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25 years of independant competition regulation

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Our special thanks to the following for kindly agreeing to contribute to this publication:

Edouard Balladur • Pierre Cahuc • Guy Canivet • Philippe Escande • Marie-Dominique Hagelsteen • Frédéric Jenny • Gérard Mestrallet • Robert Saint-Esteben • Anne Wachsmann

Thanks also to all those who worked so hard to prepare and produce it:

Coralie Anadon • Ingalill d’Armaillé • Liza Bellulo • Sophie-Anne Descoubes • Marianne Faessel-Kahn • Virginie Guin •Anne Perrot • Sébastien Soriano • Fabien Zivy

This brochure is published in French and English.

The interviews reproduced in this brochure were conducted in French. The translations into English aim to faithfully reflect the original text, but should not be treated as quotations of the interviewees.

“C'est la concurrence qui met un juste prix aux marchandises,et qui établit les vrais rapports entre elles.”1

1"It is competition that puts a fair price on goods and establishes the true relations between them."

Montesquieu

English version

02

Competition at the heart of the economy

03

With hindsight, how would you assess the ongoing process of introducing competition over the past 25 years? Back in 1986, France was not fully prepared for the move awayfrom a State-controlled economy. This meant any changes had tobe gradual. Having said that, it is quite remarkable to observethat the process has moved forward ever sincewithout interruption and without any U-turns.Successive governments and parliamentary majorities, whether on the left or the right, haveall done their bit to strengthen the existing framework, improve its effectiveness and add toits legitimacy.

The Autorité de la concurrence is now one of themost active and innovative competition authoritiesin Europe. It is also one of the best equipped interms of tools and procedures. Its mission is widely acknowledged and the need for such anagency is no longer questioned. It is an integral part of the marketeconomy, and is seen as a necessary counterbalance: without areferee to enforce the rules of the game, who is capable of puttinga stop to non-compliance or abuse, how can our businesses andcitizens trust their own economy?

Are the benefits of competition being perceived objectively? There is some confusion about these benefits in France, for tworeasons. First, the introduction of competition in the network industries (telecom, energy, railways, postal services, etc.) gaverise to much heated debate. Some of these industries, such as therailways, gained special consideration through their active involvement in the Résistance during the Second World War. Theideals of the Résistance and the 1946 Constitution firmly boundtogether the inseparable triad of monopoly, State-owned

company and special status employees. For many, ending the monopoly was perceived as calling into question the public natureof the service or employees’ rights. The move to open these markets to competition encountered strong opposition as this wasseen as privatising the service rather than a way of encouraging

State-owned companies to "do better". The reason given for opening up the markets inFrance also tended to be the need to complywith European law, rather than that it wouldmake economic sense. When successive governments opened various markets to competition in line with European directivesthey did not adequately explain how businesses and citizens would benefit fromlower rates, innovative products, better quality and more choice. This undoubtedly ledto concerns about competition and at timessuspicion towards Europe, which was accused

of "destroying" the "French public service" model.

Things are different nowadays and nobody questions the competition process. We recently commissioned research fromTNS-SOFRES which shows that the French have understood thatcompetition can improve their daily lives and have integrated itinto their buying behaviour.

Does that mean France is a "special case" in Europe?Yes, but only in terms of how things were perceived rather thanwhat has actually been done. France was more hesitant to embracecompetition than other countries.

The United Kingdom is an interesting example; it did not wait forEurope before changing its model. Competition was seen as a way

25 years of constant progressBruno Lasserre, President of the Autorité de la concurrence

Introduction ///

We have come a long way in the past 25 years, a quarter of a century that has been markedby reforms through which a young agency gained acceptance and effectiveness while always serving the public interest. Bruno Lasserre, the President of the Autorité, takes alook back at the circumstances that, along with independence, tenacity and – at times –courage, have led the French people to embrace the reality of a competitive economy.

The Autorité de laconcurrence is seenas a necessarycounterbalance and is an integral part of the market

economy

Introduction ///0

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for the country to motivate its public service operators andencourage them to improve performance in terms of price,quality of service and innovation. The government even created new competitors with the sole purpose of waking upsleeping monopolies. The concepts of "more choice" or "valuefor money" were widely taken on board.

In Germany, home of ordoliberalism, the principles of free enterprise and regulating competition date back to the end ofthe Second World War in reaction to the high degree of industrialconcentration (“Konzerne”) associated with a totalitarian State.The German economy also required radical modernisation at the start of this century to absorb the effects and costs of reunification. The country now views these principles as a non-negotiable part of political democracy. Moreover, the concept of"free and undistorted competition" was the subject of overwhelming consensus during the debates on the constitutionaltreaty: it is seen as a positive value, protecting the less powerfulagainst large companies with excessive market power. It formsan integral part of the “social market economy”.

In France, however, these same concepts are sometimes confusedwith "ultra-liberalism"; they are seen to be in contradiction withour cultural heritage which still places values such as protectionand equality higher than such ideals as freedom and risk. Bydefinition, competition is a game in which the players are notequal and which rewards the best player.

Despite the different historical contexts, if we compare the present day Autorité de la concurrence with the Bundeskartellamt, we can see that these agencies – both independent and highly respected – have many similaritiesand have both managed to carve out a place in the economiclandscape, while successfully fostering competition.

Is the notion of competition more closely associated withleft- or right-wing politics?The concept of competition is not the property of any singlepolitical camp. What is important is that it is not seen as anend in itself, but as a tool to achieve growth, create wealthand foster innovation. It is an effective way of defending purchasing power, and should be used to redistribute the benefits of a more competitive economy fairly and equally.Competition can rhyme with solidarity.

On what basis was competition introduced in Europe as a whole?It is the result of a historical compromise. Germany was adamant that the rules of free competition, already entrenchedwithin in its own legal system, should be included in the founding treaty. France was more concerned with agriculturalissues, but favoured the creation of strong European institutions placed above individual States, without which the policies on competition could not have been implemented withthe degree of success we have seen.

The concept ofcompetition is not the

property of any single politicalcamp. What is important is that it is not seen as an end in itself,but as a tool to achieve growth,create wealth and fosterinnovation. It is an effective wayof defending purchasing power,and should be used to redistributethe benefits of a morecompetitive economy fairly and equally. Competition canrhyme with solidarity”

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What happened next?While individual Member States gradually implemented the competitio nprocess, their national authorities underwent a revolution in 2004 withthe construction of the European Competition Network (ECN), whichhas accelerated the entire process. The success of the European competition policy is based on an effective relationship between the European Commission and the National Competition Authorities (NCA).One practical impact has been a decentralised application of commu-nity law and the creation of the European network in May 2004. Withtheir increased responsibilities, the national authorities have gainedin importance, adopted a more proactive approach and now occupy akey position in regulating competition in Europe. Such cooperationwould have been impossible to imagine fifty years ago at the start ofthe great European adventure, and is undoubtedly an excellent development. The competition commissioners, Mario Monti, NeelieKroes and the current commissioner Joaquín Almunia, have allfirmly believed in and encouraged the project.

To what do you ascribe the advances made bythe Autorité over the past 25 years?Firstly, I believe that independence has been a key value and a constant over the past 25 years. However, independence is meaninglessif it is merely a principle stated in the statutesof the institution. Independence is a battle thatis won every day by the men and women who have actively defended and implemented that principle over the past 25 years, attimes in very difficult circumstances. In spite of the many obstaclesand problems they encountered, my predecessors, Pierre Laurent,Charles Barbeau and Marie-Dominique Hagelsteen, always fosteredthis "culture of independence", for which I am extremely grateful.

But what does such a level of independence imply? It means westeer clear of lobbies and pressure groups, and ensure that any decisions result from a collegial process based on a fair hearing ofall parties concerned and an assessment of the legal or economicarguments, to the exclusion of any other factors. One of theagency's strengths is that we have never been afraid to remindeven the largest players of the rules of the game. The agency's verybroad remit over all sectors of the economy means it can remainimpartial and does not have links with any particular sector.

Expertise has also been a key factor. The agency has been able tostrike a fine balance between precise legal reasoning and relevanteconomic analysis, combining the best of these at times opposingapproaches. The erstwhile Conseil de la concurrence was one ofthe first authorities in Europe to prioritise economic considerationsand to weigh restrictions to competition against efficiency gains,in antitrust cases as well as in merger review.

And none of this would have been possible without the human,legal and procedural resources that first the Conseil and then theAutorité has gradually been provided with. This has been a steadyand continuous process: the new tools conferred to it improved itseffectiveness and responsiveness, while at the same time the rightsof the companies were further consolidated on the procedural side,thus upholding the principle of due process and ensuring impartialdecision-making. I cannot praise enough the work achieved internally to improve the quality of our service.

How will the economic and financial crisis affect competition?Confidence is the key factor in this time of uncertainty, when the col-lapse of the euro seems a real possibility and several countries arestruggling to stay afloat. Confidence cannot be maintained without anindependent regulator to ensure the rules are respected and protectcollective interests against "high risk" behaviour that distorts compe-tition and damages the economy. During periods of doubt, it is all the

more important that a strong, neutral referee is seento exist and act when necessary. Obviously, we alsoneed to take a pragmatic approach: for example, inthe remedies we obtain or when assessing companies'ability to pay, which might be affected by the crisis.We need to be flexible and not hide behind absolutesor dogma. This means the Autorité has a duty toconstantly reinvent itself, question its role and actions,

and maintain a sense of humility.

Would a global authority be a good idea now that we have aglobal economy?The idea of creating global regulators is a legitimate one giventhe removal of barriers and the globalisation of trade. However,a global competition authority is not a realistic proposition at themoment. Having said that, establishing the broadest possibleconsensus between national competition authorities is an achie-vable objective, and a sensible way forward.

This is to some extent the role of the International CompetitionNetwork (ICN), of which the Autorité is an extremely active mem-ber. This network provides a forum sharing opinions, defininggood practices, and implementing actions designed to minimisenational differences. The ICN had just 15 members at the time ofits inception ten years ago. More than 120 competition authoritiesare now members, including many in the emerging countries.Some of them have followed in our footsteps; perhaps becausethe very gradual and steady processes we have implemented areseen as accessible and transposable.

Independence,expertise anda team of

professionals

06

1977 19861953

1987-1993

CharlesBarbeau

PierreLaurent

1993-1998

The Decree of 9 August 1953added additional provisions tothe Ordinance of 30 June 1945covering unlawful concertedpractices and created theCommission technique desententes (“concerted practicescommission”).

The Law of 2 July 1963 thenextended the legal remit to coverabuse of dominant position.

The agency was renamed theCommission technique desententes et des positionsdominantes (“concerted practicesand dominant positionscommission”).

The Law of 19 July 1977extended the agency'spowers and responsibilitiesfrom the merely "technical",and the Commission de laconcurrence (“competitioncommission”) was born.

The commission advised thegovernment on allcompetition-related mattersand expressed opinions onmergers and plannedmergers.

The commission became theConseil de la concurrence.It was given decision-makingpowers allowing it tosanction anticompetitivepractices, while retaining itsadvisory and educationalroles. Companies could refercases to it directly. It gained“official expert” status,requiring the Government toconsult it on certain draftlegislation.

Key dates ///

Pierre Laurent was a member of the Conseild’Etat (French Administrative Supreme

Court which also advises government ondraft bills and regarding administrative or

public policy issues). He also served asDirector of Employment with the Ministry

of Employment and then as SecretaryGeneral with the Ministry of National

Education, before returning to the Conseild'Etat in 1974, where he held a number ofimportant positions including President of

the sixth litigation sub-section, President ofthe social section and President of the

litigation section. Edouard Balladur chosehim to lead the newly created Conseil de laconcurrence in 1987. His methods, precisionapproach and independence left their markon the new agency. He left in 1993 to chair

the Commission de privatisation(Privatisation Commission). Please turn to

Page 59 for a tribute to Pierre Laurent.

A member of the Conseil d'Etat, andmore a gifted public servant than aneconomist, Charles Barbeau becamePrefect of the Corrèze département in1974, and was then appointedDirector of Regulations and Litigationand subsequently Director General ofAdministration with the Ministry ofthe Interior. Charles Barbeau alsoheld the position of Director Generalof the Gendarmerie nationale from1979 to 1984 and then from 1989 to1991. In 1992, Michel Vauzelle, theMinister of Justice, asked him to join him as Chief of Staff. He wasappointed President of the Conseil de la concurrence in 1993, and remained in office until 1998. He left to become Chief of Staff for Jean-Pierre Chevènement, Minister of the Interior.

Moving towards autonomy and efficiency >>>

Our leaders

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200420082001

BrunoLasserre

Marie-DominiqueHagelsteen

1998-2004

2004- . . .

The Law of 15 May 2001 onnew economic regulations(“Loi NRE ”) reinforced theConseil ’s powers, raisingmaximum potential fines andintroducing new tools(leniency, settlement) andadditional guaranteesregarding the protection ofcompanies’ businessconfidentiality.

The Ordinance of 4 November2004 aligned French legislationmore closely with Europeancompetition law.

The creation of the EuropeanCompetition Network heralded amore concrete form of Europeanco-operation.

The Law on the modernisationof the economy of 4 August2008 (“loi LME”) created theAutorité de la concurrence,which replaced the Conseil on 2 March 2009.

Its powers were extended andits independence reinforced. Its mandate was broadened to include merger control. It acquired self-referral powersand its own investigation teams,while retaining all powers andresponsibilities of the Conseilde la concurrence.

