This country-specific Q&A provides an overview of the legal framework and key issues surrounding merger control law in France.
This Q&A is part of the global guide to Merger Control. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/merger-control
The French merger control regime is set out in Articles L. 430.1 and seq. of the Commercial Code and is further described in practice by the merger control guidelines issued by the French Competition Authority ("FCA"), which is the relevant enforcement authority in France. To a more residual extent, the French Ministry of Economy holds limited powers at two main stages of the merger control process : at the end of a phase I review he can request the opening of an in-depth investigation, or at the end of an in-depth review by the FCA, he can decide to review the transaction itself if matters of public interest are at stake.
French merger control where applicable requires clearance before closing. In practice, this prohibition is recognized by conditions precedent typically included in the contractual documents. Failures to comply with the filing obligation, or pre-closing the transaction without clearance (“gun-jumping”), are punished by fines and an injunction, under article L. 430-8 of the Commercial Code. A recent case of gun jumping shows that the FCA considers it as an enforcement priority.
Is mandatory notification compulsory or voluntary?
Filing is compulsory if merger control thresholds are met.
Is there a prohibition on completion or closing prior to clearance by the relevant authority? Are there possibilities for derogation or carve out?
Closing a reportable transaction without having obtained a clearance decision is prohibited by French law since merger control has a suspensive effect. Derogations to the suspensive effect of French merger control are possible subject they are necessary and justified in case of public bids and in specific cases such as when companies are under receivership or compulsory liquidation. However, such derogation shall be accompanied and followed by a filing and does not prejudge the assessment of the transaction in substance.
There is no provision on the possibility to carve out.
What are the conditions of the test for control?
A transaction - acquisition, merger or creation of a full function joint venture, is reportable under French merger control rules if it leads to an acquisition or change of control, even a change in the quality of control. The notion of control is the same as in EU law and corresponds to the ability to exercise a decisive influence over an undertaking on a lasting basis. The appraisal of such control may be undertaken either on a de facto or de jure basis.
What are the conditions on minority interest in your jurisdiction?
Irrespective of the percentage held, the acquisition of a minority interest may be reportable if jurisdictional thresholds are met and if the minority interest is accompanied by controlling rights. Although there is no list of rights conferring control, the FCA notably takes into account direct or indirect veto rights on strategic decisions such as (but not limited to) budget, business plan, appointment and/or dismissal of senior management as indicia.
What are the jurisdictional thresholds (turnover, assets, market share and/or local presence)?
French merger control thresholds are expressed in terms of turnover.
A merger is reportable if:
- the parties’ combined worldwide pre-tax turnover exceeded €150 million in the last financial year;
- at least two of the parties each achieved pre-tax turnovers of €50 million in France; and
- the concentration does not have an EU dimension.
There is a specific provision applicable to the retail sector with the following lower thresholds:
- the parties’ combined worldwide pre-tax turnover exceeded €75 million in the previous financial year;
- at least two of the parties each achieved pre-tax turnover of €15 million in France in the retail trade industry; and
- the concentration does not have an EU dimension.
Finally, there is a specific threshold applicable to French overseas if at least one party to the transaction has activities in one or more French overseas departments (Guadeloupe and La Réunion), the Mayotte department or in the French overseas communities of Saint-Pierre-et-Miquelon, Saint-Martin and Saint-Barthélémy and
- the parties’ combined worldwide pre-tax turnover exceeded €75 million;
- at least two of the parties each achieved pre-tax turnover of €15 million (or €5 million if in the retail sector) in at least one French overseas department or overseas community (Saint-Pierre-et-Miquelon, Wallis and Futuna islands, French Polynesia, Saint-Barthélémy, and Saint-Martin); and
- the concentration does not have an EU dimension.
How are turnover, assets and/or market shares valued or determined for the purposes of jurisdictional thresholds?
