Competition law: how to protect your company?
Competition is one of the foundations of well-functioning markets, encouraging economic actors to innovate, improve the quality of their products and services, and offer competitive prices. However, certain practices, whether from competitors or business partners, can distort this competitive game and seriously endanger the activity of a company.
To protect oneself effectively, it is essential to understand both the behaviors sanctioned by competition law (I.), and the control and enforcement tools implemented by the competent authorities (II.), in order to set up appropriate programs (III.).
I. Identification of prohibited anti-competitive practices
Before an effective protection strategy can be adopted, it is essential to identify behaviours that may hinder the free play of competition, as defined and prohibited by law. These practices are: illicit cartels (A), abuse of a dominant position (B), abuse of a state of economic dependence (C), as well as restrictive practices of competition (D), and are the subject of precise regulation, both at national level (Book IV of the Commercial Code, hereinafter “Com. C.“) and at European level (Articles 101 and 102 of the Treaty on the Functioning of the European Union, hereinafter “TFEU“). Therefore, a thorough analysis of their nature and typology is required as a prerequisite for any approach to securing the company against competitive risks.
Cartels (Articles L. 420-1 C. com. and 101 TFEU)
Concerted actions, agreements, express or tacit agreements or coalitions that have “the purpose“ or may have “the effect“ of preventing, restricting or distorting competition in a market are prohibited.
The distinction between restrictions “by object” and “by effect” is particularly significant from an evidentiary point of view: when a restriction is qualified “by object”, the competition authorities are exempted from establishing its concrete impact on the market, whereas a restriction “by effect” requires a detailed demonstration of its consequences. This presumption of harmfulness is based on the intrinsic seriousness of the practice and on the case law experience acquired. In addition, a restriction identified “by object” is deemed sensitive and may be sanctioned regardless of any evidence of a significant effect. This mechanism therefore reduces the burden of proof on competition authorities.
There are several forms of anti-competitive cartel:
- Horizontal agreements: they occur between competing companies operating at the same level of the economic chain. Examples include:
- Joint pricing.
- The distribution of markets or customers [1].
- Concerted bidding (bid rigging) [1].
- Vertical agreements: they occur between companies located at different levels of the economic chain (example: a supplier and its distributors). They may be prohibited if they restrict competition, for example by imposing a resale price or limiting the distributor’s commercial freedom. It is in this respect that the distribution networks are concerned, these agreements relate to the conditions of purchase, sale or resale of goods or services within the distribution network. They are very common in distribution contracts, such as exclusive, selective or franchise distribution, and may contain clauses that may restrict competition, subjecting them to competition law control. Indeed, the Competition Authority has already sanctioned cases of vertical agreements between a franchisor and its franchisees [2]. Nevertheless, in the context of dual distribution, which combines purchase-resale and direct sale, the network generates restrictions of competition that are no longer only vertical and can also be horizontal. Dual distribution introduces a dose of horizontal restriction likely to upset the conventionally retained competitive analysis of the agreement. The Commission has incorporated this element into Regulation 2022/720, in which it exempts exchange that “is both directly related to the implementation of the vertical agreement and necessary to improve the production or distribution of contractual goods or services” (EU Regulation 2022/720, 10 May 2022, recital 13).
An agreement practice may be exempted if it meets the cumulative conditions. As such, there are two types of exemption.
-
Categorical
- exemption by exemption regulations
The block exemption is a collective exemption provided for by way of regulations, for vertical agreements it is Regulation (EU) 2022/720, for horizontal agreements it is Regulations 2023/1066 (on horizontal R & D) and 2023/1067 (on horizontal specialization).
This exemption concerns specific categories of agreements that comply with certain conditions, such as market share thresholds (maximum 30% for the parties concerned), and the absence of so-called “black” clauses that severely restrict competition (examples: minimum price, absolute territorial protection). This exemption allows a presumption of legality and creates a safe harbor for agreements that fall within these criteria, thus facilitating the development of contractual networks without systematic recourse to individual authorization. The objective is to reduce the administrative burden and encourage the establishment of structured commercial networks (selective, exclusive distribution, etc.) in a clear and secure framework.