After eight years at the Conseild'Etat, Bruno Lasserre spent elevenyears working in the telecoms sectoras Director of General Regulationsand then as Director General of Post and Telecommunications.During this period he was one of the main architects of the Frenchtelecommunications sector reform,which opened this sector tocompetition, privatised the publicoperator and introduced anindependent regulator. He returnedto the Conseil d'Etat in 1998, wherehe was President of the first sub-section before being appointedDeputy President of the litigationsection. He has been a member ofthe Conseil de la concurrence since1998 and was appointed Chairman in 2004. He played an active part in the transformation of the Conseilde la concurrence into the Autoritéde la concurrence, holding theposition of President since itscreation in 2009.

After serving as Head of the LegalDepartment of the Elf-AquitaineGroup from 1981 to 1986, Marie-

Dominique Hagelsteen returned tothe Conseil d’Etat in 1992, joining itsfinance section. She then held the

position of President of the 8th litigation subsection until 1998. At the same time, she chaired the

Observatoire juridique destechnologies de l’information (IT legalobservatory) from 1993 to 1996, and

the Bureau de Vérification de laPublicité (BVP) from 1994 to 1998. Tenyears after joining the Conseil de laconcurrence she was appointed itsPresident in 1998 until leaving in

2004 (see her interview on page 18).She has held the position of

President of the public work sectionof the Conseil d’Etat since 2007.

to create competitionyears

Competition was born with the market economy. France officially

recognised it in the Ordinance of 1 December 1986, which paved the way

for modern competition law based on independent regulation.

From its creation that same year the Conseil de la concurrence gradually

imposed itself as a key market regulator. Under its new identity as the

Autorité de la concurrence the agency has retained its youthful spirit,

energy and enthusiasm.

25 years to create competition /// The foundations1

0

Competition is now recognised as a tool that can improve economic efficiency and justice, but it wasoften the subject of heated debate in the past. A consensus reached in Europe after the SecondWorld War was anchored in the 1957 Treaty ofRome, establishing a common foundation. This wasfollowed by a consensus around decentralisation ofthe application of European competition law in2003. In France the process has been slower, but haspicked up speed over the past 25 years.

Signature of the Treaty of Rome on 25 March 1957

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The birth of freedom of trade and industry in FranceThe existence of a competition policy in France can be traced backto the French Revolution, when the new political freedom engendered freedom of trade and industry. The so-called “Allardedecree” abolished guilds (jurandes and maîtrises) while the “Le Chapelier Law” of June 1791 abolished corporations and encouraged"freedom of trade and free enterprise". In 1810, Article 419 of theCriminal Code (Code pénal ) prohibited coalitions that manipulatedprices "above or below levels that would have existed as a result of natural competition and free trade". This provisionremained in force until it was replaced in the Ordinance of 1986 by more modern administrativeregulations.

Two schools of thought In 19th-century America, competition regulation became the subject of some discussion. The first antitrust laws were introduced (Sherman Act in 1890on cartels, followed by the Clayton Act in 1914). Inthe 20th century, two different schools of thought engaged in heated political and theoretical debate. Supporters of strict regulation of competition (Harvard, 1936 to 1972) distrusted largecompanies and advised State intervention to ensure a fair market.From 1972, the Chicago school advocated for self-regulationthrough market forces and innovation.

Across the Atlantic, the preponderance of powerful pre-war conglomerates was associated in 1945 Germany with the troubled political times that had allowed the creation of the Third Reich. TheAllies therefore encouraged the country’s new business leaders toadopt a competition policy that would dismantle existing cartels andbreak up large market structures. The Freiburg school developed thenotion of Ordnungspolitik (or ordoliberalism) based on defence of marketstructures. In 1957, the GWB Act against restraints of competitionmade competition an object of law that merited protection.

The construction of Europe brought together these diverging approaches and a consensus has now been achieved. European law

seeks to protect competition and recommends a balanced approachto prevent anticompetitive behaviours having regard to their objectas well as their effects.

Gradual regulation of competition in France from 1953The 1810 legislation was no longer relevant to the industrial realityafter the First World War, when it was extensively amended and applied with a much greater degree of flexibility.Between 1945 and 1953, the need to rebuild the country and manage

depleted resources justified price controls and "indicative and incentive" planning.The subsequent more prosperous period, known as the“Trente Glorieuses”, made economic modernisation pos-sible, heralding the emergence of a market economy., In the introduction to the memoirs of a former Director General of Prices from 1947 to 1962,François Bloch-Lainé wrote: "the Fourth Republic, withits robust administrative machinery and its short-lived,but conscientious ministers, successfully brought

France back from the brink and into the "glory years".

The Commission technique des ententes (concerted practices commission)was set up in 1953 with the task of providing the Minister of the Economy with opinions on concerted practices. The Law of 2 July 1963 subsequently broadened its mandate to include abuse ofdominant position. Its opinions focused on pricing, to the exclusion ofother practices that could also restrict competition, and allowed for anumber of exemptions.

In this connection, the OECD noted in a report in 2005 that "the administrative management of the economy at the time prevailed overthe still very modest tools of competition policy". The main priority wasstill to curb inflation and prices were regulated. Power still lay with theMinister of the Economy, and the Commission had very meagre resources. Dependent upon the General Directorate of Prices and Economic Investigations, it could not publish its opinions, which remained confidential.

Laying the foundations for competition1953/76

The main prioritywas still to curb

inflation

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25 years to create competition /// The foundations

Moving towards a market economy10 years of opening up to competition

At the end of the 1970s, the political approach to regulating the economy, and more specifically competition,evolved radically. The planned public economy approach lost its appeal with the 1973 oil crisis and its repercussions. Prime Minister Raymond Barre, began lifting price controls while encouraging competition. A highlysymbolic piece of legislation authorised bakers to set the price of their bread (decree of 9 August 1978). Thismarked the end of 30 years of State regulation of prices through ministerial decrees based on the 1945 Ordinance,which had maintained prices at the level of 1 September 1939.

1977: a broader mandate for the commissionThe Act of 19 July 1977 extended the commission's powersfrom the merely "technical" and renamed it the Commissionde la concurrence. It was vested with two additional missions: to advise the government on competition-relatedmatters and to express opinions on mergers or planned mergers. Rapidly, and unlike many other national competitionauthorities, the French authority was given an educationalrole at the same time as its role to analyse and control.

The new commission was granted additional resources but remained a purely advisory body, as all decisions were takenand all penalties were imposed by the Minister of the Economy.

Merger control remained optional and ex-post, constituting a veryminor aspect of the agency's activities: in eight years only eight

mergers were examined, and only one of them was prohibited.However, these first steps paved the way for more extensive reform with a much broader scope several years later.

1986: the Conseil de la concurrence is bornBy the mid-1980s, freedom of prices, competition and the sanctioning of concerted practices and abuse of dominant posi-tions had been generally accepted. The Minister of Economyand Finance, Edouard Balladur, instructed a panel of specialiststo look at reinforcing the legal framework governing competi-tion. The aim was to achieve a smooth transition to a genuinemarket economy with sufficient stability to entrust the applica-tion of competition law to an independent administrative authority with decision-making powers. The German and Euro-pean models were examined as a possible source of inspirationfor competition regulations that could be adapted to suit France.

1976/86

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8676/

The Commission was also tasked with defining "all the conditions thatneed to be put in place to ensure that competition can effectively playits role as a regulator in a free environment".

This process resulted in the Ordinance of 1 December 1986 on freedom of prices and competition, which brought an end to price regulation: "the prices of goods, products and services that were previously set by the said Ordinance (1945) will be freely determinedas a result of competition".

A broader mandateThe Commission des ententes (concerted practices commission) became the Conseil de la concurrence, with powers to start proceedings ex officio, order interim and emergency measures and impose fines, all of which had previously fallen within the remit of the Ministry of the Economy. At the same time, rights of defence were enhanced.

Referrals to the Conseil were also extended to include referrals fromcompanies, so as to create a "competition culture" across the economy as a whole. The former agency’s mandate to provide recommendations to the government was retained and broadenedto give the Conseil de la concurrence a role as an “official expert”,particularly as regards draft bills and regulations. The opinions ofthe Conseil were published.

The vision of the working group chaired by Jean Donnedieu de Vabreshad thus become a reality: "the State will cease to manage the eco-nomy and will instead guarantee the freedom of the economy."

The 1986 Ordinance lay the foundations for a free marketeconomy, redefining the roles and responsibilities of government, the courts and companies”Édouard Balladur

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25 years to create competition /// The Conseil de la concurrence

Creation of the Conseil de la concurrenceÉdouard BalladurFrench Minister of State for the Economy, Finance and Privatisation(1986-1988)French Prime Minister (1993-1995)

1986

Mr Balladur, you were the driving force behind the 1986legislation that enabled France to transition from a planned economy to a true market economy, in particularby vesting an independent administrative authority withthe power to regulate competition. How would you describe the economic context in which the Conseil de laconcurrence was created and the main goals underpinningthis reform?In the mid-1980s, the French economy was lagging behindto a certain extent. This was reflected in substantial publicdeficits, high taxes and social insurance contributions, persistent inflation and slow growth. The goal was simple: to modernise the French economy,remove barriers to growth, and introduce our country tothe idea of economic freedom, which was still somethingof a novel idea at that time.I was certain that free market competition would boost eco-nomic activity and help counter inflation, provided that therules of competition were enforced by an independent body.This is why, after repealing the 1945 Ordinance on pricecontrols, I endeavoured to lay the foundations for a systemof independent regulation of competition.

What kind of opposition, if any, did the 1986 reform encounter?The reform faced three main obstacles. First, there was political opposition, but that was the democratic processat work, especially given the left-right cohabitation at thetime. Then there was intellectual opposition, with the finestminds going around saying that we could not live withoutprice controls. Finally, the third obstacle was economic: thewinds of freedom shook up conventions and corporatistsystems. Many industries were accustomed to the shelterafforded by regulated prices. They had complained aboutprice regulations in the past, but when it came down to removing them, they were vehemently opposed.

How would you say the French view competition today?Do they see it as an opportunity, a risk or a source of regulatory control in the face of unbridled free marketforces? In your opinion, has the French perception of competition evolved much since the 1986 reform? Public opinion has greatly evolved since 1986. Free marketcompetition has proved its worth, especially as a meansof fighting inflation, which has stabilised at an average of

about 2% a year since 1986. The 1986 reform, with itssubsequent improvements, is perceived as a safeguardagainst an unbridled free market system, because competitionis subject to specific, clearly defined and constant rulesenforced by an authority whose absolute independencehas never been called into question.

Do you think the Law for the Modernisation of the Economy(“loi de modernisation de l’économie”) and the 2008 Ordinance, which completed the 1986 reform by creatinga single competition authority with the power to makeself-referrals and issue opinions to public authorities andrecommendations to companies, also contributed to furthering a “competition culture”?Yes, the improvements you mentioned were essential, butthey could not have been envisaged in 1986. It wasn’tuntil later that they became possible. Truth be told, theLaw for the Modernisation of the Economy and the 2008Ordinance may never have seen the light if a “competitionculture” had not gradually become integrated into theFrench way of life. I am pleased to see that the specificpowers vested in the Autorité de la concurrence furtherenhance its credibility, not that this was lacking in anyway. The opinions issued by the Autorité and the penaltiesit imposes are respected and acted upon.

Competition law is sometimes viewed as a possible hindrance to business development. Taking stock of the situation with respect to merger control and the fightagainst anti-competitive practices, in France and in Europeon the whole, do you think this view is justified?Not only is competition law far from being a hindrance, itis an essential condition for business development. Whatwould be damaging to companies is an environment devoid of rules. When the laws governing competition areclear and constant, their enforcement through a competentauthority is a safeguard for companies.

Free market competitionhas proved its worth, especially as a means of fighting inflation”

15

86In your opinion, is the current crisis a resultof over-regulation or under-regulation,with respect to economic regulation on thewhole or, specifically, the regulation ofcompetition?The current crisis certainly provides fuel forthis debate. I am surprised that, in Europe,economic liberalism has been blamed asthe source of all ills, while the State hasonce again been clothed in virtue. However,what happened in the United States in2008 primarily reflects under-regulation bythe State and its governing bodies. If theappropriate public authorities had perfor-med their duties, the sub-prime crisiswould never have happened. Over-regula-tion is not the problem.

This simply confirms the views I havebeen defending for many years now. I amnot an ultraliberal, and economic liberalismonly runs smoothly if the State is strongand is able to impose rules and penaltieson those who fail to comply.

The French model of economic regulationembodies these principles. The challengelies in ensuring that this model can also be embraced by a sufficient number of developed and emerging countries.

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The New Economic Regulations ActTools and procedures are modernised

2001

Measures to combat anticompetitive practicesThe maximum fine was raised from 5% of French turnoverto 10% of international turnover, excluding taxes. The decision to base fines on group turnover instead of theFrench company's turnover meant fines were consistentwith the size of the offenders. The Conseil was also authorised to take repeat offences into consideration whenfining.

Extended toolkitUnder the previous system, the Conseil could only imposeinterim or emergency measures requested by the referringparty or proposed by government. The new agency wasempowered to impose any measures it considered necessary to protect economic public order.

Competition regulation gained in importance at the start of the new millennium. Further regulatory developments were seen to be necessary following the Conseil d'Etat’s move to extend competition law toapply to the public sector (“Société Million et Marais” ruling of 3 November 1997). Marie-Dominique Hagelsteen, who headed the Conseil de la concurrence at the time, won over Prime Minister Lionel Jospinand certain members of his cabinet, such as Jean-Pierre Jouyet and Pierre Duquesne, who enthusiasticallyembraced the "new economic regulations".

The New Economic Regulations Act of 15 May 2001 increased the powers of the Conseil de la concurrenceand completely overhauled legislation on merger control and anti-competitive practices.

Inspired by European and US law, the Act also introducedthe concept of leniency. This allowed "repentant" partiesto a cartel to cooperate with the Conseil. In exchange, anddepending on the level of cooperation, the company's finecould be reduced or waived. This is a very effective wayof detecting infringements and destabilising existing car-tels. The agency received 57 leniency applications in tenyears, demonstrating the success of the initiative.

