The Private Competition Enforcement Review: France
Overview of recent private antitrust litigation activity
The level of private antitrust litigation activity has remained relatively low in France as compared to a number of other EU Member States, although it is rising. The transposition at the end of 2017 of EU Directive 2014/104 on follow-on actions, which led to the creation of a comprehensive set of rules specifically dealing with damages claims in relation to anticompetitive practices and which significantly improved the position of claimants in France, has paved the way for an increase in the number of actions though this increase is yet to be seen. Note, however, that it is always difficult to have an accurate view of the actual level of activity since, as in most countries, claims for damages resulting from a competition law infringement are often settled before the final decision without the details of such settlements being publicly reported. However, a number of actions initiated in the wake of several cartel cases, in particular in the retail goods sector, have recently been taken to court and more unsettled claims may follow.
The first damages decisions rendered in France, including the landmark Mors v. Labinal decision, which is the first case in which significant damages (over €5 million) were awarded, were often based on stand-alone actions where practices were held anticompetitive by the court and not by a prior decision by competition authorities.
Claims following an infringement decision have progressively increased but stand-alone actions remain frequent. This is despite the fact that many of them are dismissed for lack of sufficient evidence or legal basis. Regarding follow-on claims, it is interesting to note a growing tendency for public entities victims of anticompetitive practices to seek redress, leading to increased litigation activity before administrative courts.
General introduction to the legislative framework for private antitrust enforcement
The legislative framework for private antitrust enforcement in France has been recently further modified through the adoption of Ordinance 2017-303 and Decree 2017-305 of 9 March 2017 implementing EU Directive 2014/104 on actions for damages for infringements of competition law provisions. The Ordinance and the Decree have introduced new sections2 in the French Commercial Code specifically dealing with damages actions resulting from anticompetitive practices.
These provisions intend to help the victims of anticompetitive practices to seek redress. They provide that individuals or companies are liable for the harm they have caused as a result of their involvement in anticompetitive practices. The competitive practices concerned include anticompetitive agreements and abuses of dominant position prohibited by French and EU competition law, and also certain types of infringements that are specific to French law, such as abuse of economic dependency, the granting of exclusive importation rights in French overseas territories or abusively low pricing.
It is up to the claimant to prove that it has suffered a loss as a result of anticompetitive practices. It can be difficult for victims to gather evidence to prove that anticompetitive practices have taken place without a pre-existing decision identifying an infringement. Due to the difficulty of proving the existence of the practices, which are often secret, there are relatively few damages actions, and they tend to be more and more often based on an infringement decision of a competition authority.
The statute of limitation is five years as from the date that the claimant was aware or should have been aware of all of the following: the existence of the infringement, the fact that it has caused harmed to the claimant and the identity of the infringer. In practice, claimants may argue that they discovered the cause of action only upon publication of the decision issued by the competition authority confirming that a company has engaged in anticompetitive practices, in particular in relation to secret horizontal practices such as cartels. The limitation period starts running only when the infringement has ended.
The limitation period is not opposable to victims of an infringer having benefited from full immunity in the context of leniency proceedings so long as they have not been in a position to bring an action against the other co-infringers.
French competition law applies to any anticompetitive practice that took place in France or caused harm in France.
Damages claims can be initiated before French courts, based on the French liability regime, if the harm has been suffered in France or if the defendant is located in France. Thus, a foreign claimant may initiate an action before French courts if the company having infringed the competition law is a company established in France. Likewise, a claimant may sue a foreign infringer before French courts if the claimant has suffered harm in France.
Any person or company having suffered harm as a result of anticompetitive practices may initiate an action to obtain compensation. There is no restriction as to the type of person or company entitled to seek compensation. It could typically be consumers, purchasers, distributors or competitors. Direct as well as indirect victims (typically purchasers) can bring an action.