- Depressed mood
The individual exemption is a mechanism by which a company assesses itself whether its agreement, although potentially restrictive, meets the conditions of Article 101 (3) TFEU, and Article L.420-4 of the Commercial Code, namely an agreement: “which contribute to improving the production or distribution of products or to promoting technical or economic progress, while reserving for users a fair share of the resulting profit“. It is up to the company claiming the benefit of this exemption to demonstrate that the conditions are met.
The demonstration of the benefit of an individual exemption consists of a balancing of the restrictive aspects of competition of the agreements concerned with their pro-competitive effects, which must compensate for them. This assessment must be carried out in particular taking into account the context of the cartel in question
- Recommendation: prioritize the block exemption to develop a network
To develop a commercial network, it is recommended to structure agreements in such a way as to comply with the conditions of the agreement block exemption regulations in order to benefit from the presumption of legality. This reduces legal risks and the need for long and uncertain individual exemptions. This positioning secures contractual relations in the network, in particular through clauses compatible with competition rules, controlled market shares, and a famous attention paid to restrictive clauses (avoid black clauses). In summary, the block exemption offers a more flexible and predictable legal framework, ideal for structuring and growing a network, while the individual exemption is a more burdensome and risky procedure, to be reserved for cases where the block exemption does not apply.
Abuse of a dominant position (Articles 420-2 C. com. and 102 TFEU)
This prohibition targets the behaviour of a company holding a position of strength in a market that allows it to abstain from competition. The protection of the company here implies ensuring, if it is in a dominant position, that it does not commit abuse, or if it is a victim of abuse, that it knows how to identify them.
The case-law shows that an ‘abuse‘ is an objective concept referring to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is already weakened and which, through recourse to methods different from those governing normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition. [3]
Three conditions must be met for an abuse of a dominant position to exist: the existence of a dominant position on a specific market, called “relevant market“, an abusive exploitation of this position, and an object or effect, at least potential, restrictive of competition on a market.
For example, a speech or communication by the company in a dominant position has already been considered as constituting an abuse of a dominant position. [6]
Abuses can consist of:
- Denial of access to critical infrastructure, [4]
- Predatory or excessive prices, [5]
- Tied sales,
- terms,
- Disparagement. [6]
Discriminatory transaction
The abuse of a state of economic dependence (article 420-2 C. com.)
Specificity of French law, this provision protects a client or supplier company that is unable to have a solution technically and economically equivalent to the contractual relations it has established with another company. [7]
The abuse of economic dependence presupposes the meeting of three cumulative conditions: (1) the existence of a situation of economic dependence of one company on another, (2) an abusive exploitation of this situation and (3) an effect (actual or potential) on the functioning or structure of competition. In its most recent case law, the Court of Cassation defines economic dependence as “the impossibility of having a technically and economically equivalent solution to the relations that [the supplier] has established with another company” (Com., 10 Nov. 2021, No.20-13.385; in the same vein, Com., Jan. 31, 2024, No. 22-24.045).
The Competition Authority may order the company in question to amend or terminate the agreements that allowed such abuses. [8]
Restrictive practices of competition
The diversity of business practices considered to be restrictive of competition stems from the accumulation in the Commercial Code of processes or actions that the legislator has wished to control over the course of reforms. Article L. 442-1 of the Commercial Code has profoundly reworked the regime of restrictive practices of competition. It replaces the old list of thirteen prohibited practices (previously contained in Article L. 442-6) with a narrowed list of three practices, which correspond to the most frequently litigating situations:
- Obtaining or attempting to obtain an advantage without real consideration, or whose consideration is manifestly disproportionate to the service actually provided;
- The submission of a business partner to commitments resulting in a significant imbalance in the rights and obligations of the parties;
- The sudden termination of an established business relationship, in the absence of sufficient written notice.