Lastly, a settlement procedure was introduced to speed upthe handling of cases. This allowed companies to apply fora reduction of their fine if they waived their right to challenge the statement of objections. The Conseil also benefited, as cases could be processed much more quickly,freeing up resources.

Additional guarantees for companiesThe Act also more clearly separated the agency's investigation and decision-making functions. The GeneralRapporteur and the Deputy General Rapporteurs, who manage the investigation services, no longer attend thedeliberations of the Board regarding litigation cases. Theinvestigation process (assignment of a case to a case officer, transmission of investigation requests to the Minister of Economy, notification of a statement of objectionsto the parties) became the responsibility of the GeneralRapporteur instead of the President of the Conseil de laconcurrence.

Specialisation of the courts The Act also introduced a specialisation of the competentcourts, along the lines of the courts specialised in indus-trial property, in order to improve the effectiveness ofcompetition law and standardise its application throughoutthe country.

Systematic merger review One of the main innovations of the Act was the introductionof a systematic merger control system, with mandatoryprior notification of all merger transactions to the Ministerof the Economy.

A simplified procedure was also introduced for the simplesttransactions (most cases) and the average processing timeswere shortened in line with business imperatives.

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01

The New Economic Regulations Act of 15 May 2001 increased the powers of theConseil de la concurrence and completelyoverhauled legislation on merger control and anti-competitive practices”

18


Marie-Dominique Hagelsteen’s leadership approach during her time with the Conseil de la concurrence between 1998 and 2004 can best be described as an iron fist in a velvet glove.

Under her leadership, the agency gained budget autonomy and underwent modernisation, while ensuringa fairer hearing of all parties.

Recruitment, organisation, communicationMarie-Dominique HagelsteenPresident of the Conseil de la concurrence (1998-2004)President of the Public Work section of the Conseil d'Etat

How did the role of the Conseil de la concurrence evolveduring your time as President?When I arrived, the agency was still operating along thelines of an administrative body, rather like an extensionof central government. Although this system had provedits worth thanks to the professionalism of the agency’smembers, and in particular its former Chairman, PierreLaurent, who established its independency from the outset, the Conseil nevertheless remained a body with limited powers and resources.

European competition law was evolving dramatically atthe time, under the direction and impetus of the successiveCompetition Commissioners, Karel Van Miert and MarioMonti. We needed to embark upon a new phase in the history of the Conseil, and I am pleased to say that we enthusiastically rose to the challenge.

What were your main achievements? I very quickly realised that the Conseil needed to be thoroughly reorganised and modernised by introducing

back-office services and broadening the range of expertiseand knowledge through a high-quality recruitment process. I was particularly keen to bring economists intothe agency. The idea of combining law and economy wasquite unusual at the time.

One of my greatest achievements was an essential part ofthis restructuring: I am talking about budget autonomy. I was extremely fortunate to have had the support of suchefficient General Rapporteurs: Patrick Hubert and ThierryDahan, and I benefited from their valuable experience inadministrative matters.

Then, convinced that advocacy should also be one of theagency's main missions, I decided to raise its profile bycreating a Communications Office.

I also focused on procedural issues and compliance withthe fair hearing principle, which greatly improved the quality of discussions at hearings.

19

mercredi 2 Janvier 2002 mercredi 2 Janvier 2002

L’économiste L’économiste

29 juin 2001

You also contributed to the drafting of the New EconomicRegulations Act. Can you tell us something about that?

The Prime Minister, Lionel Jospin, had launched the ideaof "economic regulations", which encompassed competitionpolicy. His government was keen to hear what we had tosay and to examine the initiatives such a law could introduce. We were therefore invited to take part in thedrafting of this landmark Act. My aim was to produce legislation that gave the agency the legal means necessaryto operate as a modern competition authority.

One of the most important innovations was undoubtedlythe right to impose higher fines, in line with Europeanpractice. The maximum fine was increased from 5% ofFrench turnover to 10% of international turnover. At thesame time, new procedures were introduced to increaseefficiency, such as settlement and leniency, although suchconcepts constituted radical new departures for France.

I was also very much in favour of removing the General Rapporteur and Deputy General Rapporteurs from deliberations, a move that was welcomed by companies.

In my opinion, the next step was to entrust merger reviewto the independent authority. It was essential that the dualsystem be replaced by a single authority, as has been donein most European countries. I included this proposal in myfinal presentation of the activity report before I left theagency. Although this reform was seen as quite revolutionaryat the time it has now been successfully negotiated by my successor, Bruno Lasserre, with his usual energy andenthusiasm.

My position as President hasbrought me into contact with every aspectof the French economy and has been oneof the most challenging and interesting inmy entire career”

20


Creation of the European Competition NetworkA common initiative

2004

Decentralisation, cooperation and convergence The European Competition Network (ECN) was establishedon 1 May 2004 with the entry into force of EC Regulation1/2003. This reform completely reorganised the applicationof European competition law by giving national competitionauthorities (NCAs) the powers to apply European law whencompanies’ behaviours affect trade between MemberStates – powers that had previously been held exclusivelyby the European Commission.

The brainchild of Commissioners Van Miert and Monti, thedecentralised application of Euro-pean law allowed Member Statesmake it their own, significantlyboosting efforts to combat cartelsand increasing the European Union'sinternational stature.

The Regulation also founded a powerfully integrated European Competition Network to ensure more uniformanalysis of competition in particular sectors or with regardto particular cases. For example, the European Commissionis now required to refer its draft decisions to an advisorycommittee comprised of NCAs, and the NCAs must consultthe European Commission in connection with any draft decisions that apply European competition law. All national competition authorities meet on a regular basisto discuss general or sector-specific issues relating to theapplication and enforcement of competition policy andprocedural issues.

The development of a common competition culture alsorequires effective cooperation in individual cases. Competition authorities can conduct joint investigations

(for example, the UK Office of Fair Trading investigated the London head offices of certain oil companies, following a request from France in 2008), exchange information and evidence, or re-assign the case to anotherauthority that is better placed. The NCAs have also developed procedural tools with a common core, such as the model leniency programme that was jointly drafted by the Conseil de la concurrence and the UK’sCompetition Commission, and which has contributed to the generalised use of this highly effective method of detecting cartels.

Lastly, the Court of Justice of the European Union monitors the observance of the Community principles of effectiveness and equivalence between European andnational competition law. In 2009, it

developed a consistency principle as regards the settingof fines by NCAs in cases that apply European law, and in2011 it ruled that the NCAs should have the same procedural rights as other parties when the legality of anyof their decisions is disputed and referred to a higher authority.

The Autorité de la concurrence is a driving forcewithin the European Competition NetworkThe European Network's success is based on the initiative of its member authorities, and the Autorité de la concurrence is one of the most active. Between 1 May2004 and 31 December 2011, France began 207 new antitrust investigations within the ECN and handed down79 decisions based on European law, ahead of Germany(147 and 71, respectively) and Italy (91 and 75).

The year 2004 marked a major milestone, when Europe decentralised the application of European competitionlaw to national authorities to ensure consistent and uniform application of competition rules.

At the same time, the European Competition Network was created to organise cooperation between nationalcompetition authorities and vertical cooperation with the European Commission.Below is a brief history of the development of a common competition approach in Europe.

A forum for discussion and experience-pooling

21

04

The story started on 30 August 2007, with the creation of the Commission pour la libération de la croissance française(Commission on Economic Growth), chairedby Jacques Attali. Mario Monti paid tribute to the "quality of this unique group ofleading specialists" and recalled: "I decided at a very early stage of our work to raise theissue of competition policy, having alreadyenjoyed some constructive and at timesrather controversial discussions with Frenchbusiness circles and politicians at all levels."

On 17 September 2007, he sent Jacques Attalia memo suggesting that the Commission "re-examine the institutional framework ofcompetition policy in France, particularly inlight of recent developments in otherEuropean countries". He recommendedreducing the number of authorities from two to one; limiting the government's role incompetition matters to raising general, non-competition issues in connection with mergercontrols; giving the agency the right to drawpublic attention to the effects of certaincompetition laws and regulations, etc.

A consensus was quickly achieved "thanks tothe intellectual enthusiasm of my colleaguesand Bruno Lasserre’s powers of persuasion".

He was "astonished" by the speed at whichthings went ahead: on 23 January 2008 theAttali report was presented to the Presidentof France, the Act was passed six monthslater and the Autorité was created in justanother six months.

This development truly placed France "on the front line as far as the modernisationof competition enforcement in Europe wasconcerned", particularly since the entry into force of European Regulation 1/2003 in 2004, as "each national competitionauthority plays a vital role in the Europeansystem of authorities".

Mario Monti referred to the EuropeanCompetition Network and observed that itwas in "Europe’s general interest that eachnational authority be able to operateeffectively and independently".

France on the front lineMario MontiEuropean Competition Commissioner (1999-2004),Italian Prime Minister since November 2011A summary of his speech at the inauguration of the Autorité de la concurrence on 13 January 2009

The former Competition Commissioner underRomano Prodi (1999-2004), who was electedPrime Minister of Italy in November 2011, attended the inauguration of the Autorité de laconcurrence on 13 January 2009.

The theme of his speech was "the untold story",and he began by praising Minister Christine Lagarde for her "vision and courage in takingthe political and legislative initiative to createthe Autorité de la concurrence within the framework of the Modernisation of the Economy Act".

The Autorité is a valued participantin discussions between networkmembers thanks to its extensive experience. It has influenced a numberof European initiatives, in particular inthe retail distribution sector, and morespecifically on-line shopping, and alsoin the application of competition law tothe agricultural sector. France is veryactive in both horizontal (cooperationissues and procedural safeguards, cartels, mergers), and sector-specificworking groups (financial services,energy, telecommunications, etc.).

The European Commission has referredsix complex European merger controlcases to France since 2009, the firstreferrals of this type of case since2002.

Lastly, some of the cases investigatedby the Autorité could be finalizedthanks to its membership in the Network and the resulting exchange ofdocuments and information. Nationalauthorities can share information anduse it in evidence for the purpose ofapplying European law. The Autorité hasalready implemented the informationexchange procedure with a numberof other national competition authorities(Germany, UK, Spain) and with theEuropean Commission.

22

25 years to create competition /// The Autorité de la concurrence

2008The background to the reformFrom the Attali Commission to the creationof the Autorité

The Modernisation of the Economy Act (“loi LME”),enacted in August 2008, was based in part on the recommendations of the Commission on EconomicGrowth chaired by Jacques Attali. Its aim was to promote sustainable and strong growth in a difficultinternational context, based on three main drivers:competitiveness, creation of wealth and employment.

Reform was a political priority

Government and Parliament pushed this major reform through at top speed. Only six months lapsed between its presentationto the government and its publication in the Journal Officiel in August 2008.

Parliament decided to include landmark measuresin the Act to reform competition regulation, creating the Autorité de la concurrence and handing responsibility for merger control overto this new agency. This initiative demonstratedthe political importance of this high-visibility reform and its importance to the government.

Stimulating the French economy The Commission's proposals were based on a number ofobservations. Despite its advantages, France was laggingbehind due to an outdated model. Growth had consistentlydeclined over the previous 40 years, stagnating at around1.7% since 2000. The need for urgent action resulted in the Commission's proposals, which in turn led to the Modernisation of the Economy Act.

However, stimulating the economy and promoting competi-tion did not mean a return to jungle law. The financial crisismade strong safeguards against abuses and anti-competitivepractices all the more important. A stricter regulatory framework was essential if economic players were to begiven greater freedom.

Removing barriers to stimulate growth and employmentOne of the reform's main objectives was to eliminate those obstacles that constrain the economy and artificially protect certain sectors. For example, it introduced newrules for the distribution sector to reduce entry barriersand allow new players to enter the market. The rules governing the opening of new supermarkets and hyper-markets had previously tended to protect existing operatorsfrom competition, encouraging higher prices and curbingemployment and local growth. The reform gave consumersthe opportunity to choose between different outlets, withthe dual objective of stimulating the market and boostingpurchasing power.

The reform in four steps23 January 2008 The Attali Commission delivered its report to the President of the Republic: 316 proposals to changeFrance, four of which concerned the creation of a single,independent competition authority.

4 August 2008The Modernisation of the Economy Act, prepared and presented to Parliament by Christine Lagarde, Minister of Economy, Industry and Employment, was enacted. It provided for the creation of a single authority tasked with regulating competition.

13 November 2008The Government added the final touches to the reform in an Ordinance.

2 March 2009The Board of the new Autorité de la concurrence met for the first time, bringing the reform into being.

"The draft law on the modernisation of the economy (...)introduces some major structural reforms and strengthensthe foundation of our economic strategy.

(...) Like Germany in the 2000s, the United States in the 1990s, and Spain in the 1980s, France is now in the process of modernising its economy. (...) After implementing emergency measures, we haveprepared draft legislation (...) that contains substantivemeasures and structural measures, measures that are courageous but are also inexpensive measures. (...)

It has two main objectives, more competitors and morecompetition, to achieve three concrete results: moregrowth, more jobs, and more purchasing power. More competitors and more competition: these are notjust economic values. They are the values on which our democracy is based, values that in the past only theFrench Revolution has been able to impose. I am thinking,for example, of the Le Chapelier Act of 14 June 1791,which, by abolishing the traditional corporations, made a stand for freedom of trade and free enterprise with the

objective of serving "the interests of every individual as well as the general interest". (...)

The obstacles we are faced with today are unfair practicesand administrative rigidity. These obstacles hinder ourcountry's development and the creation of newbusinesses. (...) We are determined to breathe new lifeinto our economy. (...) Let us examine the three underlyingprinciples of the Act: growth, freedom and balance –because freedom is only acceptable with a balancedregulatory framework.