Damages claims can be brought against legal entities or individuals who may in certain circumstances be liable if they have played a personal and decisive role in the design and implementation of anticompetitive practices. The recently introduced specific rules on antitrust damages actions only apply, however, in the case of an action brought against an undertaking (i.e., an economic unit carrying out a commercial activity). As far as groups of companies are concerned, there is a rebuttable presumption that the parent company is liable for the conduct of its wholly owned subsidiaries.
Damages claims can be brought before commercial or civil courts, with specific courts specialised to hear competition damages claims. They can also be brought before the administrative courts if the author or victim of the anticompetitive practice is a public entity.
Actions for damages for infringement of competition law (EU law or domestic law) were traditionally tortious actions based on the general liability regime set forth in the French Civil Code. They will in the future probably be based on the most recent provisions of the Commercial Code specifically dealing with damages actions following competition law infringements.
The process of discovery
Under French law, parties must disclose all documents upon which they rely. They do not have to disclose documents that would adversely affect their case or support the other party's case.
In the course of proceedings, a party may, however, request the court to order the other party to disclose documents relevant to the case that are not already within the control of the requesting party. Such requests should normally identify expressly the documents requested; fishing expeditions are not permitted under French law.
Specific rules have, however, been introduced regarding disclosure in the context of damages actions following competition law infringements, which allow a claimant to request the disclosure of relevant categories of evidence. The category of evidence in question must be circumscribed as precisely and as narrowly as possible, by reference to common relevant features of its constitutive elements such as the nature, object, date or content of the documents that are being requested.
The main exception to disclosure ordered under these provisions is that documents covered by business secrets and privileged documents, as well as certain categories of evidence submitted or held by the competition authority, cannot be disclosed.
When a claimant requests the disclosure of evidence that is alleged by the defendant or a third party to contain business secrets or otherwise confidential information, the court may decide that only part of the documents or a redacted or summarised version will be disclosed, restricting the persons allowed to see the evidence and adapting the content of its decision to take due account of the necessity to protect business secrets or other confidential information. The court may also decide to conduct hearings in camera.
Persons having been granted access to evidence considered by the court to be likely to contain business secrets are bound by an obligation of confidentiality preventing them from using or disclosing the relevant information in their relationships with third parties. This obligation remains enforceable as long as the court has not waived it, or as long as the information has not lost its confidential nature or has not become easily available.
Parties, third parties and their legal representatives may be exposed to a fine of up to €10,000 if they fail or refuse to comply with the disclosure order of the court, destroy relevant evidence, or fail or refuse to comply with the obligations imposed by a court order protecting confidential information. Courts may also draw adverse inferences from the above conduct of the party.
Use of experts
The court may request, at its own initiative or upon request from any of the parties, the assistance of an expert to clarify factual elements of the case.
The use of experts generally mostly relates to an assessment of the harm and the corresponding amount of damages. In this respect, it is common for the parties to submit their own expert reports in support of the case, generally prepared by economic consulting firms.
Although experts hired by the parties must provide accurate information, they do not have as strong a duty to the court as in certain other jurisdictions. This may lead the court to decide to appoint a third-party expert independent from the parties who will have a legal duty to be impartial.
A specific class action procedure related to competition and consumer law infringements has been adopted by the Law of 17 March 2014 (Hamon Law) and is set forth in the French consumer code.3 Class actions are possible to repair the individual harm caused by the infringement of competition law provisions to consumers placed in an identical or similar situation. They can only be initiated by authorised consumers' associations.
To be authorised, a consumers' association must fulfil specific criteria, including:
- having been in existence for a period of at least one year;
- demonstrating that the organisation carries out effective public activity in defence of the interests of consumers;
- if purported to be a national organisation, having a membership of at least 10,000 members; and
- being independent from any form of professional activities.
Approval is granted for a period of five years and may be renewed subject to the same conditions.
Authorised associations may only represent consumers, defined by the consumer code as individuals acting for purposes that are primarily outside their trade, business, craft or profession.
The procedure of this new class action is twofold. First, the court must establish the liability of the professional, identify the group of consumers concerned and set the amount to be paid as compensation for each consumer. Once such a ruling has been issued, the consumers concerned then have two to six months, as specified in the decision, to join the group and be compensated. By joining the group, consumers are deemed to have given proxy to the association, which will collect the damages and redistribute them to each individual consumer. The French regime is therefore based on an opt-in mechanism.