The method for calculating turnover under French Law is the same as in Article 5 of the European Union Merger Regulation. Thus, the turnover must be generated by products or services sold to companies or consumers in France, after deducting internal sales within a group of companies, and taxes. The turnover figures make it possible to see the overall economic strength of the business concerned, which is why the Authority takes into account the turnover of other companies within the same control group, and not only just the specific companies involved in the proposed merger.
When the merger involves the acquisition of only parts of a company (either through purchase of shares or assets), only the turnover from those parts of the target is included for reporting purposes.
Outsourcing transactions make it more difficult to calculate the relevant turnover for the purpose of merger control, since the activities are by nature intragroup sales before the transaction. (Intragroup sales by their nature do not have a market value.) In this case, the parties should generally consider both the turnover earned internally before the transaction, and the turnover the buyer expects in the next year following the transaction.
For the purpose of its geographic allocation, the turnover shall be allocated in principle by reference to the country where the client is located.
Is there a particular exchange rate required to be used for turnover thresholds and asset values?
There is no binding exchange rate applicable. However in practice, the European central bank yearly average rate is frequently used.
Do merger control rules apply to joint ventures (both new joint ventures and acquisitions of joint control over an existing business?
Yes, both types of transactions are caught by French merger control rules. In the case for example of a newly created joint venture with no existing turnover, the parties to the concentration (for the purpose of turnover thresholds calculation) will be the parent companies which will exercise control.
In relation to “foreign-to-foreign” mergers, do the jurisdictional thresholds vary?
No. There is no specific provision on foreign-to-foreign mergers.
For voluntary filing regimes (only), are there any factors not related to competition that might influence the decision as to whether or not notify?
Additional information: Jurisdictional Test
What is the substantive test applied by the relevant authority to assess whether or not to clear the merger, or to clear it subject to remedies?
The test focuses on whether the transaction is likely to significantly lessen competition, by either producing unilateral or coordinated effects.
The assessment starts by identifying the relevant markets concerned by the transaction i.e. horizontal overlaps, actual or potential vertical relationships and potential conglomerate effects (complementarity). Depending on the market positions of the parties in the relevant markets (primarily assessed by reference to their respective market shares and those of the competitors), the FCA assesses whether there are risks of distortions of competition. Market shares are a first indicia but not the only one to be considered. The FCA assesses the market structure form a supply and demand side. In the case of a newly created full function joint venture, the FCA also assesses the risk of coordination between parent companies. Ultimately, the FCA may take into account efficiency gains subject certain conditions are met.
Among the determinant factors in the FCA's assessment, the feedback from the market test. If the transaction is likely to raise antitrust issues and the results of the market test confirm it, the notifying party may wish to propose remedies. There are several approaches to remedies and several stages at which they may be proposed to obtain clearance in complex cases.
Are non-competitive factors relevant?
In principle, the FCA should only take competitive factors into account.
The residual powers of the Ministry of Economy in merger control are based on matters of public interest which may be considered as "non-competitive factors" - industrial development, employment.
Are there different tests that apply to particular sectors?
There are no specific tests for particular sectors. However, the FCA takes into account sector specific rules which may impact the competitive assessment for example in the energy, TV, press sectors.
Are ancillary restraints covered by the authority’s clearance decision?
Restrictions which are presented as necessary and directly related to the transaction by the notifying party may be considered as ancillary restraints by the FCA and covered by the decision. However, the notifying party is required to conduct a self-assessment and file it in the filing form. In certain cases, the FCA may require a modification of such agreements or provisions (exclusivities, non-compete or licensing) to grant clearance.
What is the earliest time or stage in the transaction at which a notification can be made?
Parties may formally file the transaction when their deal is sufficiently advanced. In practice, the notifying party generally formally files at signing.
For mandatory filing regimes, is there a statutory deadline for notification of the transaction?
What is the basic timetable for the authority’s review?
A first step which has become market practice is to prenotify the transaction once the main structure is stabilized so that informal discussions may take place between the FCA and the notifying party. This preliminary phase is not framed by a binding timetable but has proven very useful to clear all matters before formal filing.