(...) I will now turn to Title II, the purpose of which is toencourage competition. Competition is the most naturaland healthiest way of influencing prices. I believe that byreinforcing competition, we will achieve the right balancebetween greater flexibility in price negotiations and anincrease in the number of actors present on the market,while, and this is essential, taking a firm stand againstanti-competitive practices.

(...) There is no point in introducing new legislation topromote competition if it is not implemented. In order to effectively combat anticompetitive practices,we are proposing the creation of a competition authoritywith a broader mandate, including the examination of allmerger operations, which will have its own investigativepowers to impose more effective and harsher penalties.

(...) The draft law is neither to the left nor the right... its purpose is not to pit the smaller players against thelarger players, local shops against supermarket chains... It is, quite simply, to reconcile the French to a spirit ofenterprise and increased competition."

23

08The creation of the Autorité de la concurrenceChristine LagardeMinister of the Economy, Industry and Employment (2007-2011)Managing Director of the International Monetary Fund (since June 2011) Excerpts from the presentation of the bill on the modernisation of the economy to France's National Assembly on 2 June 2008

Competition is the most natural and healthiest way of influencing prices”

24


The birth of the Autorité de la concurrence

Increased efficiencyThe Autorité de la concurrence is now responsible for ad-dressing anti-competitive practices throughout the processchain: detection, investigation and decision-making. Com-bining the investigation and decision-making functions wi-thin the same agency prevents duplication and reducesthe risk of lost information. It has also brought about im-portant improvements in quality, speed and efficiency.The investigation services are now capable of conductingany enquiries that may be necessary to enforce competi-tion rules, which means the Autorité can develop a com-prehensive investigation strategy.

Transferring the investigation services was a challenge,with a large number of DGCCRF staff joining the Autorité

and the merging of two cultures, and has now been successfully completed. This was the final phase in theprocess diligently implemented by legislators and government over almost a decade with the objective ofgradually creating a structure equipped to effectivelycombat cartels and respond to today's needs.

Advocacy and self-referralsUnlike the Conseil de la concurrence, which could only ex-press opinions following referrals, the Autorité can expressopinions publicly on its own initiative concerning anycompetition-related matters, reforms or draft legislation.It can also make recommendations to the government, byproposing measures designed to improve competitivemarket structures. By expressing an opinion whenever it

The reform introduced by the Modernisation of the Economy Act was one of the most significant events since the1986 Ordinance, and marked the final phase in the introduction of a modern and independent regulatory system.Based on the proposals set out in the Attali report, the provisions of the Modernisation of the Economy Actrelating to competition brought an end to the dual institutional system and transformed the Conseil into theAutorité de la concurrence, reinforcing its existing powers and adding new ones. France now has a singlecompetition authority responsible for competition enforcement and advocacy. The political decision to haverecourse to an independent administrative authority has been reaffirmed.

The culmination of the movement towards an independent regulatory system

2009

Bruno Lasserre, Christine Lagarde and Mario Monti

25

The greatest challengewas undoubtedly theintroduction of an independent and comprehensive merger control system”

deems necessary, the Autorité can encourage greater awareness ofcompetition-related matters in public policy, while also sending stron-ger signals to businesses and educating them about competition. Eachcompetition assessment and recommendation is another brick in theconstruction of the – still fragile – competition culture.The agency’s new mandate allows it to adopt a proactive approachand determine priorities, namely by targeting sectors suitable for in-depth assessments. Its sector-specific enquiries give it a general over-view and avoid multiple individual cases.

Acting upstream of the market structureThe greatest challenge was undoubtedly the introduction of an inde-pendent and comprehensive merger control system. No-one woulddispute that this reform has clarified the separation of tasks betweenthe Autorité and government. Making merger control and antitrustenforcement the responsibility of a single agency allows for a unifiedand coherent approach in the implementation of competition law andmakes things clearer and easier for companies.

Since 2 March 2009 companies are required to give notification oftheir merger plans to the Autorité de la concurrence if they fall underthe remit of the national authority. This one-stop shop approachworks well and satisfies the efficiency and speed criteria so essentialfor merger control. Although the Autorité adopts an open-minded andpragmatic approach when imposing remedies, it has also been quickto remind companies that any commitments made in order to obtain

clearance must be respected. Brussels recognises that the French sys-tem is both credible and efficient, and now regularly refers complexcases to the Autorité.

Improved rights for companies: the French system is one of the most protectiveThe reform significantly reinforced the rights of companies by reaf-firming the main principles that applied previously, making theFrench system one of the most protective in Europe. In particular, itclearly separated the investigation and decision-making functions,thus ensuring that companies can benefit from the so called “foureyes principle”. In addition, the written and oral contradictory proce-dure guarantees that companies will be given the opportunity to pre-sent their arguments throughout the proceedings.

Lastly, a procedural expert (the hearing advisor) has been designatedto act as a procedural mediator between the investigation servicesand the parties to a case. This means parties now have someone toanswer their procedural questions, help them resolve any problemsas and when they arise, and submit a report to the President contai-ning an independent opinion on procedural aspects.

09

The first Board

26


An active member of the European Competition Network(see page 20), the Autorité also contributes to the work ofthe ECA (European Competition Authorities), an associationformed by European competition authorities in 2000,which organises an annual conference for the competitionauthorities of the Member States of the European Unionand the European Commission.

It serves as an informal forum for discussion betweencompetition authorities when they jointly examine mergers that do not fall within the remit of the EuropeanCommission. Following an initiative by the Conseil de laconcurrence and the Italian competition authority, the ECAdrew up principles for convergence of financial penaltiesin 2007.

The last 25 years have seen a more integrated internal market, which has fostered greater economic interpenetration. Uniform application of European law – which prohibits anti-competitive agreements and abuseof dominant positions – has to be supplemented with more efficient tools to detect anti-competitive practices,which rarely stop at a national border, and to develop more effective sanctions. Competition authorities areaware of the need to cooperate and standardise their tools and decision-making practices, both at a Europeanand international level, in order to promote best practices and assist less experienced countries wishing to introduce effective competition regulation.

The Conseil de la concurrence played an extremely active role in promoting closer relations between authorities.The Autorité de la concurrence has resolutely pursued the same objectives. The creation of a competition cultureis a gradual process, involving exchanges and shared experiences, cooperation and partnerships, both officialand unofficial, within the framework of bilateral and multilateral relations.

European co-operation

The futureTowards a global competition policy

European Competition Day, Paris, November 2008

27

In its capacity as a member of the International CompetitionNetwork’s steering group the Autorité is one of the network’smost active members”

Bilateral cooperation: privileged partnerships with youngauthoritiesThe Autorité de la concurrence co-operates with a number ofits counterparts around the world, regularly sharing its experiences with younger competition authorities to helpthem develop their own practices and improve their know-ledge. It holds training sessions for foreign delegations (Armenia, Tunisia, etc), and also takes staff from other authorities on internships (Mauritius). It also cooperates withsome authorities with which it has signed medium-term partnership agreements (Brazil, Russia). The Autorité also operates twinning programmes financed by the EuropeanCommission to provide technical support in connection withcompetition law and policies (Ukraine, Algeria).

Multilateral cooperation fosters high-level exchangesand voluntary convergenceThe Autorité is a very active contributor to working groupsand discussions held under the aegis of various internationalorganisations and also within ad hoc competition authoritynetworks. These forums provide opportunities to promotea competition culture on a global scale and allow competitionauthorities to air their views.

More specifically, the Autorité is an active contributor toworking groups organised by the OECD's Competition Committee. The Autorité shares its experience and obtains

feedback from its counterparts through written reports andround-table discussions on specific topics. It is also a member of the UNCTAD’s Intergovernmental Group of Experts on Competition Law and Policy, and contributes tovoluntary peer reviews of Member States' competition policy. The objective of both organisations is to exchangeopinions, develop best practices and adopt strategic recommendations for governments and the private sector.

The International Competition NetworkNational competition authorities are also members of international networks. The International Competition Network (ICN) was set up in 2001 upon the initiative ofCommissioner Mario Monti and his US counterparts. It hasexpanded from its original 15 member authorities to morethan 120 members. This specialist, unofficial forum allowsdirect discussions between competition authorities with aview to achieving a voluntary convergence of national competition policies based on consensus and within a non-mandatory framework, thus promoting better coordinationof national practices.

In its capacity as a member of the steering group the Autorité is one of the network’s most active members. It isalso co-chair of one of the working groups and is responsiblefor liaising between ICN member authorities and "Non-Governmental Advisors".

International co-operation

ICN, The Hague, May 2011

28


What are your thoughts on the gradual introduction of an independent system to regulate competition in France?The steady rate at which progress has been made is quiteremarkable, almost as if the administrative and judicialinstitutions had jointly decided to move forward with calculated caution to achieve a gradual acceptance by economic players of stricter competition regulations.Conversely, it could be the dissemination of a competitionculture in the national economy that has brought about theinstitutional changes. The changes have also been influencedby modern regulatory techniques developed and implementedby other countries more advanced along this path.

Whatever the impetus, authorities and businesses alikehave moved from fairly basic competition law and a simpleregulatory system in 1986, to a much more sophisticatedlegal system. Several factors have contributed to the system’smodernisation, including in particular developments in theeconomic analysis of competition and the meshing of economic and legal considerations in both private and publiclaw. The Autorité de la concurrence has built up a competitionlaw doctrine based on its decision-making practice throughrigorous economic assessments and a clearly defined competition policy, under the supervision of the Conseild'Etat and the Cour de Cassation. This relatively newbranch of law has reached maturity and is now an integral

part of the legal order. By vesting the Autorité de laconcurrence with decision-making powers with regard tomergers, the 2008 Act improved the consistency and reinforced the independence of the competition regulatoryframework. At the same time, the diversification of proceduresavailable to the agency, such as settlement, commitmentsand the leniency programme, has made it more effective.Procedural safeguards have also been enhanced.

Moreover, a general progressive climate has motivatedeconomic actors, institutional authorities and jurisdictionalauthorities alike. It would seem that businesses, lawyers,experts, academics, members of agencies and the courtshave reached a symbiotic consensus which has served asa driving force.

Do you think that a balance has been achieved in competition litigation over the same period, or that further progress is possible or necessary?I can respond on several different levels. With regard to jurisdictional supervision of the decisions of the Autorité dela concurrence, the right balance had to be found betweeneffective control of its decisions and the acknowledgementof the necessary freedom for an economic doctrine of competition law to establish itself and grow. On the onehand, there is a need for a control system to ensure the decisions of the Autorité de la concurrence are lawful and,on the other hand, a need to allow the agency a certain leewayin its reasoning to enable it to factor in complex economicsituations, while defining a scale of suitable penalties, taking into account, over the years, the decisions of the review courts. This presupposes a series of minute adjustments that entail reciprocal recognition of the separate roles of the agency and the review court. I am ofthe opinion that this balance has now been found.

With regard to the application of competition law by the ordinary courts of law, there is still great room for improvement in France and elsewhere, as the Commission hasobserved. The first issue to be addressed is whether there isa need for a certain re-criminalisation of competition law.

Looking back at 25 years of competition law Guy CanivetMember of the Conseil constitutionnel (French Constitutional Council)First Honorary President of the Cour de cassation (French Supreme Court)

29

Such a legislative policy could only be adopted after a thorough review of the sectors, situations and practices in which administrativeregulation has proved unsuccessful, despite the undisputed efficiencyof procedures and the substantial rise in fines. There are some extreme cases where dissuasive criminal penalties are the only effective solution.

The setting of civil damages is another area where an effective evidentialmechanism, expertise models, the adaptation of liability law and bettertraining for judges are all necessary. I am not saying anything new here.These are prerequisites conditioning the use of the courts as a viablealternative to proceedings before the Autorité de laconcurrence. It is not an impossible scenario, but itwould mean that the courts’ decisions in major caseswould need to be examined critically.

Moreover, competition litigation is sufficiently complex to make the specialisation of courts a necessity, along the lines of those that hear cases involving highly technical issues, such as patent law.This was made possible by the decree of 30 December 2005, whichdesignated a small number of lower courts and centralised all appealsbefore the Paris Court of Appeal. However, if the system is to be effective certain thresholds need to be established to guide allocationof cases to the specialist court, and specify training needs for bothjudges and attorneys.

How has increased dialogue between the judiciary systems contributedto enhance the ‘openness to Europe’ of competition law so far?The European Union and the OECD have made fairly critical assessmentsof the court system. The principle of judicial independence has prevented the introduction of directive structures similar to the net-works of competition authorities, with the result that very little information reaches the Commission and there is very little interventionfrom the Commission. I believe the current lack of formal organisationcould be improved upon. Central structures could be created with aview to training the judiciary, sharing experiences, exchanging information,allocating cases, determining procedural rules, providing technicalsupport and assessing amounts of damages. It is true that the specialistjudges have created associations that provide opportunities for discussion and exchanges of opinion. However, although informal

structures bringing together the judiciary of the various MemberStates are a positive development, they cannot be used to resolve organisational issues on a European scale or to standardise decisions.

How do you envisage the future of competition litigation in Europe?Are the current tools (preliminary ruling, amicus curiae, etc.) sufficient or are more needed?Given that the national authorities and courts have been given the powers to enforce European competition law, a European appeal structurehas clearly become necessary.

All the other harmonisation techniques that you havereferenced merely form a smokescreen that has delayedthe creation of a European judicial authority vested withpowers to confirm or reverse decisions issued in the various Member States on the basis of European competition law. There is a need for a similar structurein other areas, such as European patent law. It is a longway off, as it means changing the very nature of the European Union’s legal order. I am not sure that many

people share my opinion, but a controversial stance can sometimes helpto move things forward.