A simplified procedure allows for direct and individual compensation when the number and identity of consumers harmed is known and when these consumers have suffered damage of the same amount.
Aside from this new type of class action for competition law infringements, there still exists the traditional representative action: the action of joint representation. This action is only opened to registered consumers' associations and may be brought before any French court, including criminal courts, to represent either an individual interest or a number of interests where the individuals involved have sustained damage as the result of the same infringement. To initiate an action of joint representation, a consumers' association must first obtain a written proxy from at least two of the consumers affected by the infringement. The consumers' association cannot publicly call for proxies. Because of these very strict requirements, the action of joint representation is rarely used. This procedure is of lesser interest in light of the new class action procedure introduced by the Hamon Law.
For the purpose of consumers' class actions, the consumer code provides that infringements of competition law are irrefutably established on the basis of a final decision of national or European authorities or courts (including competition authorities and courts of all Member States of the European Union). However, the authorised consumers' association or the claimant still needs to provide evidence of a loss and a link between the infringement and the damage.
Consumer class actions can be brought up to five years from the date of issuance of a final decision by a national or European authority or a court establishing an infringement of the competition rules. The limitation period for individual damages actions is suspended by the launch of a class action. The period resumes for at least six months from the date on which a final class action decision establishing liability for damages has been issued.
French law establishes a rebuttable presumption that cartel infringements cause harm. No such presumption applies to other competition infringements such as abuse of dominant position or vertical practices.
The claimant will in any case have to assess the extent of the loss it has suffered. French law provides for the principle of full compensation, meaning that a person who has suffered harm shall be placed in the position in which that person would have been had the infringement of competition law not been committed. Compensation shall therefore cover the right to compensation for actual loss and for loss of profit, plus the payment of interest.
French law provides that the compensation may include:
- the loss resulting from the overcharge (subject to the absence of passing on to the downstream purchaser) or from a lower price paid by the infringer;
- the loss resulting from the loss of volume of products sold in the case of a partial or total passing on of the overcharge;
- the loss of chance; and
- moral damage.
Courts will continue to assess the extent of the harm, although it is up to the claimant to quantify his or her loss. Courts can request guidance from the French Competition Authority regarding the assessment of harm.
The losing party normally bears the costs of proceedings (translation fees, witnesses, experts, etc.). These costs do not, however, include attorneys' fees, but courts may order the losing party to bear the attorneys' fees. Courts have discretionary powers to set the amount of legal costs to be paid by the losing party, and these costs are generally much lower than the actual attorneys' fees incurred by the party.
The passing-on defence is available under French law. Given that compensation of harm can be claimed by anyone who has suffered it, irrespective of whether it is a direct or indirect purchaser from the infringer, it must be ensured that a claimant does not obtain compensation of harm exceeding that caused by the infringement of competition law to such claimant.
The defendant in an action for damages can therefore invoke as a defence against a claim for damages the fact that the claimant passed on the whole or part of the overcharge resulting from the infringement of competition law. The burden of proving that the overcharge was passed on rests on the defendant. Indeed, the rule is that direct or indirect purchasers are deemed not to have passed on the overcharge to their direct co-contractors.
There are specific rules regarding damages claims made by indirect purchasers. It is normally up to such indirect purchasers to prove that they have been affected by the anticompetitive practices through passing on and to quantify the resulting loss they have suffered. However, to make it easier for such indirect victims to claim damages, the law provides that the indirect purchaser is deemed to have demonstrated the existence of a passing on if it is able to show that the defendant committed an infringement of competition law; the infringement resulted in an overcharge for the direct purchaser of the defendant; and the indirect purchaser bought the goods or services that are the object of the infringement, or derived from or containing them.
The defendant can nevertheless demonstrate that the overcharge was not, or was not entirely, passed on to the indirect purchaser.