Once the formal filing is made, the FCA has a 25 working days period of examination to adopt a clearance decision in the so called Phase I. For a clearance to be obtained in such timeframe, the transaction must not be likely to raise antitrust concerns. The 25 working days period may be extended if remedies are submitted.
At the end of a Phase I, the FCA either clears the transaction, finds that merger control does not apply or opens a so called Phase II which is an in-depth examination where the transaction is likely to raise antitrust concerns which are not alleviated by appropriate remedies.
A phase II examination lasts at least 65 more working days, subject to extension or suspensions notably if remedies are submitted. At the end of a Phase II, the FCA may clear the transaction with or without remedies, or prohibit the transaction.
If no decision is issues once the deadlines of Phase I or Phase II expire, the merger is deemed to be approved.
Finally, the waiting period granted to the Ministry of Economy shall also be taken into account: at the end of Phase 1, the Ministry of Economy can ask the FCA to conduct an in-depth examination of the concentration within 5 working days from the notification of the FCA’s decision. At the end of Phase 2, the Minister of Economy may review the case and take a final decision on the concentration on public interest grounds within 25 working days from the notification of the FCA’s decision.
Under what circumstances the basic timetable may be extended, reset or frozen?
Triggering events for extension are mainly the submission of remedies and failure to answer request for information in due time by the notifying party.
The notifying party may also request extension based on specific needs.
Timetable is reset in case of re-notification.
Are there any circumstances in which the review timetable can be shortened?
The formal examination period may be shortened in two cases i.e. where the transaction meets the criteria for a simplified procedure as it does not raise competition issues (no market concerned for example as there is no overlap, no vertical relationship), and where the transaction is in the retail sector and does not give rise to a change of brand names.
In both cases, the FCA may (but is not bound to) issue a clearance decision within 15 working days as from the formal filing. Such simplified procedure is frequently used by the FCA where the conditions are met.
Which party is responsible for submitting the filing? Who is responsible for filing in cases of acquisitions of joint control and the creation of new joint ventures?
The notifying party is the acquirer(s) of control. In case of joint ventures, parent companies make joint notifications.
What information is required in the filing form?
The filing form basically contains (a) a description of the transaction; (b) information on the identity of the parties involved and their business; (c) information on the relevant market(s) and an assessment of the market shares of the main players; and (d) a declaration that certifies that the notification is accurate and complete.
The presentation of the markets concerned and the competitive analysis are obviously the most important part of the form. The markets “concerned" shall be distinguished from the markets “affected” by the transaction, i.e., on which the parties have a combined market share of more than 25% in case of horizontal overlaps, or when at least one party has more than 25 % market share in case of vertical relationship or where a potential competitor would be eliminated. In case the transaction leads to affected markets, additional information must be provided by the parties.
The notifying parties shall calculate their own market shares both in value and in volume, and those of their competitors in value and volume when possible. The Authority will accept estimates of competitor data when authoritative data does not exist. The parties may also provide the data on which their findings are based and in any case refer to it.
Which supporting documents, if any, must be filed with the authority?
The following main documents shall be submitted together with the filing form: a copy of the agreement bringing about the concentration; the last annual report and annual accounts.
Depending on the complexity of the transaction and the potential antitrust issues, the FCA may request market studies, economic analysis, statistical reports, internal documents.
In principle, all documents must be provided in French. In practice, the FCA may accept in certain circumstances that the notifying parties submit documents in English or in a French version limited to the excerpts of documents that are relevant for its assessment.
Is there a filing fee? If so, please specify the amount in local currency.
Is there a public announcement that a notification has been filed?
Pre-notification contacts are confidential. It is only once the formal filing is made, that the FCA publishes a notice on its website with the summary of the transaction, the names of the parties and the markets involved.
Does the authority seek or invite the views of third parties?
The FCA is entitled to market test the proposed transaction. Competitors, customers and suppliers or even trade associations may receive questionnaires from the FCA to which they are invited to respond. The same goes for remedies submitted by the notifying parties which are subject to market test.
