On October 19, 2022, the Cour de cassation dismissed[1] an appeal brought by Carrefour against two decisions of the Paris Court of Appeals, which rejected its follow-on damage claim against Johnson & Johnson Santé Beauté France (“Johnson & Johnson”) in relation to its participation to the home and personal care cartel.[2]
In essence, the Cour de cassation held that, notwithstanding the fact that the EU Damages Directive[3] (the “Directive”) should have been transposed into French law at the time Carrefour lodged its claim in January 2017, the Directive was not applicable at the time of the infringement nor at the time the claim was introduced, because the Directive had not yet been transposed into French law. As a result, the presumption that the overcharge resulting from the competition infringement had not been passed on did not apply, and Carrefour was still required to prove that it had not passed-on the overcharge[4] resulting from the anticompetitive practices – which it failed to do.
Background
The Directive
The Directive largely alleviates the burden of proof lying on a claimant seeking compensation for loss suffered as a result of anticompetitive conduct, providing for a presumption that the victim of anticompetitive conduct has not passed on to its customers the overcharge caused by the infringement. The Directive therefore shifts the burden of proof to the defendant to prove that the overcharge was in fact passed on to consumers, whereas prior to the implementation of the Directive, the burden of proof fell on the claimant to prove that it had not passed on the overcharge to customers.
Although the deadline to transpose the Directive into national law was December 17, 2016, France only transposed the Directive into national law on March 11, 2017.[5]
The Case
On December 18, 2014, the French Competition Authority (“FCA”) imposed a €951 million fine on eight hygiene products manufacturers, including Johnson & Johnson, for participating in two cartels in the home and personal care sectors between 2003 and 2006 (the “infringement”).[6]
On January 23, 2017, Carrefour sought compensation from Johnson & Johnson before the Paris Commercial Court, as a result of which Carrefour was awarded €8 million.[7] The Paris Court of Appeals subsequently annulled the ruling on April 14, 2021 on the basis that the existence of a loss suffered by Carrefour had not been sufficiently established.
Carrefour then appealed before the Cour de cassation, arguing that the Directive was applicable to the case at hand because it should have been transposed into national law by December 17, 2016 at the latest, whereas the claim was lodged in January 2017. Accordingly, Carrefour argued that there was a presumption of the absence of any pass-on of the overcharge. Furthermore, Carrefour claimed that because the Paris Court of Appeals had acknowledged the existence of a prejudice suffered by Carrefour, it should have granted some kind of financial relief (even with insufficient evidence) and, at the very least, should have explored the reasons why the passing-on of the overcharge was not possible in practice, in particular due to the specificities of the Loi Galland[8] in France which prohibits below-cost reselling.
The Directive was not applicable
First, the Cour de cassation reminded that EU directives are not directly applicable and may not be invoked in private litigation before they are transposed into national law.
Then, the Court explained that, in the scenario where an EU directive has not yet been transposed into national law despite the deadline to do so having expired, national law should be interpreted in such a way as to make it compatible with the directive that should have been transposed. However, it highlighted that it was not possible to do so when national law and EU law were in contradiction with each other.
In the case at hand, given that the Directive was transposed into French law after the deadline, on March 11, 2017,[9] i.e., both after the facts at issue and after Carrefour lodged its claim, the Cour de cassation held that the presumption provided for in the Directive did not apply.
As a result, the Cour de cassation held that Carrefour had to demonstrate that it did not pass on the additional costs induced by Johnson & Johnson’s infringement.
No proof of lack of passing-on
The Cour de cassation also found that Carrefour did not show that the overcharge had not been passed on. In particular, the Cour de Cassation highlighted the lack of evidence and supporting documents – including accounting data – produced by Carrefour and disagreed that the Paris Court of Appeals had established Carrefour had suffered any loss. It also rejected Carrefour’s claim that French law requiring companies to keep invoices only for a period of 10 years was sufficient to explain the lack of evidence.
The Paris Court of Appeals reached a similar conclusion in relation to Carrefour’s damage claim against Vania in January 2022 in relation to the same competition infringements.[10]
[1] Cour de cassation (Financial and Economic Commercial Division) judgment of October 19, 2022 (no. 21-19.197).
[2] See FCA decision No. 14-D-19 of December 18, 2014, relating to practices implemented in the cleaning products, insecticides and hygiene and personal care sectors. This decision was confirmed by a Paris Court of Appeals ruling of October 27, 2016 (no. 2015/01673), which reduced the fines for Procter & Gamble and Henkel, which was however subsequently partially overruled in the Cour de cassation ruling of March 27, 2019 (no. 16-26.472).
[3] Directive 2014/04/UE of the European Parliament and of the Council of November 26, 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union.
[4] “Passing-on” is an economic concept whereby an injured party passes on its actual loss resulting from an antitrust infringement to the next level of the supply chain (“overcharge”), by increasing the price of its products or services sold to its own customers.
[5] Order no. 2017-303 of March 9, 2017 on actions for damages due to anticompetitive practices and decree no. 2017-305 of March 9, 2017 on actions for damages due to anticompetitive practices.
[6] FCA Decision No. 14-D-19 of December 18, 2014 relating to practices implemented in the cleaning products and insecticides sector and in the hygiene and personal care products sector. The appeal brought by Johnson &Johnson Santé Beauté France was dismissed by the Paris Court of Appeals on October 27, 2016 (Paris Court of Appeals ruling of October 27, 2016, no. 2015/01673).
[7] Paris Commercial Court ruling of September 23, 2019 (no. RG 2017013944).
[8] The Loi Galland n° 96-588 of July 1, 1996 bans below-cost resale. French retailers are therefore prohibited from reselling goods below their unit purchase price (understood as the price stated on the invoice, plus any discount established at the date of sale). As the law also prohibits the application of dissimilar sales conditions to retailers, Carrefour argued that it necessarily implied that there was no overcharge passed on to consumers and that negotiations had shifted towards back margins (i.e., rebates and remuneration for commercial cooperation services).
[9] Order no. 2017-303 of March 9, 2017, on actions for damages due to anticompetitive practices and decree no. 2017-305 of March 9, 2017 on actions for damages due to anticompetitive practices.
[10] Paris Court of Appeals ruling of January 5, 2022 (no. 19/22293). See also our January 2022 French Competition Law Newsletter.