The above rules are also applicable to direct or indirect suppliers of the authors of competition law infringements claiming compensation for a loss resulting from a lower price paid by infringers.
French law provides that an infringement of competition law is deemed to be irrefutably established by an infringement decision of the French Competition Authority or of the court of appeal that cannot be appealed through an ordinary appeal process. The same applies in relation to final infringement decisions issued by the European Commission, as French courts cannot issue decisions that go against Commission decisions.
Findings of infringements of competition law in a final decision rendered by other national competition authorities or a court of appeal are deemed to constitute prima facie evidence of an infringement. Thus, if a final prior decision of the French Competition Authority or the European Commission has already established that the defendant has infringed competition law, the claimant will only need to prove causation and loss.
Infringers that cooperate with the Competition Authority in the context of leniency or settlement proceedings are not protected against private actions. In this respect, the anticipated increase of follow-on actions may have deterred certain infringers from applying for leniency, as is reflected in the decreasing number of leniency applications received by the French Competition Authority.
It must be noted that parties settling a case under French law do not have to expressly acknowledge their guilt (i.e., their involvement in the anticompetitive practices); they merely have to abstain from contesting the objections. However, it is often considered that it may be more complicated for a company to successfully defend a follow-on damages action if it has settled with the Competition Authority.
French courts recognise legal privilege, but only in relation to independent attorneys registered with a Bar. In-house counsel do not benefit from legal privilege. French courts will give full effect to applicable legal professional privilege when ordering the disclosure of evidence. Attorney–client correspondence, attorneys' work products, handwritten notes of a conversation with an attorney and all the documents that form part of an attorney's file are legally privileged.
French law also contains specific rules regarding disclosure of certain documents held by or submitted to competition authorities. Thus, a court cannot request competition authorities or the French Ministry of Economy to disclose evidence that can reasonably be obtained from another party.
Investigation evidence is ordinarily confidential and therefore not disclosable in judicial proceedings. Any information or document prepared by a natural or legal person specifically for the proceedings of a competition authority, any information drawn up and sent to the parties by the competition authority, and any settlement submissions that have been withdrawn are therefore not disclosable so long as the competition authority has not closed its proceedings by adopting a decision or otherwise.
In addition, courts cannot at any time order a party or a third party to disclose corporate statements (written or transcription of oral statements) made in the context of leniency or settlement proceedings.
A party may request the court to access the evidence for the sole purpose of ensuring that it is protected. The competition authority may, acting on its own initiative, submit observations to the court before which a disclosure order is sought. The court may also request the competition authority's opinion. If only parts of the evidence requested are covered by the above protection, the remaining parts thereof shall be released.
Evidence that is obtained by a natural or legal person solely through access to the file of a competition authority is deemed to be inadmissible if it is submitted prior to the closure of the proceedings by the authority or if it concerns leniency statements or settlement submissions.
As in any other damages claims, parties to a damages claim in relation to a competition law infringement can settle the case. In fact, most follow-on actions tend to be settled, as defendants want to avoid the issuance of a publicly available decision awarding damages that may encourage other potential victims to seek compensation. French law provides for certain rules dealing with the amount of compensation that can be claimed to settling and non-settling parties in this context.
The injured party having settled with one of the co-infringers can only claim from the other co-infringers an amount of damages reduced by the settling co-infringer's share of the harm that the infringement of competition law inflicted upon the injured party.
Any remaining claim of the victim can be exercised only against non-settling co-infringers. By way of derogation, except as otherwise provided in the settlement agreement, where the non-settling co-infringers cannot pay the damages that correspond to the remaining claim, the victim may exercise the remaining claim against the infringer with which it has previously settled.
Non-settling co-infringers are not permitted to recover contribution for the remaining claim from the settling co-infringer.
When determining the amount of contribution that a co-infringer may recover from any other co-infringer in accordance with their relative responsibility for the harm caused by an infringement of the competition law, courts must take due account of any damages paid pursuant to a prior consensual settlement involving the relevant co-infringer.
