Competition and “fairness”: French Competition Authority imposes fine for abuse of a dominant position in the medical waste management sector for unfair and excessive pricing

Written on 10 Oct 2018

On 20 September 2018, the French Competition Authority (FCA) imposed a €199,000 fine on a company for abusing its dominant position in the Corsican medical waste management market from 2011 to 2015. The FCA found that the company had suddenly, significantly, persistently and unjustifiably increased the rates charged to Corsican hospitals and clinics over that period for waste disposal.

Background

Management of infectious medical waste generated by healthcare activities is regulated and healthcare facilities are therefore required on a regional level to dispose of such waste within strict time and financial conditions.

In Corsica, only one private company was capable of managing such waste in compliance with legal requirements applicable to this territory. This company had therefore been authorised to operate this activity and over time developed long-standing relationships with most of the Corsican healthcare facilities.

Between 2007 and 2015, this company imposed on its customers unilateral and continued increases in prices (average price increased by 88% in 2 years), while threatening that it would terminate its contracts and refrain from bidding on calls for tenders if the customers did not accept these new prices. Being under a legal obligation and without any available alternative to collect and manage their medical waste in Corsica, healthcare facilities were forced to accept the abruptly increased prices.

Competition law enforcement and local anticompetitive practice

In January 2013, an investigation conducted by the French administration in charge of competition and consumer protection enforcement (DGCCRF) concluded that the company in charge of medical waste management in Corsica had committed practices in breach of article L. 420-2 of the French Code of commerce that prohibits abuses of a dominant position.

In accordance with article L. 464-9 of the French Code of commerce regarding local anticompetitive practices (anticompetitive practices affecting local markets and involving firms with individual turnover not exceeding €50m or combined turnover not exceeding €200m), the Minister of Economy offered the infringing company to settle the case. In such cases, settlement will result in a maximum fine up to €150,000 or 5% of the turnover achieved in France.

However, since the company did not reply to this proposal, the case was referred to the FCA in July 2014.

FCA analysis of the increase in prices

In this case, the FCA had to analyse whether and how the increases in prices decided by the company qualified as an abuse of a dominant position, the company having in this case a de facto monopoly.

The FCA considered that although it is not the role of a competition authority “to regulate on prices and their increases“, under certain circumstances, the FCA has jurisdiction to “assess pricing policy” of firms imposing “unfair commercial terms” due to their market power. In such case, unfair prices (i.e. disproportion between the economic value of the service and the price actually claimed, without objective justification) could be considered an abuse of a dominant position (as an “exploitative abuse“).

In this case, the FCA considered that Corsican healthcare facilities had no choice but to accept imposed increased prices, which could not be objectively justified. Notably, the argument that the increases in prices were meant to manage the emergence of new players who could have driven the company out of the market was not accepted by FCA, as such pricing policy created a barrier to the emergence of any competition.

The FCA concluded that the company’s behaviour constituted an abuse of a dominant position within the meaning of article L. 420-2 of the French Code of commerce and imposed on the infringing company jointly with its parent company a €199,000 fine – equivalent to 5% of its turnover achieved in France – as well as publicising the decision, based upon a “name and shame” approach.

Comment

The FCA had seemed inclined in this case to more severely punish local anticompetitive practices referred to it following on from a refusal of the settlement offered by the administration. Indeed, the Code of commerce enables the FCA to punish infringing companies on local anticompetitive practices with fines up to €750,000. However, in spite of its findings on the practice in question, the FCA, ordered a fine limited to the amount of the transaction offered by the administration.

These sort of “exploitative abuse” cases seem to constitute a relatively newly developed concept of abuse of dominance that competition authorities are keen to use as a modern tool of their competition policy. The FCA, it seems, is punishing exploitative abuses with the aim of restoring “fairness” (“équité” in French).

This decision may be appealed by the company before the Paris Court of Appeal.