

Similarly, certain calculation parameters relating to the most serious restrictions of competition remain identical. For example, this is the case where taking into account a proportion of the value of sales included in the range of 15 to 30%. 

However, some elements of the calculation have changed. Among these new features, which are inspired by the European system, are:

• The introduction of what is known in competition jargon as an "entry fee", i.e. the application of an additional flat rate increase of between 15% and 25% of the value of sales. The aim is to dissuade companies further, even if, as the Authority states, this measure will only apply to the most serious cartels and abuses of dominant position.
• A change in the manner the Authority will take into account the duration of the infringement. This is the mechanism with the most impact for companies which will lead to double the duration factor in the fine calculation.  The first year of the practice previously counted for 1 and this remains the case. But, where the following years previously counted for 0.5 each, they will now count for 1. So, for infringements that lasted more than a year, the duration will count for double. In the final version of the text, the Authority has finally accepted to apply a prorata temporis for periods of less than a year, but this remains a minor point in terms of the overall expected impact.

Our simulations show that the value of fines will increase considerably, as a result. 

In short, the Authority, now endowed with additional powers (opportunity to prosecute, possibility to open ex officio interim measures cases, significant reinforcement of sanctions against professional associations, possibility to opt for a simplified procedure in a discretionary way), is driving its point home, with a hardening of potential sanctions against companies. Yet, the weapons at its disposal were already comprehensive and its reputation as a repressive institution already widely established (as a reminder, 1.8 billion euros in fines were imposed in 2020). 

[1]    Government Ordinance 2021-649 transposing Directive (EU) 2019/1 of the European Parliament and of the Council 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.

[2]    Directive (EU) 2019/1 of the European Parliament and of the Council 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.

[3]    Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003 (2006/C 210/02).

[4]    Communiqué pt.5.