French court upholds €20 million fine for breach of merger commitments

In a decision of 7 November 2019, the French State Council ("Conseil d'Etat") dismissed the appeal brought by Fnac Darty, a retailer specialising in cultural and electronic products, against a fine imposed by the French Competition Authority (the "FCA") for failure to comply with its obligation to divest three stores, which were conditions to the clearance of the merger between Fnac and Darty.

In 2018, the FCA fined Fnac Darty for non-compliance with the remedies accepted in relation to the FNAC/Darty merger because:

• for one of the stores to be divested, neither a sale contract or a buyer was presented to the FCA; and
• for the two other stores, the proposed buyer was found to be unlikely to compete effectively with Fnac Darty by the FCA.

The FCA had also refused to extend the deadline for implementing the remedies because Fnac Darty did not make this request in time and could have considered alternative commitments in view of the difficulties encountered.

The State Council, which is competent to deal with action brought against FCA decisions in the field of merger control, confirmed the decision of the FCA and raised several interesting points:

• first, it indicated that, unlike sanctions for anti-competitive practices, the FCA is not required to explain the level of fine imposed when adopting a sanction in relation to merger control.
• second, it stated that the proportionality of the sanction must be assessed in the light of the gravity of the infringement, i.e. the significance of the non-fulfilled remedies in relation to the full range of remedies imposed, the behaviour of the undertaking in the implementation of the remedies and its specific situation – including its financial situation.
• third, the State Council stressed that the FCA is not required, however, to assess the proportionality of the fine in relation to the consequences of the infringement on the market. As a result, the FCA is not required to carry out a new analysis at the time of the decision to determine the impact on the market, as Fnac Darty claimed.

The State Council therefore confirmed the proportionality of the FCA's sanction, stating that the remedies in question represented half of the remedies imposed, that Fnac Darty could have anticipated the difficulties in finding a buyer well before the deadline and that it did not report any financial difficulties during the investigation.

With thanks to Adèle Azzi of Ashurst for her contribution.