By a decision handed down on 4 July 2019, the Paris Court of Appeal has added a new chapter to the judicial saga of the flour cartels, which were sanctioned by the French Competition Authority ("FCA") in 2012 (see here for the English version of the FCA press release). The practices investigated by the FCA consisted of the conclusion of a non-aggression pact between French and German millers, leading to market sharing, as well as agreements between French millers to fix prices, limit production and share customers. Although the Court of Appeal largely confirms the FCA's sanction decision, six of the seventeen companies involved secured a substantial reduction in the fine originally imposed.
| what you need to know - key takeaways |
- To determine how long an undertaking has participated to a cartel, the Court of Appeal bases itself on the perception that other cartelists had of its participation, not on the requirement for a "public distancing". This perception was reflected, in this case, in the fact that an undertaking was no longer invited to the meetings of the cartel.
- An infringement cannot be said to be particularly harmful and, therefore, a "by object" restriction, without taking into account the economic and legal context which may worsen or mitigate effects on the market.
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There are three key areas of interest in the judgment of the Court of Appeal.
Duration
First, the Court disagreed with the FCA's reasoning as to the duration of the participation of certain undertakings in one aspect of the cartel, the non-aggression pact.
The pact had been put in place during 12 meetings that took place from May 2002 to September 2004. The Court noted that two of the undertakings stopped participating in these meetings after having attended only one meeting. Whilst there was no evidence that they had publicly distanced themselves from the practices, they had at some point no longer been invited to attend the subsequent meetings.
The Court dismissed the FCA's reasoning, which considered that in these circumstances the undertakings were liable for the entire duration of the cartel. The Court considered instead that the two undertakings were no longer participants in the cartel from the date they stopped receiving invitations to participate in the next meeting (i.e. the date of the invitation sent to all participants except them).
From this date, according to the Court, the other cartelists necessarily considered that these undertakings were no longer part of the cartel. The Court concluded with regard to VK-Mühlen, that the absence of an invitation "demonstrated with sufficient clarity that it distanced itself from the cartel and that its behavior was interpreted as such by the other participants".
Thus, the Court does not require undertakings to adduce evidence of actual public distancing from the behaviour to conclude their participation has ended. This could instead be implied by the absence of invitation.
Legal and economic context
Second, the Court of Appeal sets out that, in order to assess the degree of harmfulness of the infringement and its "by object" nature, it is necessary to take into account the legal and economic context which may aggravate or mitigate its impact on the market.
The FCA's decision did not take into account the existence of a legislation fixing the maximum and minimum prices applicable to flours, which was in force until 1978. This legislation reduced competition on price and thereby impacted the harmful nature of the infringement during this period. However, this legislation did not alter the effect of the market sharing practices and sensitive information exchanges.
Ability to pay
Finally, the Court of Appeal acknowledged the financial difficulties encountered by the petitioners and significantly reduced certain fines in the light of their ability to pay.
Whilst this decision continues the judicial saga and provides interesting analysis, it is not yet its last chapter, as the FCA has already lodged an appeal before the French Supreme Court.
With thanks to Adèle Azzi of Ashurst for her contribution.