Third parties may also on their own initiative contact the FCA in relation to a specific transaction and submit their comments on their perception of its likely impact.
What information may be published by the authority or made available to third parties?
Once the formal filing is made, the FCA publishes a notice stating the nature of the transaction, its rationale in the non-confidential version provided by the notifying party. Neither the filing form nor the supporting documents or submissions made during the review are provided to third parties. Where remedies are submitted, it is only a non-confidential version of the remedies which is provided to third parties for the purpose of the market test.
Once the clearance decision is issued, a notice indicating that it has been issued is published and only a non-confidential version of the decision is thereafter published.
Does the authority cooperate with antitrust authorities in other jurisdictions?
The FCA is part of the European Competition Network and therefore tightly cooperates with other competition authorities. It also cooperates with international competition authorities based on bilateral agreements.
What kind of remedies are acceptable to the authority? How often are behavioural remedies accepted in comparison with major merger control jurisdictions, such as the EU or US?
Both behavioral and structural remedies may be submitted to the FCA and may be accepted subject they address the competition concerns identified. The FCA tends to accept behavioral commitments generally in combination with structural and/or quasi structural remedies.
What procedure applies in the event that remedies are required in order to secure clearance?
Remedies can be submitted both in Phase I and Phase II examination. The submission of remedies automatically extends the review period since the FCA needs to assess them and market test them before considering it may address the identified concerns.
Should the remedy proposal be considered insufficient, the FCA may either prohibit the transaction or impose injunctions.
What are the penalties for failure to notify, late notification and breaches of a prohibition on closing?
Failure to file a reportable transaction or to wait until clearance is obtained (so called gun jumping) exposes the notifying party to a risk of i) being obliged to file or demerge subject to a daily fine of maximum 5% of the average daily turnover, and/or ii) a fine amounting to up to 5% of the previous financial year's French turnover (for legal entities) or € 1.5 million for individuals.
In practice, the FCA uses such powers and has imposed sanctions on several entities for both practices. As regards gun jumping, the FCA notably imposed a record € 80 million fine on Altice Luxembourg and SFR group in November 2016.
What are the penalties for incomplete or misleading information in the notification or in response to the authority’s questions?
The FCA may (a) impose a fine of up to 5% of the previous financial year’s French turnover for corporate entities, and €1.5 million for individuals, and/or (b) withdraw the clearance decision. In such case, the notifying party may renotify the transaction.
The FCA may also (a) enjoin parties that have failed to reply on time to a request for information to do so, subject to a daily penalty of up to 5% of their average daily turnover; and/or (b) impose a fine of up to 1% of its highest worldwide turnover during the latest financial years on any company that has obstructed the investigation by providing incomplete or incorrect information.
Can the authority’s decision be appealed to a court? In particular, can third parties who are not involved in the transaction appeal the decision?
Decisions by the FCA can be appealed by the parties concerned or by third parties before the French Administrative Supreme Court (Conseil d’Etat) within two months from the date of notification of the decision to the notifying parties, or publication of the decision for third parties.
Appeal is not suspensive so the parties can implement the transaction while the decision is appealed. Interim measures may be requested before the French Administrative Supreme Court subject an emergency is proven and serious doubts as regards the legality of the decision arise.
What are the recent trends in the approach of the relevant authority to enforcement, procedure and substantive assessment?
In 2016, the FCA issued 230 merger decisions, among which 224 unconditional clearance decisions and 6 clearance decisions subject to the implementation of remedies (1 in Phase II, 5 in Phase I).
The main notable trend in the FCA's practice is the use of its wide powers of investigation and sanction for gun jumping practices and compliance with remedies undertaken. Altice and SFR have been severely fined in 2016 for gun jumping. In late 2017, the FCA opened an investigation to check whether Fnac Darty complies with the divestment remedies undertaken.
Are there any future developments or planned reforms of the merger control regime in your jurisdiction?
No reform is announced.