TV ads & crooks – “Antitrust & the Political System” goes to France

In part III of our series antitrust and the political system, Guillaume Fabre, partner at French antitrust boutique Jouvensal Fabre, gives insights into the French antitrust world and latest developments.

On 4 October 2021, the small world of competition law in Paris was thrown in turmoil. Ms de Silva was widely expected to be appointed for a second term at the helm of the French Competition Authority (FCA). But on that day, she announced that her term would end a mere 9 days later, and that Emmanuel Combe, a long-standing Vice-President of the FCA, would be acting president until her replacement could be appointed. At this stage, the leading contender for the job would be Benoit Coeuré, an economist and former member of the Executive Board of the European Central Bank. The formal appointment should be confirmed at the end of the year.

Some in the French press speculated that the decision not to prolong her term could be a way to exert political pressure on the FCA, at a time when the FCA has to assess the big media merger between TF1 and M6. The French Daily Les Echos for instance hinted that the new president could face mounting political pressure in a case where Ms de Silva had kept a “strictly independent attitude”.

But just how independent is the FCA, in particular in relation to mergers?

According to French law, the FCA is an “independent administrative body”. In French legalese, this is a bit of an oxymoron: whereas an “administrative body” is supposed to be under the supervision of the government, the FCA should be “independent”.

This ambiguity is well reflected in the applicable legal framework: whereas various procedural provisions safeguard the FCA’s independence , two specific provisions allow the French government to take part in the decision-making process.

Safeguarding the FCA’s indepedence

Both the legal status of the FCA’s decision-making body (the Panel) and the separation between the investigative services and the Panel are important tools to safeguard the FCA’s independence.

First, decisions are in principle taken by at least 3 or 5 members of the Panel (An important exception relates to Phase I merger cases, where the President of the FCA can adopt decisions on its own. Although there are some important cases that end in Phase 1, this is justified by the number of totally non-problematic mergers that the FCA needs to approve each year). All in all, the Panel has 17 members. They are all appointed for 5 years but the term of half of the members expire every two and half years. As a matter of principle, all terms can only be renewed once.

The President of the Panel (i.e., the President of the FCA) is appointed by the President of the French Republic. All other members are appointed by the Ministry for the Economy, and by law they must come from a variety of backgrounds (e.g., from France’s highest courts, be business leaders etc.). In other words, the process to appoint the FCA Panel members is in the hands of the government, which has to respect the relevant legal provisions.  

Second, the FCA is in essence split in two. The “investigative services” are, in short, assessing mergers and carrying out antitrust investigations. They report to the head of the investigative services and are in theory separate from the Panel. In particular, the head of the investigative services is appointed by the Minister for the economy and not by the FCA President – although the Panel can give a non-binding opinion to the Minister.

Once the investigative services come up with a position, they can only offer their views to the Panel. The Panel will hear both sides – the investigative services and any undertaking concerned by the relevant proceedings – and make a decision.

This “separation of powers” preserves the FCA’s independence and reduces the risk that the technical, day-to-day work of the investigative services be exposed to political pressure. And of course, all decisions adopted by the FCA can be appealed to the French Administrative Supreme Court.

The Role of the French Government and Phase 3

First, a representative of the Minster of the Economy takes part in the proceedings before the FCA, submitting written briefs and taking part in all hearings before the Panel.

In many cases, it sides with the investigative services or limit its briefs to technical points. Yet, in some cases, it actually takes a different view on the merits, or calls for the FCA to be either lenient or to show severity. For instance, in antitrust cases, it may be that the Minister for the Economy wishes to insist on the need to preserve French SMEs from hefty fines, or that in (Phase 2) merger cases, it can put forward the need to create a “French Champion”.

Second, in merger cases, the Minister for the Economy can (i) request that the FCA opens a Phase 2; (ii) once the FCA has adopted a Phase 2 decision, override its decision and rule on the case on grounds of public interests other than the need to preserve competition (to readers of this blog, this might sound vaguely similar to German ministerial permission). Such public interests may include for instance “growth of industrial activities, competitiveness on the international stage, or employment considerations”. Such public interests may, but do not have to, compensate any harm to competition.

So far, the Minister has opened such a “Phase 3” only once:

In the Cofigeo/William Saurin case, both companies manufactured and sold ready-made dishes. Due to their high market shares, the FCA had, in Phase 2, imposed that Cofigeo sell one of William Saurin’s brands and one of its manufacturing plants. However, William Saurin was a subsidiary of a failing conglomerate. Its CEO had just passed away, leaving behind vast debts and outright fraud: a book about that CEO was later published under the title “Queen of Crooks”. The French State had intervened to essentially bail out that conglomerate. When the FCA imposed, as a remedy, sale of the assets that the State had tried to keep afloat, the Minister for the Economy stepped in. Its decision is rather well drafted and reasoned (albeit not in competition law terms). It notes that the relevant sector is facing headwinds, and that the FCA remedies would make it impossible for the merged entity to become profitable, and would result in many lays offs. Accordingly, it did away with the FCA remedies but imposed that Cofigeo invests in the manufacturing plants and keeps a given number of employees.

What is the impact of such “Phase 3” on the decision-making process of the FCA for highly-visible mergers such as the TF1 M6 case?

Mr. Combe, the acting FCA President, published a piece in which he seems to argue that the possibility of a “Phase 3” actually contributes to the FCA’s independence. The argument seems to be that if the government can just decide on a case in Phase 3, why would it need to exert pressure on the FCA? In any event, it seems that one of the key issues that the FCA could have to decide when assessing the TF1/M6 merger is whether Google, Meta and other companies selling online advertising space exert competitive pressure on TV channels when they sell their own advertising space. Upholding that view could be later relied on by Google & Meta. This is not necessarily an easy assessment to make, so that this will be a case to follow closely to see whether and how the French government may or may not try to influence the merger control process.

Guillaume Fabre is an antitrust lawyer and one of the founding partners at French antitrust boutique law firm Jouvensal Fabre in Paris.