Substantive competition law has borrowed from private law, administrative law, European law and will no doubt also in the future borrow from constitutional law. In your opinion, is this beneficial or a potential source of problems? The Conseil constitutionnel does not consider free competition as abasic right, unlike freedom of enterprise. This means there is no riskof any conflict with European treaty guarantees.

Although contradictions between the case law of the European Courtsand the decisions of the Conseil constitutionnel may occasionallyarise, they will be overcome and will undoubtedly ultimately enrichboth bodies of law. I also firmly believe that the involvement of economic players in constitutional litigation and repeated referrals tothe Conseil constitutionnel will encourage the development of basicrights for businesses based on safeguards introduced by the EuropeanConvention on Human Rights and the general principles of EuropeanUnion law.

A European competition court

has become necessary

of competition

The impact of

years It is impossible to imagine life without competition today.

Competition permeates every aspect of our daily lives. Without competition,

we would have no choices, no freedom and no diversity in pricing. Changing

attitudes towards competition over the past 25 years have gradually led to the

emergence of a "competition generation" who are more aware, more demanding

and more informed in their choices. French consumers have learned to exercise

their economic rights and are now a driving force behind competition policy.

Here we present some of the memorable moments and landmark initiatives

of the Autorité that have supported consumers in their pursuit of better prices

and freedom of choice.

25 years of competition /// Competition and French Consumers3

2

For 87% of the French, competition promotes competitiveness, 82% believe it results in greater choice, and 76% think it lowers prices.”“

The competition generationCompetition in daily life

33

To mark its 25th anniversary, the Autorité commissioned TNS-SOFRES tocarry out a survey of a representative sample of 1,000 French people inNovember 2011. Highlights from the study are presented below.

Competition promotes lower prices and improves choiceFor 81 % of those questioned, competition is generallyviewed as something positive.

Competition is spontaneously associated with consumerbenefits such as diversity, the ability to compare products, competitiveness, better prices, better quality,better services, etc.

For 87 % of the French, competition stimulates compe-titiveness, 82% believe it results in greater choice, and76 % think it lowers prices.

A need to regulateThe French understand that the market economy shouldnot be a "jungle" and that a referee is essential to supervise and regulate relations between competitors.

82% of those questioned agree (and 49% agree completely)with the idea that small businesses should be able tocompete on a level playing field with businesses in adominant position. 70% think that companies should notengage in price-fixing agreements, and 69% believe thatthe existence of a competition regulation at nationaland European levels is beneficial to both consumers andsociety as a whole.

Competition is an economic driverThe majority consider that competition has a positiveimpact on innovation within companies, purchasingpower and economic growth. 72% of those questionedthink that competition stimulates innovation withincompanies, while 65% consider that it has a positive impact on purchasing power. For the French, competitionis a stimulus that encourages people to work harder anddevelop new ideas (68%).

Competition is seen as a positive value

The French have integrated competition into their buying behaviour. Six out of tenoften or always compare the competition when they buy a product or service. Only5% of those questioned said that they never look at the competition, the main reasonbeing lack of time (22%). It has become an automatic habit, especially when buyingfood (57%). Our survey showed that people are happy to use a range of tools to compare what is on offer: 55% said they spontaneously compare offers over the phoneor by going from shop to shop, while 37% use the Internet. In France, capitalising oncompetition means comparing prices rather than haggling. Only 16% ask for quotesand only 2% are prepared to negotiate!

Two-thirds of people surveyed believe that the current level of competition inFrance is adequate and that it has a very positive impact on choices, prices and thequality of products and services. 74% are aware that anticompetitive agreementshave been sanctioned, most frequently citing mobile phones (66%) and inter-bankfees for cheques (42%). Competition is judged to have had the most positive impacton the telecom sector, with 77% believing that prices and product choice have improved over the past ten years. The public transport sector is a close second.

However, not every economic sector is seen in such a positive light, and competitionis judged inadequate in some sectors. Those questioned consider that things areworse than before in both the energy and the banking sectors, often citing highprices, problems switching suppliers, and lack of choice.


4

Competition is a daily affair

Room for progress in some sectors

35

The survey on "Competition and French consumers" shows that anoverwhelming majority of French consumers view competitionpositively. 82% believe that competition gives them greater choice.They actively benefit from competition, as most of those questionedfrequently look at the competition before purchasing. 76% agree thatcompetition drives prices downwards. They are firmly convinced ofthe positive impact of competition on purchasing power. They canalso see other benefits, as 71% consider that quality improves whenthere is more competition.

So from a consumer standpoint, when asked precise questions abouttheir everyday experiences, the French seem to be very attached tothe idea of competition, associating it with better prices, more choice,better quality and a competitive attitude that fosters innovation.Competition is seen as stimulating markets and guaranteeing a levelplaying field between economic players. Unsurprisingly, nine out often people questioned believe that companies that do not complywith competition law should be sanctioned.

However, the survey reveals more nuanced opinions on the moregeneral and abstract aspects of competition. 55% believe thatcompetition does not rein in company profits. This figure shows thatthe majority of people questioned are not familiar with the economicmechanisms that are essential for a minimum understanding of theconsequences of competition, given that in practice competition doeshave the effect of reducing a company’s profits! This ignoranceprobably explains the lack of interest shown in competition laws andregulations.

Competition is not seen as an important social issue. Although themajority of those questioned feel competition should be upheld, it is clear from the results that the French have a very superficialknowledge of the subject.

More than one-third are not aware of the existence of an authority that regulates competition, and none of those questioned could name it!

This very limited interest in competition explains the apparentlycontradictory opinions expressed regarding regulation of competition.On the one hand, almost two-thirds of those surveyed consider thatthe current level of competition in France is generally adequate.However, when questioned in greater detail about specific sectors,opinions become more negative as people refer to actual purchasesthey have made.

Most people are critical of the lack of competition in the energysector, banking and insurance, supermarkets and public transport.They feel that insufficient competition in these sectors results inexcessively high prices, not enough suppliers and a limited choice.

Competition determines economic efficiency. Public authorities havebeen aware of this for a number of decades now, as is shown by thereforms introduced in France in the mid-1980s. This survey showsthat the French have a very positive view of the progress achieved in this area, but that there is still a long way to go before competitionconcerns are given the importance they merit in public debate.

From a consumer standpoint, when asked precise questions about their everyday experiences, the French seem to be very attached to the idea of competition”

The majority of Frenchconsumers view competition positively”

Pierre Cahuc, Professor at École Polytechnique (Paris) and member of the CREST - Centre for Research in Economics and Statistics


6

Consumers are at the heart of competition policy

Retail industry

Banking sector

Healthcare

Comparing prices has become a firmly entrenchedpurchasing habit, and is proof that consumers havetaken control of their choices. The Conseil and thenthe Autorité have worked continuously to supportconsumers in this process over the past 25 years.Their work has covered all economic sectors withoutexception, taking the form of sector-specific enquiries,recommendations to the public authorities and initiatives to combat anticompetitive agreementsand the abuse of dominant positions that have ledto artificial price increases and limited choice.

Here, we take a closer look at three sectors importantto daily life: food retail, banking and healthcare.

37

The retail grocery sector has changed considerably over the last quarter century. The Conseil and the Autorité anticipatedthese changes and were quick to identify the pertinent issues: an over-concentrated market, the practice of so-called "backmargins", commercial planning restrictions, retailers' inability to set their own prices, the difficult start of Internet shopping,etc. All these factors can lead to increased prices and slow down the development of a more open and innovative market.

Over the past decade, the Conseil and the Autorité have sought to remove these constraints by acting upstream to modify thelegal framework and market structures, while sanctioning anticompetitive conduct and abuse of dominant positions downstream.

Modifying the legal framework: detailed assessments and recommendations to the public authoritiesAs part of its ongoing task of identifying entry barriers, constraints andproblems, in 2004 the Conseil focused on the harmful effects of backmargin payments (opinion 04-A-18 of 18 October 2004), later examining commercial planning (opinion 07-A-12 of 11 October2007). These opinions paved the way for reforms designed to reducethe obstacles that prevent new players from entering these markets,and thus to stimulate competition at a local level.

More recently, the Autorité significantly expanded its permanentwatch of the retail markets. In 2009, as purchasing power fell, the Government asked it to conduct a detailed assessment of the situationin France's overseas départements as a result of which it issued anumber of recommendations (opinion 09-A-45 of 8 September 2009).In 2010, it also decided, on its own initiative, to carry out a comprehensive sector enquiry, and was highly critical of the existenceof lock-up clauses in affiliation agreements that bind independent retailers to the major retail chains and also of the practice of freezingcommercial land (opinion 10-A-26 of 7 December 2010).

Supervising market structures by controlling mergers and acquisitionsIn the 1990s, a series of mergers and acquisitions involving food retailers created a highly concentrated market. One example was theCarrefour-Promodès merger in 1999. The European Commission referred the merger to the French authorities in 2000. The Conseil dela Concurrence recommended that the Minister of the Economy require Carrefour to sell eight hypermarkets and 26 supermarkets,most of which had previously formed part of the Promodès group. In its final decision the Minister of the Economy followed the Conseil’sopinion almost to the letter.

When the Autorité de la Concurrence replaced the Conseil in 2009 itwas given merger control powers and notification thresholds were lowered, meaning it could look at smaller transactions which, despitetheir size, can nevertheless have an impact on consumers locally.

Anticompetitive agreements, resulting in higher prices, aresanctionedThe Conseil has often ruled against vertical agreements between suppliers and distributors. Such arrangements result in price alignments,depriving consumers of any real possibility of implementing competitionbetween different retail outlets (intra-brand competition).

One of the most famous cases involved the toy sector, and resultedin five toy manufacturers and three distributors being fined a totalof €37 million in 2007 (decision 07-D-50 of 20 December 2007).

Other memorable cases include Disney videos in 2005 (€14.4 million)and the school calculators case in 2003.

Internet shopping: a new source of competitionThe Conseil firmly believed that the emergence of the Internet as a distribution channel was a positive development for consumers (morechoice, home deliveries, no opening hours), while also facilitating comparison shopping. Focusing in particular on sectors where selective distribution is used, its actions ensured manufacturers couldnot prevent their approved distributors from selling online, but couldstill apply certain quality criteria (top-of-the-range Bose audio systems, Festina watches).

In 2007 its actions resulted in ten major pharmaceutical companiesbeing ordered to offer their cosmetic products for sale on the Internet(Bioderma, Caudalie, Cosmétique Active France (L’Oréal), Expanscience,Johnson & Johnson Consumer France, Lierac, Nuxe, Oenobiol, RogéCavaillés and Uriage) (decision 07-D-07 of 8 March 2007).

The Autorité is aware of the growing weight of Internet shopping inhousehold consumption, and decided, through the self-referral procedure, to analyse competition in this sector, identify concernsand, if applicable, issue recommendations and solutions.

Retail of daily consumer goods:a core focus

In 1977, the competition authority at the time (the Commission de laconcurrence) recommended that the Ministry of the Economy fineDarty FRF 2.5 million for organising and conducting price controls.Darty was using its famous "contrat de confiance", which guaranteedcustomers a partial refund if they found the same item cheaperelsewhere, to identify retailers offering lower prices.

Using information received from their customers, Darty then putpressure on the manufacturers to convince them to raise prices. Insome cases, Darty had even suggested that manufacturers put inplace a co-ordinated price increase over a period of several months,and more than 15 distributors had agreed to go along with thesecollective arrangements.

1970


8

Landmark cases in the retail sector

DartyBreach of trust

Jean Chapelle, a Parisian shopkeeper, waged a war against hi-fi manufacturers that lasted severaldecades. Mr Chapelle began to sell televisions and hi-fi equipment at unbeatable prices in his twostores, both of which were called "Concurrence" (competition). After falling victim to retaliatorymeasures from some of these manufacturers, who were not at all happy with his low-cost retailbusiness, he filed a series of complaints from the 1970s onwards. Not all these efforts weresuccessful, but Sony, for example, was found in 1990 and 1993 to have used discriminatory salesconditions by preventing Mr Chapelle from placing any further orders and by organising systematicstock shortages that constituted an anticompetitive refusal to sell.

Hi-fi equipmentThe triumph of the underdog

1977 1987

Who remembers that before 1987 only retailpharmacies were allowed to sell parapharmacy

products? Although their presence in supermarkets isnow taken for granted, it was made possible by a

decision of the Conseil, which found that pharmacistsdid not have an exclusive right to sell cosmetics and personal care products. In a decision dated

28 January 1988, the Paris Court of Appeal confirmedthe injunctions imposed by the Conseil, which provided

that "manufacturers must no longer require that approved distributors of their products be

qualified retail pharmacists".

Parapharmacy productsCosmetic and personal

care products enter the supermarket

Motorway service stationsA victory for retail chains An opinion issued by the Conseil allowed retail chains to open service stations on French motorways. The opinion of the Conseil, following a referral by Parliament asking it to examine competition between motorway service stations,had important repercussions for the sector. In 1988, theMinistry of Industry awarded Leclerc its first motorwayconcession.

1988

39

Competition applies to all sectors, however safe they mayconsider themselves. This is why for the past 25 years theConseil and then the Autorité have strived to increase competition in the banking sector, where existing practicesdirectly penalised both businesses and individuals.

Banking,a key area for concern

Renegotiation of property loans Banks vs IndividualsIn 2000, the Conseil fined the main property loan and mortgageproviders over €174 million in total (decision 00-D-28 of 19 September 2000).

In 1993 and 1994, at a time when interest rates had fallen sharplyand many individual customers wanted to renegotiate their property loans, the main loan providers entered into an "interbanknon-aggression pact" under which they each agreed not to makeany offers to another bank’s customers. This meant individualswere unable to renegotiate more advantageous terms with another bank.

