This article explores how France addresses three aspects of competition law impacted by the Covid-19 crisis.
Business cooperation to tackle the crisis
The French Competition Authority (ADLC) issued a press release on 23 March 2020 to answer the questions of companies on how they can deal with the Covid-19 crisis without infringing competition law. It relays the common position jointly adopted by all EU national competition authorities within the European Competition Network (ECN) on the same day.
- The current extraordinary situation may require companies to cooperate in order to ensure the production and fair distribution of basic necessities to all consumers. In these circumstances, the ADLC will not actively intervene against necessary and temporary measures put in place to avoid a shortage of supply of these products;
- Informal advice on the compatibility with competition law of a Covid 19-related cooperation initiative can be obtained from the ADLC or the European Commission;
- The ADLC will not hesitate to take action against companies that take advantage of the current situation by engaging in cartels or abusing their dominant position, in particular with regard to products considered essential to protect the health of consumers in the current situation (e.g. protective masks and hydro-alcoholic gel);
- The ADLC recalls that the existing rules allow suppliers to set maximum prices for their products, which could be useful to limit unjustified price increases at the distribution level. Note that maximum prices do not mean fixed prices.
3. Abuse of market power
Abusive renegotiation of contracts
Another matter of concern is the attempt by some companies to exert pressure for the renegotiation of current contracts, sometimes by wrongly using the notion of force majeure under Article 1218 of the Civil Code and/or by excluding Unpredictability under Article 1195 of the same Code.
These abusive behaviours are closely monitored by the French economic administration, which declares its readiness to carry out controls. Vigilance is called for during the renegotiation of current contracts motivated by the Covid-19 epidemic!
Unfair trading practices
The Covid-19 epidemic may lead to abusive behaviour in commercial relations, particularly with regard to payment deadlines and abusive renegotiation.
Inter-company payment terms are a major concern in France. Many companies are facing late payments from their customers, trying to build up a liquidity cushion.
A crisis committee has been set up by the Ministry for Economy.
In addition, Emergency Act No. 2020-290 of 23 March 2020 aiming to tackle the Covid-19 epidemic empowered the government to modify, with due respect for reciprocal rights, the obligations of legal persons governed by private law carrying on an economic activity with regard to their customers and suppliers, and of cooperatives with regard to their member-cooperators, particularly in relation to payment terms and penalties and the nature of the counterparts.
The French authorities are apparently torn on this issue, wishing to allow companies in difficulties to extend its payment deadlines, while being aware that some companies abuse their power of market and negotiation to extend payment deadlines in order to build up cash flow when they are able to honour their debts within the required time limits or have recourse to bank credit.
4. Merger control
Early on, the Merger Department of the French Competition Authority (ADLC) informed businesses that they will not be able to guarantee the usual timelines for processing merger filing.
They indicated that, while striving to ensure the continuity of public service, measures to prevent the epidemic related to covid-19 (including work from home) would impact on their ability to handle merger cases with their usual diligence, in particular for cases that require gathering information from third parties (market test).
Companies have been invited to defer any proposed economic concentration that is not urgent.
For transactions already notified or to be notified during the crisis period, deadlines and procedures may be adapted. The ADLC, as the European Commission, have already announced their willingness to use all means currently at their disposal to give themselves time for a full examination of merger cases: declaration of incompleteness (thus delaying the start of the phase I examination deadline), "stop the clock" mechanism, opening of phase II.
More structurally, Order No. 2020-306 adopted on 25 March 2020 on the extension of expired deadlines and the adaptation of procedures provides for the suspension or postponement, until the end of the current state of public health emergency, of the deadlines by which administrative decisions must be taken (or are implicitly acquired), as well as of the starting point of these deadlines.
While the epidemic lasts, filings and documents are to be submitted by electronic means, as deliveries of documents in physical form, by hand or by post, are no longer possible.
On the flip side, there is a possibility that, in the aftermath of the Covid-19 crises, the 'failing firm' argument - implying that bankruptcy of the target is looming and would be the only counterfactual scenario in case the transaction is not authorised under merger control - would be more readily accepted by the ADLC.