First precedent for France’s new settlement procedure

Written on 11 Aug 2016

On 27 July 2016, the French Competition Authority (FCA) fined Henkel France S.A.S. and its wholesaler-importers (based in several overseas French territories) approximately €615,000. The fine was imposed for the unlawful implementation of exclusive import contracts between the parties from March 2013 to February 2016, following the introduction of a new Act in 2012.

The real interest in this case is that it is the first in which the FCA has publicly released a general settlement under its new settlement procedure. Under this procedure, a company can apply for a reduction in the fine for anti-competitive behaviour if it agrees not to challenge the FCA’s formal settlement of objections in an investigation into a potential competition law infringement.

What was the dispute about? 

The dispute concerned the overseas distribution of consumer goods. 

Since the entry into force of the “Lurel Act” in 2012, exclusive importation agreements are prohibited in the French overseas territories, except where the parties show that these agreements contribute to improving cost-effectiveness and profit-sharing with consumers.

In breach of the Lurel Act, Henkel and several of its overseas importers implemented exclusive importation contracts between March 2013 and February 2016. 

The new settlement procedure 

The new settlement procedure replaces the previous non-objection procedure, which offered penalty reductions when a defendant decided to waive its right to dispute the statement of objections. This procedure was criticised for its uncertainty: the General Rapporteur, whilst negotiating with the party waiving its rights, would offer to apply a certain percentage reduction on an unknown penalty amount; parties were only given an indication of the maximum penalty (which could be up to 10% of the group’s world-wide turnover) and informed that this could be halved. The maximum amount of the penalty could be reduced but the parties were negotiating a reduction on an unknown amount. Companies could therefore not be sure of the actual penalty when accepting settlements. 

Under the new settlement procedure, when a party agrees to waive its right to dispute the statement of objections, the negotiation covers a range of penalties with both minimum and maximum amounts. There is no longer a percentage reduction. If the party accepts the range, the General Rapporteur proposes to the FCA to set a penalty amount within the limits established. If the company is not satisfied with the penalty range it may choose to withdraw its application for settlement and defend its case against any alleged infringements. 

The aim of this modification is to make the settlement procedure more effective. Companies will now be certain of the exact maximum and minimum penalties available and it is hoped that they will then appreciate whether it is in their best interests to accept the settlement. The procedure should be quicker and more cost-effective both for the companies and for the FCA.  

Another advantage is the brevity of the new settlement decision itself, which does not give details of the negotiations that led to the agreement. Confidentiality of the conditions of the settlement is also guaranteed for companies engaging in this procedure.  

First precedent and warning over exclusivity agreements in the French overseas territories 

As well as providing useful precedent on the use of the settlement procedure, this first decision is a warning to all overseas wholesalers and companies selling products in these territories to avoid exclusive import practices of any kind, as they can lead to serious fines.