The sanction of practices prohibited by Articles L. 442-1, L. 442-2 and L. 442-3 of the Commercial Code is governed by Article L. 442-4. The penalty provided for is a civil fine, if the action is brought by the Minister of the Economy, the amount of which may not exceed the higher of the following three amounts: five million euros, three times the amount of the benefits unduly received or obtained, – 5% of the turnover excluding taxes achieved in France by the author of the practices.
II. Control and sanction mechanisms
The protection of the company also requires an understanding of the risks involved and the control procedures.
Merger control
As a preventive measure, mergers (mergers, acquisitions of control) must be notified to the Competition Authority or the European Commission if certain turnover thresholds are reached [9], namely:
- the total worldwide turnover excluding taxes of all companies or groups of natural or legal persons party to the concentration is more than 150 million euros;
- the total turnover excluding taxes achieved in France by at least two of the companies or groups of natural or legal persons concerned is greater than 50 million euros;
- the transaction does not fall within the scope of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings.
The objective is to avoid the creation or strengthening of a dominant position.
The control procedure takes place first with mandatory prior notification. Any transaction exceeding certain turnover thresholds must be notified to the European Commission or, depending on the size, to the national competition authorities. This notification suspends the operation until authorized. Secondly, a two-phase review is conducted
-
- Phase 1 (simplified examination): the Commission assesses in principle within one month whether the transaction raises serious doubts about competition. If no, the operation is allowed.
- Phase 2 (in-depth examination): if phase 1 raises concerns, an in-depth investigation is conducted for 4 months (with possible extension), with hearing of the parties, collection of information and economic analysis, which may lead to commitments or a ban.
The competition authority may prohibit the concentration, approve freely or after acceptance of commitments to eliminate anti-competitive risks.
If an anti-competitive cartel is suspected in the context of a merger, the Commission may decide to combine merger control with a conventional antitrust investigation. It can investigate the suspected cartel that risks strengthening market power as a result of the merger. The control procedure may then include interim measures, injunctions, and possibly a procedure sanctioning the cartel on the one hand, and deciding on the validity or form of the concentration on the other hand. Merger control is ex ante (before the completion of the transaction), while cartel investigations are often ex post procedures but can also be combined with control.
In addition, there is a so-called “simplified” procedure, provided for in the Competition Authority’s merger control guidelines, which allows companies to submit a simplified file and the Authority to make a decision within a short time (about 3 weeks instead of 5 weeks). Only transactions that are not prima facie likely to raise competition concerns are eligible for the simplified procedure. These are transactions for which the purchaser (s) are not present in the same markets as the target (s), or in upstream, downstream or related markets, or transactions notifiable pursuant to II of Article L. 430-2 of the French Commercial Code relating to retail trade (which provides for specific notification thresholds) and which do not result in a change of brand.
Failure to comply with the notification obligation is punishable by a pecuniary fine, the maximum amount of which amounts, for legal persons, to 5% of their turnover excluding taxes achieved in France during the last financial year closed, increased, where applicable, by that achieved in France during the same period by the acquired party and, for natural persons, to €1.5 million. [10]
Administrative and criminal sanctions
In competition law, two types of sanction coexist:
-
Administrative sanctions:
- The Competition Authority and the European Commission may impose heavy financial penalties, proportionate to the seriousness of the facts, the damage caused to the economy and the situation of the company. They may also issue injunctions. The maximum amount of the penalty is, for a company, 10% of the amount of the highest worldwide turnover excluding taxes made in one of the financial years closed since the financial year preceding the year in which the practices were implemented. In addition, the authorities may order companies to publish, disseminate or post its decisions or an excerpt in the manner it specifies, for example in newspapers or on the Internet. The purpose of this injunction is to inform the public about the sanctioned practices to prevent any recurrence and promote the transparency of competition control.
- Criminal sanctions: the fact that a natural person takes a personal and decisive part in the design, organization or implementation of anti-competitive practices is a criminal offence, punishable by four years’ imprisonment and a fine of 75,000 euros [12].
