Clifford Chance

In an unprecedented decision issued on 2 May 2024, the French Competition Authority ("FCA") examined, for the first time, whether a series of mergers that had fallen below the EU and national merger control notification thresholds and had thus not been subject to an ex-ante review by the European Commission ("EC") or the FCA, constituted anti-competitive agreements contrary to Article 101 TFEU.

The FCA's decision of 2 May 2024

After initiating ex officio proceedings in 2019, the FCA investigated three companies (namely Akiolis, Saria and Verdannet, together the "Parties"), active in the French meat-cutting sector, over alleged anticompetitive geographic market sharing practices.

The Parties had carried out 21 asset swap deals in 2015 as part of five overall transactions. These mergers had not been subject to an ex-ante merger review by the FCA as they fell below the French notification thresholds and the FCA did not refer them to the EC under Article 22 of the EU Merger Regulation ("EUMR").

The FCA dismissed the case after a two-step assessment:

First, the FCA concluded that the exchanges of information about the asset swaps between the Parties only occurred in the context of preparatory discussions for the mergers and were not part of an overall market allocation plan instigated by the Parties.

In the absence of an overall market allocation plan, the FCA verified whether the mergers, in themselves, constituted anti-competitive practices contrary to Articles 101 TFEU and L. 420-1 of the French Commercial Code.

In doing so, the FCA applied a broad interpretation of the recent judgment by the EU Court of Justice in Towercast, in which the Court confirmed that mergers which do not meet EU or national merger control notification thresholds can be subject to review under the abuse of dominance prohibition in Article 102 TFEU. In support of an extension of the Towercast doctrine to the prohibition of restrictive practices under Article 101 TFEU, the FCA notably held that:

• The Towercast judgment did not intend to limit the possibility for NCAs to conduct an ex-post review of non-notifiable transactions to Article 102 TFEU.
• Like Article 102 TFEU, Article 101 TFEU is a provision of primary law having direct effect and must be applied independently of any derived law.

Finally, the FCA held that the mergers were not anticompetitive by object nor by effect since the Parties continued exercising competitive pressure against each other after signing the deals and the objectives of the various asset swap transactions were consistent with the overall market forecasts for the meat-cutting sector.

Key take-aways

This decision is notable in the context of several recent case law and legislative developments at both French and European levels:

• The uncertainty around the outcome of the Illumina / Grail case – where the upcoming judgment could invalidate the Commission's policy of accepting referrals of mergers that do not meet the thresholds for review under national merger control regimes – and the new application of Article 22 EUMR on non-reportable mergers boost NCAs' determination to have additional tools to catch mergers below the thresholds.
• The FCA's determination to focus on strategic mergers as part of its enforcement priorities is in line with the proposed raise of national turnover thresholds under discussion before the French Senate.

The following key practical implications for M&A transactions can be drawn from the FCA's decision:

• The FCA's interpretation of the Towercast case adds more difficulty and ambiguity to the legal certainty for M&A transactions. Potential post-closing review of below-threshold mergers under antitrust rules should be factored into the overall risk assessment for a transaction, even if none of the parties has a dominant position.
• The FCA’s decision reinforces a three-layers approach for the review of mergers at the national level, based on (i) turnover thresholds, (ii) the possibility of an Article 22 EUMR referral of the transaction to the EC, and (iii) the possibility of an ex post Articles 101 or 102 TFEU review.

However:

• The review of the various asset swap agreements under Article 101 TFEU seems to have been applied to a complex scenario, resulting from a series of simultaneous and mutual sales of assets between the Parties, and thus only corresponds to a small minority of existing deals within M&A transactions.
• As the case was eventually dismissed, an appeal seems unlikely and therefore the FCA's decision will not be reviewed by the Paris Court of Appeal or the Cour de Cassation.

Affaire à suivre …