This decision, which imposed what was a record fine at the time, sentshockwaves through the French economy. It marked a turning pointin the Conseil's fining policy and the start of a new awareness amongboth consumers and businesses.

2000


0

In 2010 and 2011, the Autorité scrutinised the existence andamounts of interbank fees charged for cheques and bank cards,the two most common means of payment in France. This was animportant move towards greater transparency, especially considering that banks pass on to their clients in one way or another at least part of the fees they charge each other! The Autorité has also scheduled for 2012 a review of interbank feescharged by other card payment systems (MasterCard, Visa, etc.)and those charged for other means of payment (direct debits,transfers, interbank payment orders, online payments, etc.).

ChequesSavings were not passed on In 2010 the Autorité decided, through the self-referral procedure,to look at interbank fees charged on cheque transactions. It foundthat neither the principle of an interbank fee nor the amountcharged (€0.043 for each cheque exchanged) was justified by the alleged improvement in economic efficiency. On the contrary, the dematerialization of the clearing system had allowed banks to achieve substantial savings. The Autorité accordingly finedFrance’s 11 largest banks a total of €384.9 million (decision 10-D-28 of 20 September 2010).

Bank cardsFees frozen for the past 20 yearsBack in 1988, the Conseil looked at interbank fees charged forpayments and transactions. It ordered GIE “Cartes Bancaires” tobase its fees on objective and transparent criteria. In 1989, theConseil found that the new method of calculation was still unsatisfactory and fined GIE “Cartes Bancaires” FRF 6 million fornon-compliance with the previous injunction (decision 88-D-37of 11 October 1988 / decision 90-D-41 of 30 October 1990).

In 2011 the Autorité obtained a number of commitments fromthe GIE “Cartes Bancaires” relating to substantial fee reductions,including an average reduction of 36% on interbank paymentfees and of over 20% on interbank withdrawal fees. The GIE alsocommitted to reviewing the fees after four years (decision 11-D-11 of 7 July 2011).

Interbank fees Fees called into question

2010-2011

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Healthcare A sector under scrutinyThe healthcare sector has always been closely monitored by boththe Conseil and the Autorité. Opportunities for competition are relatively rare because of the highly specific nature of this sector(namely public health objectives, the principle of equal access tohealth care for all, and the highly regulated nature of the sector),and therefore require particular protection in order to ensure thatpractitioners can select the most suitable medications, and to allowhospitals to compare and select the best offers from pharmaceuticalcompanies in terms of both quality and price, which will ultimatelybenefit both the national health care system and the patients.More specifically, the Conseil has sanctioned practices used bypharmaceutical companies to prevent the developme nt of genericdrugs and anti-competitive agreements between suppliers thatwere harmful to hospitals.

Pharmaceutical companies may be tempted to use a range of strategies in order to prolong the life cycle of their proprietary drugs and delay or prevent the market launch of generic equivalents. These may include the filing of multiple patents, legal action, denigration, predatory pricing,joint offers and other marketing practices, etc.

The Conseil de la concurrence and the Autorité have a long record of examining such cases, and fining where necessary. For instance, in 2003, Sandoz was found to have abused its monopoly for cyclosporin (a drug used to prevent transplant rejections) to persuade hospitals to buy other proprietary drugs (linked discounts)(decision 03-D-35 of 24 July 2003).

Another example is Schering Plough, which denigrated the generic drugSubutex developed by Arrow Génériques and increased pharmacists’stocks of its own products to saturation point in order to counter the generic’s arrival on the market (emergency measure 07-MC-06 of 11 December 2007; merits of the case currently under investigation).

The Autorité is currently also examining two other complaints bygenerics manufacturers. The first, Ratiopharm, claims that Janssen-Cilaghas used predatory pricing and denigration to protect its drug Durogesic.The second, the generic manufacturer Teva Santé, accuses Sanofi-Aventisof denigrating the generic equivalents of Plavix (fourth highest sellingdrug in the world).

On several occasions the Conseil has sanctionedanticompetitive concerted practices in connection with calls for tender issued by hospitals. Such cases are particularly reprehensible because of the intent to deceive the public purchaser and thenegative impact on hospitals' finances.

For exemple, in 2003, the Conseil de la concurrence finedtwo subsidiaries of the Air liquide group which hadagreed to share contracts between them and to set prices(decision 03-D-01 of 14 January 2003).

In 2007, the Conseil fined five manufacturers of cardiacdefibrillators, finding that they had acted in concert when they collectively decided to boycott a national callfor tenders organised by 17 hospitals (decision 07-D-49 of 19 December 2007).

Opening the door to generic drugs

Bid rigging in public tenders organised by hospitals

42

25 years of competition /// Competition and business4

2

The last decade has seen an important shift in attitudes, with companies nowincorporating compliance with competitionrules into their strategies from the outset”“

Business takescompetition rules on board

43

In the 1980s and ‘90s, most businesses were unfamiliar with the concept of competition, which seemed to havelittle relevance to their daily affairs; many of them were parties to long-standing anti-competitive practices, morethrough ignorance than a deliberate policy.

Attitudes altered radically, bringing about a major shift in corporate culture, with the opening of borders, price liberalisation, the creation of the European internal market, the opening up of State-held monopolies to competitionand the growing role of European competition law. Media reports on the dismantling of certain major cartels andthe educational work of the Conseil de la concurrence also had an impact.

Businesses becomefully committed to competition

Since its creation, the French competition authority has ceaselessly upheld competition rules and ensured that they areapplied in the best interest of both consumers and businesses.The underlying objectives include guaranteeing freedom of enterprise, providing new players with an opportunity to shakeup the market and preventing distortion through price-fixing orabuse of dominant positions. The 1986 Ordinance allowed companies to refer cases to the Conseil de la concurrence, whereaspreviously only the Ministry of Economy could make referrals.Companies have been quick to make use of this key innovation,and complaints from companies have consistently representedmore than half of litigation cases investigated by the Conseil andthe Autorité since the turn of the century.

Competition law entered a new phase with the Modernisation ofthe Economy Act: tools allowing for negotiated settlements wereintroduced, giving companies the option to take a different stanceand cooperate. Companies are now partners in the competitionassessment process through the commitment procedure, workingwith the agency to develop suitable solutions to remedy the situation caused by their conduct on the market. The leniencyprogramme gives company directors the choice of withdrawingfrom a cartel and starting again with a clean slate.

Risk prevention and dialogueFrom 2000 onwards companies also became aware of the needto manage risk and to put in place internal systems as part oftheir compliance programmes. While such programmes by nature have a preventive and educational role, they also allowhead offices to detect anti-competitive practices and managerisk, for example by submitting a leniency application to theAutorité de la concurrence in the event of a cartel.

Companies are now in regular contact with the agency, takingpart in its public consultations and working groups, attendingconferences and publishing academic papers.

Lastly, the merger control procedure allows for two-way dialogue. The Autorité and the concerned companies are inconstant contact throughout the proceedings, and may enterinto commitments to remedy any distortions of competitionthat have been detected. This cooperative approach has provedvery positive and, in some cases, has resulted in the Autoritéagreeing to innovative commitments.


4

Procedures such as leniency and settlement, introduced in2001, and the commitments procedure, introduced in 2004,have become valuable tools in the agency’s legal toolkit. Since2008 they have been used in almost one-third of all decisionsissued by the Autorité. These participatory procedures havegradually changed the agency's relationship with companies.The emphasis is now on mutual dialogue rather than on a purelydefensive process.

The commitments procedure allows companies to propose their ownsolutions before the commencement of the litigation phase. It can beused in those cases where penalties are not necessarily appropriate,or do not involve serious infringements such as cartels. It allows cases to be processed very quickly and solutions to be found earlyon, avoiding a lengthy investigation process. Companies have beenquick to adopt this new procedure, which means their case can beclosed quickly without a finding of infringement or penalties, andwhich allows them to propose their own remedies rather than havingremedies imposed upon them.

The Autorité also benefits, saving time and freeing up resources for other cases. The economy is also a winner, as normal market conditions are restored in the shortest possible time.

Joint solutionsthrough commitments

The exclusive distribution agreement entered into betweenOrange and Apple for the distribution of iPhones in France

was referred to the Autorité in December 2008 by BouyguesTélécom. On 17 December 2008 the Autorité imposedemergency measures to ensure that iPhones could bemarketed by other operators, for the benefit of their

subscribers (emergency measure 08-MC-01 of 17 December 2008). One year later Orange

and Apple proposed commitments not to implement exclusive distribution agreements, which the Autorité

accepted after several modifications before closing the case(decision 10-D-01 of 11 January 2010).

iPhoneLitigation was avoided

Participatory toolsfacilitate dialogue

45

What is businesses' attitude to competition law?Competition law tends to view the business sector as a single,homogenous legal category, a sort of centralised, headstrong monster, but this is actually not the case at all. A company is a living, multifacetedorganism within which competition and compliance with competition lawsare not approached uniformly by the executive board, the sales andmarketing department or the legal department. This complexity explains companies' extreme reluctance to accept that parent companies and their subsidiaries share accountability, and it results in a flood of legal disputes at the moment.

On another level, companies are becoming better skilled at integratingcompetition law into their strategy. This may be as a claimant filing a complaint against a competitor with a strong market position, as a thirdparty reporting on a merger, possibly in the hope of benefiting from the resulting commitments by the parties, or as a customer who has been the victim of anti-competitive concerted or unilateral practices. A more proactive attitude towards competition law is gaining ground, with the risk that companies may begin to instrumentalise it.

What is your opinion of the negotiated procedures?The availability of alternative solutions in litigation proceedings gives companies more options, and this is undoubtedly a very positivedevelopment. Previously, a company’s only possible line of action was that of absolute defence, which was not always desirable, especially when the case file was not on its side. The balance between defence and enforcement has become much more nuanced, as companies can nowpropose commitments to implement behavioural, organic or structuralchanges in order to avoid heavy fines. In every case in which I have beeninvolved where the parties have proposed commitments, I have had the strong impression that the resultant compromise was satisfactory to all the parties involved, including the Autorité itself.

The Autorité de la concurrence fined a cartelconsisting of the four main laundry detergentmanufacturers a total of €368 million, after they entered into anti-competitive agreements on sale pricesand special offers for the French retail market between1997 and 2004. Unilever, the first company to submit a leniency application, was not fined. The other three companies (Henkel, Procter&Gamble and Colgate Palmolive) also decided to cooperate underthe French leniency programme, and obtained variousfine reductions based on the date of their application, the added value of the information they provided and their degree of cooperation with the investigationservices (decision 11-D-17 of 8 December 2011).

In 2001 France introduced a leniency programme basedon the US and European models, designed to facilitatethe detection and dismantling of cartels. If a company cooperates fully it can obtain total or partial immunity,depending on the order of arrival of its application and the "added value" of the information it provides to the Autorité. In late 2006, the European competition authorities, working within the European Competition Network, adopted a model programme defining commonprinciples for the handling of leniency applications to ensure consistent treatment of all companies.On 11 April 2006 the Conseil de la concurrence issued a procedural notice announcing the first application of its leniency programme and explaining the proceduralstages, in a move to inform companies and increasetransparency.

The Autorité became the first national competition authority to publish a "soft law" based on European legislation. Since then, the French leniency programmehas resulted in the dismantling of a number of large-scale cartels (plywood, steel, laundry detergents).The agency has received almost 60 leniency applications,which is indicative of the success of this initiative.

The laundry detergent cartel Total immunityfor the first applicant

Anne Wachsmann, Partner, Linklaters Paris

The availability of alternative solutions gives companies moreoptions in the litigationprocess, and this isundoubtedly a very positive development”

The leniency programmewipes the slate clean

46

25 years of competition /// Competition and business

The agency promotes a climate of trust and security for both businesses and the economy by ensuring that competition lawsare applied consistently and correctly. One of the Autorité's key missions is to provide companies with legal certainty. It doesthis through educational initiatives and preventive measures, providing companies with guidelines and encouraging them tointroduce compliance programmes.

The Autorité de la concurrence is keen to operate in a transparent manner, and accordingly publishes procedural notices explaining its procedures and policy. These guidelines aim to summarise several years of decision-making practice in order to distil the best practices.

Explaining our proceduresThe Conseil and the Autorité have published guidelines on a number of procedures:• Leniency (April 2006)• Competition commitments (April 2008)• Merger control (December 2009)• Setting of financial penalties (May 2011)• Settlement procedure (February 2012)

Guidelines

ComplianceCompliance programmes can help companiessuccessfully bring a competition culture andcompetition rules into their business strategyand daily business activities. Compliance programmes can be used to increase staff awareness of risks and to prevent and managethe financial, commercial and image risks thata company may face in the event of an infringement. Such programmes are particularlycommon in international groups, as a companyneeds to be above reproach in its domesticmarket before seeking to enter a foreign market.Acceptance of competition on the national market will help the company to prepare forthe international environment.

A framework documentThe Conseil de la concurrence tackled this subject in 2007, commissioning an independentsurvey of compliance programmes in France.

In October 2011 the Autorité launched a public consultation on draft guidelines on competition law compliance programmes. Thefinal ‘framework document’ was published inFebruary 2012.

The key to success: a tailored approachA "good" compliance programme is above all aprogramme that is tailored to meet the needsof the company. Parameters such as corporateculture, decision-making channels (centralisedor decentralised), and the type of market all needto be taken into consideration when drawing upa company’s compliance programme.

Competition risks will vary depending on a com-pany's sector, size and market position. Although therole of the Autorité is to provide pointers on how tostructure a credible and efficient programme, onlythe company can decide what form it will take.

Preventive tools help companies secure their strategies

5 features of an efficient compliance programmeThe purpose of the framework documentis to explain to companies how tostructure a credible and efficient compliance programme. It describesthe five key features around which aprogramme should be structured:

• A clear and firm public commitmenton the part of the company;

• In-house contacts and experts in charge of implementing the programme;

• Effective information, training and awareness-raising measures for corporate officers, managers and employees;

• Effective control, audit and alert systems;

• A monitoring system and sanctionsin the event the policy is infringed.

