On July 4, 2019, the Paris Court of Appeals reduced the fines imposed by the FCA in the “flour” case from €242.4 million to €96.1 million.^[1] The Court reduced the fines imposed on the millers while upholding the FCA’s findings on the merits. The total fine reduction was justified by (i) the shorter duration of the infringement for two millers; (ii) the ability to pay for five millers; and (iii) the existence of a price regulation until 1978, which limited the cartel’s impact on the economy.

The “flour” case

In March 2012, the FCA fined 17 millers for participating in two anticompetitive agreements.^[2] The FCA’s decision resulted from a four-year investigation triggered by a leniency application, which was followed by dawn raids in France (conducted by the FCA) and in Germany (conducted by the Bundeskartellamt). First, the FCA found that 13 French and German millers participated in an agreement to restrict access to each other’s markets and maintain the French and German exports of packaged flour at an agreed level. Second, the FCA found that French millers had colluded through two joint ventures to fix prices, restrict output, and allocate customers of packaged flour sold to retailers and hard discount outlets in France.

In November 2014, the Paris Court of Appeals partially overturned the FCA’s decision. It ruled that it was not established that agreements relating to the French millers joint ventures were anticompetitive by object. Two years later, the Highest Court struck down the judgment for lack of legal basis. It held that the Paris Court of Appeals had not verified if the creation and the functioning of the two joint ventures went beyond what was necessary for the French millers to penetrate and remain on the markets. The case was remanded to the Paris Court of Appeals for a de novo review.

The fine reductions granted by the Paris Court of Appeals

In its judgment of July 4, 2019, the Paris Court of Appeals confirmed that the French millers colluded through the two joint ventures—but significantly reduced the fines imposed by the FCA.

Duration. The Paris Court of Appeals held that the FCA incorrectly assessed the duration of two millers’ participation in the Franco-German cartel.

In its decision, the FCA held that VK-Mühlen and Grands Moulins de Paris had participated in the Franco-German cartel for its entire duration (i.e., from May 14, 2002 to June 17, 2008), even if the two millers only participated in one of the 12 meetings that took place during that period, i.e., the sixth meeting. To support its finding, the FCA indicated that the two millers did not distance themselves from the cartel as they were continuously invited to certain subsequent meetings.

The Paris Court of Appeals overturned the FCA’s finding. First, it found that VK-Mühlen and Grands Moulins de Paris had participated in the infringement as from the sixth meeting, i.e., beginning on September 23, 2004. Second, it found that the mere fact that the two millers did not distance themselves from the cartel was not sufficient to consider that the millers had continued to participate in the infringement until its ending point, because (i) the two millers did not attend any meetings after the sixth meeting and there was a “significant” time-period (i.e., two years) between the sixth meeting and the end of the infringement; and (ii) the two millers did not participate in the monitoring of the cartel. The Court then verified whether other factual elements show that the two millers continued to participate to the cartel after the sixth meeting.

VK-Mühlen: The Court found that letters inviting VK-Mühlen to attend subsequent meetings showed that cartel members considered that VK-Mühlen shared their objectives and assumed the risk of participating in the cartel. The Court further found that the fact that VK-Mühlen was not invited and did not participate in the 11th and 12^th meetings showed that VK-Mühlen had ceased participation in the cartel at this point. The Court therefore held that VK-Mühlen’s participation in the infringement ended after the 10th meeting.

Grands Moulins de Paris: For the same reasons, the Court found that Grands Moulins de Paris no longer participated in the cartel as of the letter inviting it to the eighth meeting, i.e., on October 29, 2003.

As a result, the Court held that the two millers’ participation in the infringement lasted 10 months for VK-Mühlen, and five weeks for Grands Moulins de Paris.

Inability to pay. The Paris Court of Appeals also significantly reduced the fines of six millers for inability to pay.

In its decision, the FCA had examined the applications of six millers (i.e., Grain Millers, Bliesmühle, VK Mühlen, Flechtorfer, Grands Moulins de Strasbourg, and Grands Moulins de Paris) but granted a 15% fine reduction to only one of them (Grands Moulins de Strasbourg), finding that it was the sole applicant to provide “reliable, complete and objective evidence attesting to the existence of real and current financial difficulties affecting its capacity to comply with the fines imposed […].”^[3] Before the Paris Court of Appeals, Grands Moulins de Strasbourg, Grands Moulins de Paris, and two other millers (Minoteries Cantin and Axiane) asked for a (further) fine reduction for inability to pay.

The Paris Court of Appeals noted that it must assess the companies’ ability to pay on the date of its ruling, not on the date of the FCA’s decision. The Court therefore took into account the up-to-date documents submitted by the millers on appeal. Substantially, the Court confirmed the test applied by the FCA, i.e., the company’s overall economic and financial situation must be considered. Poor results—including losses— cannot in themselves justify a fine reduction.

Based on this methodology, the Court reduced the fines imposed on the six millers, considering that the millers’ financial situation drastically deteriorated since the FCA decision.

Grands Moulins de Strasbourg: The Court found that the miller could not pay the whole fine imposed by the FCA’s decision and was in a critical situation. The Court noted, however, that the miller had 6 million euros in assets that it could mobilize the pay part of the fine. It reduced the fine from 19 million to 2 million euros.

Grands Moulins de Paris: The Court noted that the millers had profits of only 2 million euros and a total debt amounting to three times the value of its equity. The Court noted, however, that an important portion of this debt was towards shareholders and that the miller could mobilize receivables to pay a fine. It reduced the fine from 24 million to 6 million euros for Grands Moulins de Paris, and from 35 million to 3 million euros for Euromill Nord (which Grands Moulins de Paris acquired after the FCA’s decision).

Minoteries Cantin: The Court noted that the miller’s turnover had halved between 2015 and 2016, and that the miller cumulated losses of 12 million euros over the last two years. The Court noted however that the miller still had receivables that it could mobilize to pay a fine. It reduced the fine from 23 million to 8 million euros.

Axiane: The Court noted that the miller’s turnover had dropped by 90% from 2015 to 2016 and that the miller had a negative result of 7 million euros in 2017. It reduced its fine from 44 million to 4 million euros.

Gravity of the facts and damage caused to the economy. As regards the French millers’ anticompetitive agreements, the Paris Court of Appeals ruled that the FCA should have taken into account the existence of a price regulation until 1978, which limited the impact of the agreements on competition. The Court held that the agreements nevertheless had other consequences on competition, including because they allocated customers among millers and therefore artificially froze the structure of these millers. The Court reduced the gravity rate applied to the millers from 17% to 16%.

This ruling confirms the effectiveness of the Paris Court of Appeals’ control over the amount of the FCA’s fines. Ultimately, in this case, a substantial portion of the fine reduction resulted from the millers’ inability to pay the fines imposed by the FCA. This inability to pay was due to the drastic deterioration of the millers’ financial situations since the FCA issued its decision almost seven years prior, quite a long time for a company facing financial difficulties.

[1]              Ruling of the Paris Court of Appeals of July 4, 2019, RG No. 16/23609.

[2]              Decision of the French Competition Authority of March 13, 2012, No. 12-DC-09.

[3]              Decision of the French Competition Authority No. 12-DC-09 of March 13, 2012, paragraph 955.