On March 7, 2024, the Paris Court of Appeal (the “Court”) partially overturned[1] a 2020 decision of the French Competition Authority (“FCA”)[2] sanctioning 12 companies for their participation in a cartel in the ham and cold meat sector (the “Decision”). While the Court confirmed the existence of cartel-related practices, it dropped some charges and reduced the parameters taken into account by the FCA to calculate the fine. As a result, the total fine amount was reduced from €93 million to €39 million.
The FCA’s decision
On July 16, 2020, following an investigation started in 2012,[3] the FCA imposed a €93 million fine on 12 producers for their participation in a cartel in the ham and cold meat sector,[4] for a large number of everyday consumer products. The value chain in the ham and cold meats sector involves slaughterhouses that supply the raw materials, cold meat producers who process them into various charcuterie products, and mass-market retailers who sell these goods to end-consumers. The FCA found that the cold meat producers had coordinated their conduct both on the upstream market for ham without flank[5] from January 2011 to April 2013 and on the downstream market for private label charcuterie and cured meat products from April 2010 to April 2013. The anticompetitive practices were revealed after one of the cartel participants applied for leniency, promptly followed by another company involved.
More specifically:
- on the upstream market, the FCA concluded that four of the largest cold meat producers[6] had coordinated their negotiating strategies to show a united front in their dealings with slaughterhouses in order to better resist requested price increases or obtain price reductions (first practice).[7]
- On the downstream market, the FCA found that eight producers had engaged in anticompetitive coordination of their pricing and commercial strategies for raw and dry cold meat products in the context of tenders organized by mass-market retailers[8] (second practice). This coordination took the form of regular exchanges of sensitive commercial information, including prices and volumes. Similarly, seven producers[9] had colluded on prices and commercial strategies for cooked meat products in response to tenders launched by mass-market retailers (third practice). This collusion involved numerous bilateral contacts between competitors, mainly by telephone, to discuss and coordinate their pricing intentions and offers. In both cases, the aim of the participants was to allocate markets and customers among themselves.
In determining the amount of the fines, the FCA relied on its former procedural notice on fines of May 16, 2011, in force when the practices took place. The FCA took into account the strong bargaining power of mass-market retailers on the downstream market – which to some extent limited the impact of the practices on consumer prices – and the difficult economic situation of the meat sector. It also considered the individual financial difficulties encountered by certain companies and consequently reduced the amount of the fines imposed on several participants.[10] However, with regard to Cooperl Arc Atlantique, the most heavily sanctioned participant (€35.5 million), the FCA concluded that the financial and accounting information it had provided did not attest to any particular financial difficulties preventing the company from paying the penalty imposed.[11] In addition, for the second time ever,[12] the FCA denied the benefit of total exemption from sanctions to the first leniency applicant on the ground that it had no complied with cooperation obligation.[13] In the case of the second leniency applicant, the FCA applied, for the second time in its case law,[14] the “Leniency Plus” provision.[15]
The Court Ruling
In an almost 300-page judgment, the Court confirmed the three cartel-related practices. However, it quashed several findings of the Decision with regard to (i) the attributability of certain practices to producers; (ii) the determination of the basic fine; (iii) the duration of the infringements; and (iv) one of the producers’ ability to pay. As a result, the Court reduced 7 of the 12 fines originally imposed by the FCA, bringing down the total fine imposed from €93 million to approximately €39 million (i.e., a reduction of almost 60%).
A large part (approximately €47 million) of this reduction derives from (i) the total exoneration of Les Mousquetaires with regard to the third practice and (ii) the reduction of the fines imposed on Cooperl in view of the financial difficulties experienced by the group:
- With regard to les Mousquetaires involvement in this practice, following a detailed analysis of the factual elements put forward in the Decision, the Court concluded that the participation of Les Mousquetaires, had not been established.[16] Among other things, the Court found that the alleged participation of these companies did not match the statements made by the leniency applicant with regard to the third practice, and could not be corroborated by telephone records to which the FCA referred.[17] The Court accordingly annulled the €25 million fines imposed on Les Mousquetaires for the third practice, bringing its total fine from €31.7 million to €5.6 million.
- With regard to the ability to pay of Cooperl, the Court disagreed with the conclusions of the FCA[18] and concluded that, while the company’s financial and accounting information did not demonstrate a “total lack of ability to pay,” it nevertheless justified an adjustment of the penalty.[19] According to the Court, despite the fact that Cooperl holds a high level of equity,[20] the very high level of debt of Cooperl Arc Atlantique, one of Cooperl’s subsidiaries, and the launch of a warning procedure by the statutory auditor, demonstrate the reality of Cooperl’s financial difficulties.[21] As a consequence, the Court reduced the fine imposed on Cooperl from €35 million to €13 million.
Conclusion
This is not the first time the Court sharply reduces fines imposed by the FCA. In October 2022, the Paris Court of Appeal[22] cut the €1.1 billion fine imposed by the FCA on Apple by approximately two-thirds.[23] Similarly to the present case, the Court lowered the fine as it decided to drop one of the three main objectives, overturned the findings relating to Apple’s alleged abuse of economic dependence and significantly reduced the parameters taken into account by the FCA to calculate the fine.[24]
Speaking to a committee of members of parliament in the French senate on March 12, 2024,[25] Benoît Coeuré, the new head of the FCA, referred to both the Apple ruling and the present Ruling. After pointing out that the Court of Appeal “very often” upholds the FCA’s sanctions, he warned against a situation in which “sanctions against large groups are reduced because the amounts are very high, without applying this reasoning to smaller companies [which] would then be punished more severely.”[26]
Both Apple and the present Ruling show that, for its decision to be upheld on appeal, the FCA must not only provide solid evidence of the existence of anticompetitive practices, but also substantiate each of the elements it takes into account when calculating fines.
[1] Paris Court of Appeal, ruling of March 7, 2024, no. 20/13093 (the “Ruling”), available at: https://www.courdecassation.fr/decision/65eab895d38d280008cdf86f.
[2] FCA Decision no. 20-D-09 of July 16, 2020, regarding practices implemented in the buying and selling of pork cuts and cold meat products (the “Decision”), available at: https://www.autoritedelaconcurrence.fr/sites/default/files/integral_texts/2020-07/20d09_2.pdf.
[3] The FCA started its investigation following a complaint from a slaughterhouse and a leniency application by Campofrio, a cold meat manufacturer. See Decision, paras. 1-4.
[4] The FCA fined the following producers: Coopel Arc Antlantique (€35.5 million); Les Mousquetaires (€31.7 million); Fleury Michon (€14.7 million); Coop (€6 million); Savencia (€2.2 million); Campofrio (€1 million); Aubret (€750,000); Sonical (€350,000); La Financière du Haut Pays (€330,000); CA Animation (€203,000); Nestlé (€96,000); Salaisons du Mâconnais (€1,000).
[5] Ham without soft fat (in French jambon sans mouille) is a cut of pork used for the production of cooked ham.
[6] Campofrio, Fleury Michon, Financière Turenne Lafayette, and Les Mousquetaires, fined for a total of €21.4 million.
[7] In practice, producers would first reach an agreement on the negotiating framework and, during the bilateral negotiations with the slaughterhouses, would then inform each other in real-time, by telephone, of the status of negotiations and the contracts they had concluded with the slaughterhouses. See Decision, paras. 156-189.
[8] Large retailers regularly issue invitations to tender to their suppliers to select those who will manufacture their private label and first-price products. They enable retailers to offer consumers products at lower prices than national brands.
[9] Campofrio, Cooperl Arc Atlantique, FTL, Les Mousquetaires, Nestlé, Roullier and Aubret, fined for a total of €61.4 million.
[10] Taking into account the existence of particular financial difficulties affecting their ability to pay the sanctions, the FCA reduced the fines imposed on Aubret, Charcuteries Gourmandes, La Financière du Haut Pays, Financière Turenne Lafayette SAS, Jean Caby, Salaisons du Mâconnais and Sonical. See Decision, para. 1012.
[11] See Decision, para. 1012.
[12] The first FCA decision refusing the benefit of total exoneration in the context of a leniency application was Decision no. 15-D-19 of December 15, 2015, regarding practices implemented in the courier and express courier sectors.
[13] Following the leniency notice, Campofrio resumed its participation in the cartel. It also failed to inform the FCA of an anticompetitive meeting it attended in April 2013. The group has been fined €1 million for its anticompetitive practices in the downstream market. See Ruling, paras. 971-972.
[14] The first FCA decision applying the so-called “Leniency Plus” provision set out in para. 22 of April 3, 2015, Leniency Notice is the white goods case (decision no. 18-D-24 of December 5, 2018, relating to practices implemented in the household electrical appliances sector).
[15] The Leniency Plus provision grants an additional exemption to a second applicant if they provide irrefutable evidence that helps the FCA to establish complementary elements of fact that have a direct impact on the determination of the amount of the financial penalties imposed on the cartel participants.
In the present case, the FCA granted Coop total immunity from sanctions for the period during which the practices were revealed only as a result of the information provided by the group. See Decision, para. 1012
[16] See Ruling, paras. 757-758.
[17] See Ruling, paras. 751-752.
[18] See Decision, para. 1012.
[19] See Ruling, para. 1114.
[20] See Ruling, para. 1115.
[21] See Ruling, paras. 1113-1114.
[22] Paris Court of Appeal, ruling of October 6, 2022, no. 20/08582.
[23] FCA Decision no. 20-D-04 of March 16, 2020, regarding practices implemented in the Apple products distribution sector.
[24] As reported in our October 2022 French Competition Law Newsletter.
[25] See Comptes rendus de la commission des affaires économiques, Audition de M. Benoît Coeuré, président de l’Autorité de la concurrence, March 12, 2024.
[26] Our translation. Original quote: “Il est à craindre que l’on réduise les sanctions contre de grands groupes parce que les montants sont très élevés, sans appliquer ce raisonnement à de plus petites entreprises. Celles-ci pourraient alors être sanctionnées plus durement. Si l’on en arrive là, ce sera problématique.”