47

The Autorité de la concurrence is celebrating its 25th anniversary. The past quarter-century has beencharacterised by consistency and change, completelytransforming the market environment, particularly in our own business sectors: energy, the environment andservices. Competition law, and more particularly the reform introduced in 2008 by the Modernisation of theEconomy Act, which redesigned the institutional landscapeand created a single authority with reinforced powers, has been a decisive instrument in the transformation of our business activities and has accordingly gained increasing importance in the business strategies of groupssuch as GDF SUEZ.

"Consistency", in the rules that have applied over the past25 years. Competition law is based on a very stable set of underlying rules and principles. This is very important for businesses, which need a certain level of visibility and predictability.

"Developments", in the implementation of these rules by the Conseil de la concurrence and subsequently the Autorité de la concurrence, through their litigation and advisory activities. This is an agency that has willinglyevolved so as to better respond to the needs of economicoperators and the markets.

Particularly praiseworthy initiatives include the introductionof new tools, such as the commitments procedure, makingthe agency more efficient and better aligned with economicrealities. Its advisory activities are also extremely valuableto companies wishing to take preventive measures.

The area of merger control clearly demonstrates the impactand importance competition rules have had on thedevelopment of companies such as GDF SUEZ and our dailybusiness operations. Over the past 15 years our group hasexpanded through seven major European and international

mergers. Competition law is an integral part of our externaldevelopment strategy and impacts our executive decisionsin this area.

Another example of how competition rules have affectedGDF SUEZ is the extensive structural changes we haveimplemented, particularly as the incumbent supplier for natural gas, to prevent anti-competitive practices. We implemented a restructuring programme to prepare for the opening of the energy market. Although this mightinitially have been seen as a constraint, it has also been a powerful vector for modernisation within our group.

Lastly, competition law is a tool that allows our group toexpand into new markets and new countries. Similarly, it is impossible to develop further on the electricity markettoday without a healthy respect for competition rules.

Competition law is therefore an integral part of corporatelife, a vector for change and for stability. By entering intoconstructive and frank discussions with companies theAutorité can play a key role in helping all the market playersto fully understand and comply with competition rules.

These are my thoughts on the occasion of this anniversary.

Although competition rules might initially have been seen as a constraint, they have also been a powerful vector for modernisation”

Competition law is an integral part of our externaldevelopment strategy”

Gérard Mestrallet Chairman and Chief Executive Officer, GDF SUEZ


8

In the 1960s French industrial policy favoured the creation of national champions and encouraged companiesto expand through mergers and acquisitions, in particular by offering a range of tax breaks.

Action taken by the European Commission reversed the trend and stricter merger controls were introducedfrom 1977 onwards. In 2001, the New Economic Regulations Act introduced systematic controls by the Ministry of the Economy of mergers that exceeded a certain size. A new phase began in 2008, when mergercontrol was transferred to the Autorité de la concurrence; mergers are now reviewed in a uniform and consistent manner.

Merger transactions modify the competitive landscape and are indicative of a healthy economy. They may generate efficiency gains when costs can be saved orinnovations are introduced, but may also be a potential source of unbalance whenthey reduce competition.

An open-minded approachDialogue is at the heart of the merger control procedure. Companies may proposesolutions to competition concerns identified by the Autorité. The Autorité and themerging companies share a common aim: to find an effective solution quickly. Agood illustration of the effectiveness of this dialogue and the potential positiveoutcome is the innovative behavioural commitment that was accepted by the Autorité in 2010 in the Véolia / Transdev case. A fund to stimulate competition wascreated to allow the authorities in charge of organising transportation to pay compensation to candidates not selected following calls for tenders, and to allowsmall local authorities to benefit from assistance to improve their tender procedures.

Benefits of a one-stop shop Before the 2008 Modernisation of the Economy Act, merger control was the responsibility of the Ministry of Economy and the Conseil de la concurrence had onlyan optional and advisory role. Since 2009, companies have been required to notifyall merger transactions to the Autorité, which is now their sole point of contact. Whereas previously companies had to deal with two different bodies in certain cases,now the Autorité reviews the planned merger and also issues the final decision.

The business world has unanimously welcomed this reform for two reasons. Firstly,it clearly separates the political authorities from the regulatory authority. Secondly,cases are processed more quickly, an essential consideration given the constraintsof merger transactions.

Merger control: a constructive spirit at work

49

Bringing even more simplicityAs an extension of the reform, the Autorité quickly publishednew guidelines in 2009 in order to explain the new rules and guidecompanies through their merger transactions. This educationalguide explains the merger control system (new procedural rules,new notification thresholds, etc.).

To keep necessary formalities to a minimum, the guidelines in-troduced a simplified notification procedure for the simplestcases, i.e., small-scale transactions that will not have any negativeimpact on the retail sector. A similar procedure was already availablefor the majority of acquisitions by investment funds. Early in2011, the Autorité decided to go even further by issuing simplifieddecisions that allow companies to benefit from even shorter timeframes.

Noteworthy opinions submitted to the Ministry of the Economy by the Conseil de la concurrence (up to the 2008 reform)

• 99-A-09 OF 1 JUNE 1999 - Heineken / Fischer

• 99-A-14 of 28 September 1999 - Coca-Cola / Orangina

• 00-A-06 of 3 May 2000 - Carrefour / Promodès

• 01-A-08 of 5 June 2001 - Vinci / GTM

• 02-A-07 of 15 may 2002 - Seb / Moulinex

• 06-A-13 of 13 July 2006 - Canal + / TPS

• 06-A-20 of 20 October 2006 - Marine Harvest NV / Pan Fish ASA

• 07-A-10 of 26 September 2007 - CCIP / Unibail


0

The Autorité is responsible for ensuring commitments are effectively implemented, andthe law allows it to reverse an earlier decision if it observes that the company has not

kept its promise and has failed to implement its commitments. When a merger is clearedsubject to certain conditions, intended to uphold a competitive situation, clearance can

subsequently be withdrawn if commitments are breached.

In the Canal+ / TPS merger, the Ministry of the Economy had cleared the transactionsubject to a long list of commitments, as recommended in the opinion of the Conseil de la

concurrence in 2006. The purpose of these commitments was to avoid distortions ofcompetition caused by the new entity's monopoly on the premium channel publishing

and distribution market and its reinforced dominant position on the distribution market.(Opinion 06-A-13 of 13 July 2006)

In September 2011 the Autorité de la concurrence noted that the Canal+ group had failedto implement a number of key commitments and withdrew clearance of the transaction,

with the result that the parties were obliged to notify the transaction again within onemonth. It also fined Canal+ group €30 million. (Decision 11-D-12 of 20 December 2011)

Vivendi and Canal+ group submitted a new notification on 24 October 2011.

Canal +/TPSMandatory commitments

In 2009 the European Commission referred the acquisition of control ofKeolis and Effia by the SNCF and Caisse de Dépôt et de Placement du

Québec to the Autorité de la concurrence. In January 2010 the Autoritécleared the operation subject to a number of commitments.

The competition concerns identified included the fact that Keolis mighthave access to confidential data about its competitors, and the risk

that SNCF might give undue preference to connection requests from Keolis to the detriment of other public transport operators.

(Decision 10-DCC-02 of 12 January 2010)

SNCF/KeolisA pragmatic solution

An open-mindedbut strict control systemCompanies can propose structural and/or behavioural commitments in order to remedy distortions of competition that have been detected. The Autorité takes aninnovative and pragmatic approach when considering proposed asset divestituresand/or changes of conduct. This open-minded approach and two-way dialogue iscounterbalanced by rigorous enforcement, with the Autorité closely monitoring thesubsequent implementation of commitments.

In your opinion, how has companies’competition culture evolved over thepast 25 years?When prices were liberalised in 1986there was no competition culture inFrance, and this persisted for quitesome time due to cultural reasons and France’s economic and legal history. Change then came in a series of steps forward.

The introduction of a European mergercontrol system had a major impact,particularly in the 1990s, a decadewhich saw a number of very largerestructuring operations. We should not forget that the notification ofmerger transactions remained optionalin France until the enactment of theNew Economic Regulations Act in 2001,and the tacit authorisation system inoperation at the time was not a greatconcern for companies.

The European Commission's high-profiledecision to block the Schneider-Legrandmerger by prohibiting a series of fourmajor transactions sent shockwavesthrough France, with many Frenchcompanies and corporate bankssuddenly waking up to the reality ofcompetition law.

Rising fines, in particular from 2000onwards, also put competition in theheadlines.

The New Economic Regulations Act of 2001 drastically increased themaximum financial penalties and theactual amounts fined rose substantiallyfrom mid-2000, echoing increasesimplemented by the EuropeanCommission at the end of the previouscentury.

How have companies reacted to thenew “one-stop shop” merger controlsolution?The creation of a “one-stop shop” in France, vesting the Autorité withdecision-making powers, is a significantimprovement for companies and has speeded up proceedings.

However, I believe that the pre-notification phase could still beimproved upon, although it is true that France has already shown someflexibility by accepting notificationsprior to completeness, unlike Brussels.However, companies would like to see a reduction in the time needed toreceive confirmation of thecompleteness of their notification.

Robert Saint-Esteben Partner, Bredin Prat

The creation of a “one-stop shop” is a significantimprovement for companies”

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25 years of competition /// Competition at the heart of major economic shifts

Competition policy is even more importantin times of economic crisis as it protectseconomic players' freedom to act withconsistent and strict regulations”“

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Competition at the heart of major economic shifts

For the past 20 years the agency has sought to develop a competition culture and play an active role in opening up sectorsdominated by public monopolies to competition. Its mission is also to ensure competition is upheld when reforms are introduced and new legislation is enacted.

Competition policy is even more important in times of economic crisis as it protects economic players' freedom to act withconsistent and strict regulations. On the one hand, competition fosters a spirit of innovation and energy, stimulating purchasing power and growth and therefore encouraging lower prices and greater choice. On the other hand, competitionpolices economic operators by introducing safeguards against the possible excesses of a market economy.

The rise of the advisory roleThe agency has unceasingly developed its advocacy role over thepast 25 years. Although a competition culture has been established,the French economic model is still characterised by regulations andexemptions that have resulted in constraints and market entry barriers in some sectors.

Raising awareness of the impact of legislation on competition Government and Parliament have gradually been made aware ofthe importance of examining the impact planned reforms mighthave on competition. The Autorité’s opinions aim to raise awarenessof possible risks and point out which of the potential solutions arecompatible with competition rules, and which are not.

Targeting strategic prioritiesThe Autorité's self-referral powers acquired in 2009 have allowed itto raise the visibility of competition concerns and take part in publicdebate and economic discussions. Whenever it deems appropriate,the Autorité can now determine its own priority areas of action anddecide to carry out in-depth assessments of certain sectors prior toissuing recommendations (“sector-specific enquiries”).

Among its strategic priorities are those sectors that are opening to

competition, oligopolies and certain sectors that are strategic to theFrench economy. The Autorité is aware that society is constantlychanging and pays particular attention to new markets and sectors undergoing technological revolutions that may result in the emergence of new competitive spaces.

Reform of public monopolies

The creation of the single European market in the 1990s called theexistence of France's public monopolies into question and was thestart of the process to open these sectors to competition.

The Conseil de la concurrence played a key role in the process, spe-cifically by ensuring that traditional market operators did not usetheir position to lock up the market, and by penalising their anti-competitive practices. The underlying objective was to stimulatecompetition and create and maintain sufficient space to enablenew market players to emerge.

Between 1980 and 2000 the Autorité focused on the telecommu-nications sector, urban transport and aviation. From the 1990s onwards it also examined the energy sector, and has since turnedits attention to the rail transport and postal sectors.

25 years of competition /// Competition at the heart of major economic shifts5

4

Anticipating market developments and responding to new challenges

In 1977 the Commission de la concurrence was vested with the right to "consider in an advisory capacity all matters concerning competition referred to it by the government". The Conseil de laconcurrence issued a number of opinions on the foreseeable positive or negative effects of draft legislation on competition, thus encouraging freedom of enterprise. It also received referrals fromindustry regulators, professional organisations and consumer associations on a regular basis.

When the rail transport market was opened to competition, the Conseil de la concurrence issued anopinion on the bill organising and regulating this sector (opinion 08-A-17 of 3 September 2008).More recently, the Autorité de la concurrence issued a self-referral in order to examine the transportchain and expressed reservations on the role of the SNCF in the management of railway stations(opinions 09-A-55 of 4 November 2009, 11-A-15 and 11-A-16 of 29 September 2011).

Since the 2008 reform the Autorité has also regularly received referrals from parliamentary commissions. For instance, following a referral from the French Senate it issued an opinion on thedairy sector (opinion 09-A-48 of 2 October 2009), and a referral from the National Assembly led toan opinion on the bill reorganising the electricity market (opinion 10-A-08 of 17 May 2010).

Privatisation of motorways The Conseil de la concurrence

rings the alarm bellFollowing a referral by an association of independent public works firms in 2005, in connection with the

privatisation of the main motorway operators, the Conseil de la concurrence drew the government's attention tothe need to impose obligations on future concession holders, who would have a de facto private monopoly. Itinsisted that proper tender procedures should continue to be mandatory for the award of contracts for work.

Concerned that some motorway operators might merge with public works firms, the Conseil pointed out therisks associated with the existence of vertically integrated groups that have a monopoly whilst at the same time

competing with other operators in upstream, downstream or adjacent markets. Government listened to theConseil and issued a requirement that the concession specifications document be drafted so as to ensure the

effective performance of concession agreements at the lowest cost and to guarantee full and open competitionwhen awarding contracts for work (opinion of 05-A-22 of 2 December 2005).

