On October 18, 2023, the French Cour de cassation upheld the Paris Court of Appeals’ ruling finding that the French Competition Authority (“FCA”) had rightly calculated the amount of the fine imposed on L’Oréal in 2014 for its alleged involvement in a cartel in the personal care products industry.[1] The French Cour de cassation confirmed that the sales of a subsidiary that did not itself participate in the infringement can be included in the calculation of the fine if these sales have been affected by the infringement sanctioned.
Background
On December 18, 2014, the FCA imposed fines on 13 home care and personal care product manufacturers, totaling 951 million euros, for their alleged participation in two price-fixing cartels,[2] which, at the time, was the largest amount ever fined in an antitrust investigation in France.
After having received leniency applications, the FCA carried out raids in February and July 2006 and found evidence of regular meetings or exchanges between sales and commercial managers of the main home care and personal care manufacturers in France that allowed them to align their pricing and commercial policies, and, in the personal care sector specifically, to develop a common bargaining strategy to justify price increases. The FCA found that due to these concerted practices, a number of personal care products such as shampoos, hair-conditioners, toothpastes, and deodorants were sold at artificially high prices to retailers, and that these high prices were then passed on to end consumers. The 11 sanctioned personal care product producers were Colgate-Palmolive, Henkel, Unilever, Procter & Gamble, Reckitt Benckiser, Sara Lee, Laboratoires Vendôme, Gillette, L’Oréal, Beiersdorf, and Vania.
The FCA decision was confirmed by the Paris Court of Appeals on October 27, 2016.[3] Several participants including L’Oréal appealed that decision, which was largely confirmed by the French Cour de cassation in March 2019. However, the Cour de cassation considered L’Oréal’s plea regarding the basis used to calculate its fine and partly annulled the decision, remanding the case to the Paris Court of Appeals (with a different composition), on the grounds that the sales of one of L’Oréal’s subsidiaries (Gemey Maybelline Garnier, “GMG”) had been included in the calculation of the fine, despite the fact that it had not been involved in the infringement.[4] On June 18, 2020, the Paris Court of Appeals[5] considered that including GMG’s sales in the calculation of the fine was in line with the FCA’s Communication on the calculation of financial penalties applicable at the time of the infringement.[6] The decision was appealed, again, to the French Cour de cassation.
The ruling of the French Cour de cassation
The appeal to the French Cour de cassation claimed that the sales of GMG, which sells products under the Gemey, Maybelline and Garnier brands, could not be included in the calculation of the fine, as GMG was not itself involved in the infringement and had not received a statement of objections. On October 18, 2023, the French Cour de cassation foundthat in accordance with the then-applicable Communication on the calculation of financial penalties, the sales of products and services could be taken into account for the calculation of the fine when they were “related to the infringement.”[7] It was therefore sufficient that GMG’s sales were “related to” the infringement to be taken into account for the calculation of the fine, even if GMG was not itself involved in the infringement. This Communication on the calculation of financial penalties also provided that the amount of the penalty can be adapted based on other factors, such as the duration of the infringement or case-specific aggravating and mitigating circumstances. While GMG itself did not participate in the infringement, it was not disputed that the prices of GMG’s products were impacted by the infringement. The French Cour de cassation therefore considered that the Paris Court of Appeals had rightly found that those products were “related to” the infringement, and GMG’s sales could be included in the calculation of the fine.[8]
In a second plea, L’Oréal argued that after getting the case back from the French Cour de cassation, the Court of Appeals should have applied the new and more favourable accounting rules introduced in the French Commercial Code in 2019. Applying these new rules would have resulted in lower sales amounts, and thus a lower fine. The French Cour de cassation agreed with the Court of Appeals’ finding that such legislative changes were unrelated to the calculation of antitrust fines and that the new rules did not apply in this context.[9]
Key Takeways
It is now clear that, in calculating the basis amount of the fine, the FCA can include the sales of a subsidiary that did not itself participate in the infringement and did not receive a statement of objections, provided that such sales are “related to” the infringement. The French Cour de cassation also clarified that this is a different test than the “single economic unit” test applied to delineate the undertaking for the purposes of establishing liability under competition rules.
[1] French Cour de cassation, Commercial Division, October 18, 2023, No. 680 F-D 20-17.092 (the “Cour de cassation Decision”).
[2] FCA Decision No. 14-D-19 of December 18, 2014 on practices implemented in the home care products and insecticides sector and in the personal and body care products sector. Seven companies were fined in an amount totaling 345.2 million euros for the infringement occurring in the market for home care products (SC Johnson also participated but received full immunity under the leniency programme); and ten companies were fined in the amount of 606.0 million euros for the infringement occurring in the market for personal care products (Colgate-Palmolive also participated but received full immunity under the leniency programme).
[3] Paris Court of Appeals, October 27, 2016, No. 2015/01673.
[4] French Cour de cassation, Commercial Division, March 27, 2019, No. n 219 FS-D, p. 79.
[5] Paris Court of Appeals, June 18, 2020, No. 19/08826, paras. 76-78. The Court rejected all of L’Oréal’s claims, but reduced the fine imposed to L’Oréal’s skin-care unit Lascad from 46 million to 40.7 million euros because its involvement in the infringement was less extensive than L’Oréal’s (para. 106).
[6] FCA, Communication of May 16, 2011 on the method for determining financial penalties, replaced by the version issued on July 30, 2021.
[7] FCA, Communication of May 16, 2011 on the method for determining financial penalties, para. 23 ( “[…] l’Autorité retient, comme montant de base de la sanction pécuniaire, une proportion de la valeur des ventes, réalisées par chaque entreprise ou organisme en cause, de produits ou de services en relation avec l’infraction ou, s’il y a lieu, les infractions en cause.”). The Communication has since been replaced by the FCA Communication of July 30, 2021 on the method for determining financial penalties, which now specifies that the products must be “directly or indirectly” related to the infringement (“en relation directe ou indirecte avec l’infraction”, see paras. 21-22) (our emphasis).
[8] Cour de cassation Decision, para. 9.
[9] Cour de cassation Decision, paras. 12-13.