Actions for redress or Private Enforcement
Any person who has suffered harm as a result of an anti-competitive practice may seek compensation. A decision by the Competition Authority or the Commission finding an infringement establishes an irrefutable presumption of fault, which greatly facilitates the victim’s action sinceit will only have to demonstrate its damage [13].
For a company, this represents both a risk (to be pursued by its customers/competitors) and an opportunity (to act as a remedy if it is a victim).
III. Protection and prevention strategies
A company may adopt several proactive strategies to protect itself (1.), but may also react to lessen the potential penalty (2.).
Prevent anti-competitive practices
The Compliance Program
The most effective protective measure is preventive. A competition law compliance program aims to prevent, detect and address the risks of infringement. It must include:
- A clear commitment from management.
- Risk mapping (identification of the most exposed activities and personnel).
- Drafting clear internal guides and procedures.
- Regular training of employees, especially sales teams and managers.
- The establishment of an internal alert mechanism.
Contractual vigilance
It is imperative to have commercial contracts audited regularly (distribution, franchise, general conditions of sale, etc.) to ensure that they do not contain anti-competitive clauses (example: resale price clauses imposed, excessive customer or territory restrictions), but also behaviour with partners. Similarly, non-compete clauses must be justified and proportionate to be valid [16].
Towards a moderation of sanctions
Hours*
A company that has participated in an anti-competitive cartel has the opportunity to disclose the existence of the cartel to the competition authorities. Depending on her whistleblowing rank and cooperation, she may obtain full immunity or a partial reduction of the fine she would otherwise have incurred. It is an essential defense tool when an offence is proven.
To benefit from this exemption, the company must contribute positively to the processing of the case, in particular by providing evidence of the infringement, and cooperate in a genuine, total, permanent and rapid manner in the processing of the case.
For example, four laundry detergent manufacturers active in France were sanctioned with 367.9 million euros in 2011 by the Authority. The cartel had lasted from 1997 to 2004, and was sanctioned in 2011, following the leniency application of one of the participants in the cartel. This company, which unveiled the case in 2008 to the Authority, during an investigation in another sector, was able to escape a penalty of 248.5 million euros. [15]
The transaction procedure
In France, the Competition Authority may propose a transaction to companies that do not contest the notified grievances. In exchange, a reduction in the amount of the penalty is granted.
This procedure has established itself as a tool appreciated by companies: since the entry into force of the new provisions of the Macron law, 12 decisions have been rendered for the benefit of a transaction, representing nearly 672.5 million euros in penalty. The transaction decisions concerned the most varied practices, whether it was abuse of a dominant position or large-scale cartels or gun jumping. [16]
In conclusion, the protection of a company under competition law is based on a twofold approach: rigorous prevention through compliance programs and constant legal vigilance, and reactive and strategic management of proven risks, using leniency or settlement procedures and preparing for possible compensation litigation
.
- Com., January 8, 2025, No. 22-22.610
- Authority, Decision 24-D-02 of 6 February 2024
- CJEU, 13 February 1979, Hoffmann-La Roche v Commission, 85/76, para. 91
- Authority, Decision 15-D-10 of 11 June 2015
- ECJ, 3 July 1991, C-62/86
- , June 25, 2025, No. 23-13.391
- Court of Appeal, 6 October 2022, No. 20/08582; Com., 12 February 2013, No. 12-13.603
- Article L.430-9 of the Commercial Code
- Articles L.430-2 et seq. of the Commercial Code
- Article L.430-10 of the Commercial Code
- Article L.464-2 of the Commercial Code
- Article L.420-6 of the Commercial Code
- Article L.481-2 of the Commercial Code
- Article L.341-2 of the Commercial Code; Paris Court of Appeal, 8 February 2023, No.20/14328
- Authority, Decision 11-D-17 of 8 December 2011
- For example: Decision 17-D-20 of 18 October 2017; Decision 18-D-24 of 5 December 2018
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