The advisory activity has gained in importance since the start of this century, particularly since the 2008 reform placed it atthe heart of the economy by granting the Autorité self-referral rights.

The agency can now carry out sector-specific enquiries on its own initiative or express opinions on draft reforms with the aimof improving competition on the markets concerned. This allows the Autorité to extend its advocacy role, as regards both thepublic authorities and the economic players. It encourages the authorities to take competition concerns into considerationwhen designing policies and plays an educational and preventive role with companies.

Assessing the impact of major reforms on competition

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Sector-specific enquiries allow a comprehensive and detailed study of a given marketto identify obstacles and suitable solutions. The Autorité has made active use of thistool by carrying out extensive enquiries into sectors such as online advertising, foodretail and the crossed usage of customer databases in the telecommunications sector.It plans to conduct enquiries into the automobile maintenance and repair sector, andthe e-commerce sector in 2012.

As well as providing a snapshot of a given sector, the resultant reports can be used by economic operators to assess their own practices and bring them into line with competition rules. This is particularly useful in emerging sectors and all sectors that areundergoing radical transformation.

Observing the multiplication of "all-in-one" offers, the Autorité de la concurrence decided to carry out a self-referral so as to issue an opinion on the competitive situation in this new sector, as a result of which it identified certain risks.

It considered that the crossed usage by the dominant operator, Orange, of its customer databases in the mobile and high-speed Internet market was not, in and of itself, likely to distort competition, but it nevertheless remainsvigilant about the generalisation of bundled "triple" and "quadruple" play offers. These may constitute barriers toswitching operators and create a risk of households being “locked in” as they may be prompted to migrate to thesame operator for all their needs (landlines, Internet, mobiles), which benefits the traditional operators.

The Autorité de la concurrence has issued a number of recommendations to prevent the risks of market foreclosure(opinion 10-A-13 of 14 June 2010).

Search engines, and Google in particular, have become strategic points of entry for onlinebrowsing. Their market power has generated concerns among many competitors,

customers and partners. The Autorité de la concurrence looked at competition in the onlineadvertising market and established a framework for analysing the compatibility of a range

of types of practices that Google might use with competition law, such as exclusionaryconduct (to discourage, delay or eliminate competitors through unlawful actions) or

possible operational abuses (imposing excessive terms and conditions on its partners orcustomers, treating them in a discriminatory way or refusing to guarantee a minimum of

transparency in contractual dealings, etc.).

The Autorité de la concurrence examined the results of a questionnaire sent out to 230advertisers and interviewed several major players in the sector. This eight-month enquiry,

on a scale never previously conducted by a competition authority, represented a significantcontribution to the analysis of the market (opinion 10-A-29 of 14 December 2010).Following this investigation the European Commission opened its own investigation

into the Internet giant.

“Multiple-play” offersClose monitoring of potential market foreclosure

Google - Online advertisingAn in-depth assessment

Sector-specific enquiries analyse market dysfunctions


6

Telecom marketopens to competition

Facilitating the emergence of new operators The Conseil initially focused on the landline, mobile phone and Internet markets, which eachdeveloped separately after January 1998. It issued a considerable number of decisions thatfostered the emergence of new operators.

In 2000 and 2001 the Conseil issuedemergency measures requiring FranceTélécom to withdraw offers that linkedservices that were open to competitionwith services over which it had amonopoly. Such joint offers were likely to unduly favour the incumbent operatorand curb the development of new marketoperators (emergency measures 00-MC-19of 5 December 2000 and 01-MC-06 of 19December 2001).

France Télécom was also fined €6 million(FRF 40 million) for launching a global offer that gave it a competitive advantage and also had a margin squeeze effect (decision 01-D-46 of 23 July 2001).

The telephone market Joint offers by the incumbent operatorwere prohibited

The Conseil de la concurrence also issued a number of decisions relating to thebroadband market following referrals byalternative operators (9 Télécom, T-Online),aimed at allowing France Télécom’scompetitors to formulate competitiveoffers. In particular, it required FranceTélécom to give all operators access to the local loop under economically viableconditions (emergency measure 00-MC-01of 18 February 2000, decisions 04-D-18 of 13 May 2004 and 05-D-59 of7 November 2005). It also took action to ensure that the incumbent operator was not prioritising its own subsidiary,Wanadoo, to the detriment of its ISPcompetitors (emergency measure 02-MC-03 of 27 February 2002 and decisions 02-D-46 of 19 July 2002 and 07-D-33 of 15 October 2007).

The Internet market Allowing alternative operators to develop competitive broadband offers

The agency's actions were decisive and the French market is now often cited as asuccessful example ofmarket opening”

The opening to competition of the telecommunications market enabled new operatorsto enter the market, thus creating the conditions needed for prices to fall. The Conseiland the Autorité have worked hard with ARCEP, the French telecom regulator, to guarantee proper competition in this sector.

The Conseil and the Autorité have monitored the situation carefully since the marketwas opened to competition in January 1998, as is evidenced by the many opinionsand decisions issued since. The market has a large number of operators, which hasencouraged the development of services and stimulated price competition.

The Autorité is closely monitoring the effects of the generalisation of“multi-play” offers, combining television, landline, mobile phone and

broadband services. It has already highlighted the risks of “locking in”households and the potential expense of switching operators

(opinion 10-A-13 of 14 June 2010) (see page 55).

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New concerns

The development of fibre optics and the increase in bundled offers have given rise to new concerns.The Autorité is mindful of this and also closely monitors the terms and conditions offered to virtualoperators (MVNOs) and to the fourth mobile telephone operator.

The roll-out of fibre optics has created a unique historic opportunity for alternativeoperators to acquire their own infrastructure.Seeking to optimise this market development phase, the Autorité de la concurrencehas issued opinions on a number of structural choices; more specifically, it has ordered the incumbent operator to allow other operators access to the ductnetwork so that they can install their own optic fibres (decision 08-D-02 of 12 February 2008). It also declared its support of the mutualisation of the networkterminus and multi-fibre architecture (opinion 09-A-47 of 22 September 2009). It has expressed reservations with regard to local authorities' solutions for increasingspeed (opinion 09-A-57 of 22 December 2009), and has submitted a number ofopinions on the national very high speed broadband programme to Government(opinion 10-A-07 of 17 March 2010 and 10-A-18 of 27 September 2000) and theSenate (opinion 12-A-02 of 17 January 2012).

The roll-out of fibre optics Making the right choices

“Multi-play” offers Detecting potential risk

On several occasions the Conseil and theAutorité have pointed out the need toencourage the emergence of new operators to stimulate competition and reduce prices.The agency has long been in favour of thelicensing of a fourth operator and hasexpressed concern over the difficulties Freehas encountered in accessing the 3G network(opinion 10-A-13 of 14 June 2010), therebyprompting Orange to negotiate a roamingservice agreement with this fourth operator.It has also stressed the important role ofMVNOs (mobile virtual network operators) instimulating competition, and has insisted thatthey enjoy sufficient independence from theirhost operators (opinions 08-A-16 of 30 July2008 and 10-A-17 of 29 July 2010).

Anti-competitive agreements between mobile phone operatorsIn 2005, the Conseil de la concurrence fined the three mobile phone operators €534 million, bringing a stop to anti-competitivepractices between the three operators, who were exchanginginformation on their commercial strategies and had entered into an agreement to stabilise their market shares (decision 05-D-65of 30 November 2005).

The fourth mobile telephoneoperator and MVNOs Encouraging new operatorsto develop will stimulatethe market


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Competition is not a naturaloccurrence and we will always need a justice system, laws and people to ensure it is upheld”

Why can't they leave our poor companies alone? We are in the middle of a financial crisis, the Chinese areflooding the market and technocrats in Paris and Brusselshave nothing better to do than to put a spoke in the wheelsof our leading companies, leaving them to fight thecompetition, hampered by excessive taxes and strictregulations”. Twenty-five years after the creation of theConseil de la concurrence we still hear the same criticismswhenever a company is sanctioned.

It is always too late and too much. Too late to penalisemobile phone operators or Canal+, too much to fine thecompanies involved in the steel cartel. In France, a lot ofpeople are still not convinced of the need for competitionregulation. In a country where the master-servantrelationship is better understood than the spirit ofcooperation, the need to better regulate the financial worldis applauded, but not the need to encourage competition.

The situation is due to a dual misunderstanding. First, there is a belief that competition favours the larger playersrather than the smaller players, the rich rather than thepoor. The history of industry proves the contrary.Companies naturally tend to establish a monopoly or, failing that, an oligopoly, to the detriment of othercompanies (smaller players) and consumers (the poor). The second misunderstanding arises from the belief thatcompetition means a world with no rules. However, as hasbeen seen in the financial sector, a market needs rules to survive, in the same way as we need rules when driving,to keep our roads safe.

Competition is not a natural occurrence and we will alwaysneed a justice system, laws and people to ensure it isupheld. To quote Jean-Baptiste Lacordaire, it is freedomthat grinds down and the law that liberates.

I can remember when the telecom market opened tocompetition. Decision makers behind this liberalisation atthe time debated whether one or two competitors shouldemerge, and which was the most preferable, EDF or SNCF.

Everyone was surprised by the emergence of over 10private operators of varying sizes, a situation that wasmade possible by changing technology.

And it should be no surprise to observe that it was two ofthe newcomers, Bouygues and Free, that engineered a fall in prices and boosted innovation. Consumers benefited, asdid employment. The most obvious victims were perhapsFrance Télécom employees, pushed to the end of theirtethers by managers blinded by short-term goals.Competition and the enforcement of competition rules arenot necessary for their own sake, nor are they a guaranteeagainst all abuses. However, competition is a tool that canimprove the economic efficiency of our society and enhancethe freedom of its members.

Philippe EscandeJournalist and columnist at Les Echos, a daily financial newspaper

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Pierre Laurent’s success at the head of the Conseil de laconcurrence was to a large extent due to his considerablepersonal authority, which added to the authority exercisedby the agency itself. It was only when I was in turn askedto head the Conseil de la concurrence that I realised theextent of the challenge that faced Pierre Laurent when heaccepted the position as its first President at the requestof the current Minister of the Economy and Finance,Edouard Balladur, and also all that he had achieved duringhis six years and handed down when he left.

There could have been no better choice for the first President. Pierre Laurent had already had the honour ofbeing appointed the first general rapporteur of the Commission technique des ententes et des positions dominantes. He made the Conseil part of the French institutional landscape by vesting it with those values itstill promotes today: authority, independence and expertise.Many people who were fortunate enough to work along-side him have paid tribute to his great ability to identifyand focus on key issues, and to understand what changeswere necessary. By the time he left office, Pierre Laurenthad created an agency that was highly respected, both forits independence and the quality of its decisions, chartinga course for future success.

MDH

Pierre Laurent(1919-2008)

Philippe Nasse(1939-2008)

A tribute to

Two men who have made their mark

Philippe Nasse is remembered as an exceptional publicservant who was passionate about the economy andcommitted to its modernisation. His knowledge of boththe theoretical and practical aspects of competition lawwas quite remarkable.

During his time as a member and then Vice-President ofthe Conseil de la concurrence, he unceasingly sought toblend economic efficiency, competition and public service. He knew even the most difficult and complicatedcases inside out. He spoke sparingly, but was alwaysready to develop and to defend a well-crafted argument,his opinions were always valued. He left his mark on theagency's decision-making practices. With his fine intellect, his personal qualities, modest approach, andalso his great sense of humour and stock of witty anecdotes, he set an example for all those who workedwith him, and indeed for the institution he served.

BL

Vice-President of the Conseil de la Concurrence, 2001-2008

President of the Conseil de la concurrence, 1987-1993

The investigation services

The specialist services

The administrative services

The men and women behind the Autorité

Conception et réalisation :

Crédits photos :

Assemblée Nationale

Conseil constitutionnel

Corbis : Turpin/Sygma - Tim Pannell - AntoineGyori/AGP - Monty Rakusen/cultura - Les andDave Jacobs/cultura – SuperStock – Bettmann

Deret Yann

Doumic Emmanuel

Fotolia

GDF SUEZ/Abacapress/Christophe

Getty images

Hamilton/Agence Réa

Les Echos

Minefi SG/Philippe Ricard

Minefi SG/Dominique Simon

Photo12 : Ullstein Bild - Emanuele Scorcelletti

Picard Ph.

Roger-Viollet : Alinari - Jacques Cuiniëres -Marie-Anne Lapadu – LAPI

Sipa : Maurice Raymond

Thinkstock

Van den Burg René

Our special thanks to the following for kindly agreeing to contribute to this publication:

Edouard Balladur • Pierre Cahuc • Guy Canivet • Philippe Escande • Marie-Dominique Hagelsteen • Frédéric Jenny • Gérard Mestrallet • Robert Saint-Esteben • Anne Wachsmann

Thanks also to all those who worked so hard to prepare and produce it:

Coralie Anadon • Ingalill d’Armaillé • Liza Bellulo • Sophie-Anne Descoubes • Marianne Faessel-Kahn • Virginie Guin •Anne Perrot • Sébastien Soriano • Fabien Zivy

This brochure is published in French and English.

The interviews reproduced in this brochure were conducted in French. The translations into English aim to faithfully reflect the original text, but should not be treated as quotations of the interviewees.

25 years of independant competition regulation

Autorité de la concurrence 11 rue de l’Échelle - 75001 ParisTel.: +33 1 55 04 00 00

www.autoritedelaconcurrence.fr

Documents

Mise en page 1 - Autorité de la concurrence · Deret Yann Doumic Emmanuel Fotolia GDF SUEZ/Abacapress/Christophe Getty images ... Pierre Laurent, Charles Barbeau and Marie-Dominique