In a ruling dated February 17, 2021, the Cour de cassation dismissed an appeal formed against an order dated June 2019, in which the Paris Court of Appeals confirmed that the FCA could validly initiate an investigation and carry out dawn raids on the basis of a request for inspection issued by the competition authority of another EU Member State.
Background
In November 2017, following a complaint filed by an online pharmacy, the Belgian Competition Authority (the “BCA”) opened an investigation concerning alleged anticompetitive agreements between Caudalie, a French cosmetics company, and the members of its selective distribution network. Specifically, the BCA suspected that Caudalie was engaging in resale price maintenance practices and preventing its authorized resellers (in particular those resorting to online sales) from granting discounts of more than 10% off the recommended retail price.
In January 2018, the BCA asked the FCA to carry out dawn raids at Caudalie’s Parisian headquarters pursuant to article 22 of Regulation 1/2003,[1] which provides that the competition authority of a Member State may carry out fact-finding measures in its own territory on behalf of another Member State’s competition authority in order to establish the existence of competition law infringements. However, the FCA did not merely carry out dawn raids as requested by the BCA, but instead opened an investigation of its own into potential violations by Caudalie of both European and French antitrust laws. In this context, the FCA was granted a search warrant by the liberty and custody judge of the Paris Court of First Instance, and proceeded to carry out dawn raids on Caudalie’s French premises on February 27, 2018.
Caudalie subsequently challenged the validity of the search warrant before the Paris Court of Appeals, arguing that the liberty and custody judge had breached Regulation 1/2003 by allowing the FCA to investigate beyond the scope of the BCA’s request. That claim was however dismissed, leading to the Cour de cassation’s ruling of February 17, 2021.
The Cour de cassation’s decision
In its first plea, Caudalie submitted that the search warrant issued by the Paris Court of First Instance was invalid insofar as it allowed the FCA to collect evidence of alleged resale price maintenance practices implemented within the cosmetics company’s distribution network, without limiting the scope of the investigative measures to practices concerning Belgian distributors. According to Caudalie, given that the FCA was acting pursuant to the BCA’s request, which was expressly circumscribed to practices affecting Belgium only, the FCA was not entitled to open an investigation on its own account.
In its June 2019 order, the Paris Court of Appeals had ruled that the evidence shared by the BCA suggested that the practices under investigation concerned Caudalie’s entire distribution network and consequently spanned across a number of Member States. Indeed, the restrictions imposed on online retailers were liable to have repercussions on inter-state trade, as e-commerce facilitates cross-border transactions. Limiting the scope of investigation to a single Member State would therefore be inappropriate in this context.
The Cour de cassation approved the Paris Court of Appeals’ reasoning. Further, the Cour de cassation clarified that even when the FCA is acting pursuant to a request issued by the competition authority of another Member State, the FCA is allowed to use its own powers of inspection under article L.450-1 of the French Commercial Code. In other words, the FCA is not bound by the scope of requests it receives under Article 22 of Regulation 1/2003, provided that there is sufficient evidence that the practices under investigation may have affected French markets.
In its second plea, Caudalie claimed that, in light of the evidence shared by the BCA with the FCA, the scope of the search warrant should have been limited to practices concerning distributors established or active in Belgium only. According to Caudalie, there was no evidence in the case file that the alleged resale price maintenance practices under investigation ever targeted distributors established or active in France.
In response, the Cour de cassation ruled that assessing whether there was sufficient evidence to allow the FCA to investigate Caudalie’s practices in France was within the Paris Court of Appeals’ discretion. As such, the Paris Court of Appeals was entitled to hold that such evidence “made it possible to presume that the alleged prohibited practices could have been implemented from [Caudalie’s] headquarters [in France]”.
Conclusion
The Cour de cassation’s ruling confirming the validity of Caudalie’s French dawn raid follows the BCA’s November 2020 announcement that it has submitted a proposal for a decision sanctioning the company’s alleged resale price maintenance practices and restrictions of cross-border online sales – although this does not prejudge either the Belgian Competition College’s decision or the outcome of the French investigation.
[1] Council Regulation (EC) No. 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty.