On October 29, 2024, the French Competition Authority (“FCA”) imposed a fine totalling €470 million on manufacturers and distributors of low-voltage electrical equipment (the “Decision”) for vertical resale price fixing.[1] The FCA sanctioned two vertical price agreements (i) between Schneider Electric and its distributors Rexel and Sonepar implemented from December 2012 to September 2018, and (ii) between Legrand and its distributor Rexel from May 2012 and September 2015.
Background
Schneider Electric and Legrand are the two largest French manufacturers of electrical equipment, and their distributors Sonepar and Rexel are the two main distributors of electrical equipment in France.[2]
On April 5, 2018, the online journal Mediapart denounced the existence of an alleged derogation mechanism used by two low-voltage electrical equipment manufacturers, Schneider Electric and Legrand to control the retail prices charged by their distributors, Sonepar and Rexel. Instead of conducting dawn raids under Article L. 450-4 of the French Commercial Code, the FCA’s General Rapporteur submitted a report to the Paris Public Prosecutor under Article 40(2) of the French Criminal Procedure Code on April 23, 2018, leading to the opening of a judicial investigation. On June 13 and August 1, 2018 the judge issued two letters rogatory (“commissions rogatoires”) pursuant to Article L. 450-1 II bis of the French Commercial Code in execution of which the judicial police, assisted by agents of the FCA, dawn raided the premises of Schneider Electric, Legrand, Rexel, Sonepar, and the French Federation of Electrical Equipment Distributors, as well as the domestic premises of the management of Sonepar SAS on September 6, 2018.[3] After initiating proceedings on its own motion, the FCA could then request access to the relevant parts of the criminal case file pursuant to Article L. 463-5 of the French Commercial Code and use these materials in its own proceedings. The FCA notified a statement of objections on July 4, 2022.[4]
Price fixing through the derogation mechanism
The alleged vertical price agreement concerned the derogation mechanism provided for in the annual framework contracts concluded between the manufacturers and their distributors, which allowed the manufacturers to grant discounted prices (“derogated prices”) to the distributors, so that the latter could respond to client requests for lower prices, even lower than the distributor’s standard purchase prices.[5] The request for a derogated price came from either the end customer or the distributor, who wanted to offer competitive prices to their clients while maintaining positive resale margins.[6]
The FCA considered that the derogation mechanism was not anticompetitive as such, especially insofar distributors were not prevented from charging lower prices than the derogated prices.[7]
However, the FCA considered that Schneider Electric and Legrand retained the ultimate decision-making authority over the level of derogated prices, ensuring effective control over the resale prices charged to end customers and allowing distributors to secure their positive margins.[8] The FCA found that, under the guise of non-binding ‘maximum’ or ‘recommended’ prices, the derogation mechanism was implemented with the sole aim of introducing a fixed price system to maintain high prices by limiting intra-brand and inter-brand competition.[9]
The FCA concluded that the seized documents, including a communication from Schneider Electric’s legal department dated December 13, 2012 explicitly labelling the derogated prices mechanism as a vertical restriction of competition, constituted direct evidence sufficient to prove the anticompetitive price agreement.[10] In addition, the FCA found that a body of serious, precise, and consistent evidence indicated that the manufacturers intentionally invited their distributors to implement price fixing policy and that manufacturers consciously adhered to this policy.[11]
The FCA concluded that the implementation of the derogation mechanism was a restriction of competition by object under Article 101(1) TFEU.[12]
Application of Fining Guidelines
The FCA applied its Fining Guidelines of July 30, 2021 even though the anticompetitive practices ended before their entry into force. The FCA considered that the Fining Guidelines were adopted in application of criteria L. 464-2 of the French Commercial Code as amended by the Ordinance No 2021-649 of May 26, 2021 (the “Ordinance”), and that pursuant to the Article 6 of the Ordinance the Fining Guidelines were applicable to proceedings in which a statement of objections was notified after the Ordinance went into force.[13]
The FCA imposed a fine of €207 million on Schneider Electric, €43 million on Legrand, €124 million on Rexel, and €96 million on Sonepar.[14] The FCA considered that the base amount reflected the seriousness of the practices, particularly taking into account the nature of the infringement (vertical price agreements being considered to be among the most serious infractions as they directly impact the prices charged to consumers)[15] and the undertakings’ awareness of the illegal nature of their actions.[16] At the stage of individualizing the fines, a 20% reduction was granted to Rexel, as the evidence showed that it had tried multiple times to reform the price-fixing agreement and had tried to entice Schneider and Legrand to modify their behaviour. [17]
The FCA also considered that the amount of fines should be adjusted upward to ensure their deterrent effect and proportionality in view of the financial strength of each of the companies involved (with group-level revenue being considered a good indicator of such financial strength).[18]
Takeaways
The €470 million fine imposed by the FCA marks a significant escalation in penalty amounts compared to prior years, emphasizing the FCA’s stringent stance on vertical practices. For context, in 2023 alone, the FCA issued nine fines amounting to a total of €154 million—substantially lower than this single fine.
The Decision also clarified the temporal scope of the Fining Guidelines, confirming their applicability to cases where the statement of objections was issued after the Ordinance of May 26, 2021, even if the anti-competitive practices took place before the Guidelines came into effect.
The Decision is currently under appeal before the Paris Court of Appeal.[19]
[1] FCA Decision n° 24-D-09 of October 29, 2024 relative to practices in the electrical equipment sector.
[2] See Decision, para. 21.
[3] See Decision, paras 1-3.
[4] See Decision, para. 6.
[5] See Decision, paras 45-46 and 48.
[6] See Decision, para. 48.
[7] See Decision, paras 65, 135 and 564.
[8] See Decision, paras 49 and 53.
[9] See Decision, paras 463, 478, 515, 529 and 567 for the price agreement between Schneider Electric, Rexel, and Sonepar and 520-528.
[10] See Decision, paras 187, 468-477 and 615.
[11] See Decision, paras 478-514 and 529-547.
[12] See Decision, para. 589.
[13] See Decision, para. 655 and 657.
[14] See Decision, para. 739.
[15] See Decision, para. 693 and seq.
[16] See Decision, paras. 173, 184, 211, 236.
[17] See Decision, para. 174-182, 717.
[18] See Decision, paras. 722-737.
[19] See FCA Press Release of November 19, 2024 on the Decision, available at: https://www.autoritedelaconcurrence.fr/fr/decision/relative-des-pratiques-mises-en-oeuvre-dans-le-secteur-du-materiel-electrique-basse.