Settlements may also have an impact on the level of fines imposed by the French Competition Authority on the settling infringers. Indeed, the Competition Authority may decide to reduce the amount of the fine imposed on an infringer that has paid compensation to the victim as result of a consensual settlement.
Parties who do not wish to bring their case before a court may resort to arbitration or mediation to resolve disputes involving competition law issues. The Paris Court of Appeal confirmed that, although arbitrators do not have the power to impose fines for infringements of competition law, they can decide upon the consequences of such infringements and, in particular, award damages.4
Authorised associations may also engage in mediation in the context of a class action at all stages of the proceedings. If the mediation leads to an agreement between the parties, the negotiated agreement must be confirmed by a judge, who must ascertain that the agreement has been reached in the interests of consumers and will be enforceable.
Indemnification and contribution
Under French law, damages are exclusively compensatory. Their purpose is to restore the victim to the position that it would have been in had the breach never been committed.
Punitive damages as they exist, for instance, in the United States do not exist under French law. This is because, as stated above, the purpose of damages under French law is to compensate the victim for the harm sustained rather than to deter the defendant and others from engaging in infringing conduct.
As a general rule, damages will be awarded only if the harm sustained is direct, personal, certain and foreseeable. The claimant must show that there is a causal link between the infringement and the harm suffered. Consequential damages are available if certain and foreseeable. French courts will therefore award damages for loss of chance and loss of earnings, if appropriate.
Liability will ordinarily be joint and several for infringements of competition law involving several defendants. This means that a claimant may potentially bring an action for damages against any one party for the entire loss caused by all infringers. In cases where only one cartelist is sued, it can seek to join others to the action or initiate a claim against them at a later stage for a contribution to any damages paid out, or both.
If an award of damages is made against a group of defendants on the basis that their liability is joint and several, it is for the court to assess how liability should be apportioned as between those defendants. French courts will apportion damages between co-defendants by reference to the seriousness of their respective conduct and the causal role in the resulting harm.
By way of derogation, where an infringer is a small or medium-sized enterprise (SME), it is liable only to its own direct and indirect purchasers where its market share in the relevant market was below 5 per cent at any time during the infringement of the competition law, and the application of the normal rules of joint and several liability would irretrievably jeopardise its economic viability and cause its assets to lose all their value.
Such derogation does not apply where an SME has led the infringement of competition law, has coerced other undertakings to participate therein, or has previously been found to have infringed competition law by a decision of a competition authority or an appeal court.
Similarly, defendants having been granted immunity from fines in the context of leniency proceedings may only be held jointly and severally liable to claimants other than their direct or indirect co-contractors where such other claimants cannot obtain full compensation from the other undertakings that were involved in the same anticompetitive practices.
In addition, the amount of contribution of an infringer that has been granted immunity from fines under a leniency programme shall not exceed the amount of the harm it caused to its own direct or indirect purchasers or providers.
Future developments and outlook
Until now, antitrust private enforcement actions have remained relatively rare in France. Commentators have suggested that a possible reason for the low number of private enforcement actions brought in France was the relatively low level of awareness of the possibility for aggrieved companies to obtain damages, the absence of discovery and the lack of expertise of courts, in particular in relation to the assessment of damages.
The recent implementation of the EU Directive on Damages in France has largely remedied this situation. Courts have also been issued with guidelines and have received training on the assessment of damages following competition law infringements.
Although this more favourable legal environment for claimants has not led to a dramatic increase in private enforcement in France to date, it is expected that follow-on claims will become more and more common in the coming years. Indeed, awareness of the potential for possible private action has increased not only within companies but also within the legal community, with claim-funding companies also becoming more active in the French market. In the case of EU-wide cartels, French companies tend to bring actions before foreign courts, such as UK or Dutch courts, which are still viewed as more claimant-friendly, in part due to discovery rules. Measures have, however, been taken to increase the attractiveness of French courts as suitable litigation forums with the appointment of specialised judges and the creation of an international chamber within the Paris Court of Appeal allowing for part of the proceedings to be held in English.