Warning on the risks of not complying with investigations | French Competition Authority imposes a fine of €30 million for obstructing investigations

On 21 December 2017, the French Competition Authority (FCA) imposed a fine of €30,000,000 on the French branch of a chemical products company and its parent company for having hindered an investigation launched by the FCA. It is the first time that the FCA has enforced article L.464-2 of the French Code of commerce, which gives the FCA the ability to fine a company for obstructing an investigation.

The FCA has also given useful guidance on what it considers ‘obstruction’, emphasising that simple negligence is enough – and that justifications such as workloads and unavailability of data will not be accepted. 

Background

In 2002, the FCA opened an in-depth investigation into alleged abusive practices and vertical restraints within the chemicals industry. To assess dominance and the impact of the company’s exclusivity provisions, the FCA requested that the company provide factual and material information (mainly invoices and account records).

Between 2012 and 2015, the FCA made four such requests for information. Despite the FCA granting extensions and making proposals to agree on a time schedule and to meet the finance director to help in processing data, the FCA stated that the company refused such proposals, arguing that:

• the data was too complex to be compiled,
• the information was unavailable for the considered period; and
• the request was disproportionate and irrelevant.

The FCA concluded that the behaviour amounted to an obstruction and imposed a fine.

What is required from an investigated company pursuant to “active and fair cooperation”?

On a preliminary basis, the FCA indicates that ‘obstruction’ covers any behaviour aimed at impairing or delaying, in any form whatsoever, the progress of the investigation. The FCA specifies in this respect that such behaviour does not require a deliberate action or will to obstruct the investigation. According to the FCA, simple negligence in providing information is sufficient to fall within the definition of an obstruction of the investigation. 

According to the FCA, non-availability of data is an irrelevant argument since commercial companies are legally obliged under French law to keep invoices and commercial documents, specifically contracts, for between 5 and 10 years. The FCA also rejected the company’s argument in relation to the workload necessitated by the data collection, on the basis that that the FCA says it offered its assistance in this task.

Concerning the provision of information, the FCA specified that if the requested data is not accessible in a format that can be used, the companies have to collect, assemble and put the data into an appropriate format, so as to become useful to answer the FCA’s request. If data is presented other than in its original form, the companies are required to certify the source of such data and the method used to create the final document.

In this case, the company challenged the alleged breach of its obligation of active and fair cooperation on various grounds, including the violation of rights of the defence. In this respect, the FCA confirmed that, in accordance with EU law (article 18 of regulation No 1/2003), cooperation with a competition authority does not mean self-incrimination.

Finally, the decision to fine both the subsidiary company and its parent company shows that parent companies are likely to be fined for the wrongdoing of their subsidiaries.  This is based on the presumption that the conduct of a subsidiary is imputable to its parent company, with limited possibility to rebut such presumption.

What lessons can be drawn from this decision?

This decision comes as a nod to recent European Commission decisions.  Last year the Commission used its powers for the first time to fine companies which had allegedly provided incorrect or misleading information during merger investigations.

The level of the fine imposed on the company reflects not only the seriousness of the alleged abuse of dominance but also the desire to deter other companies from withholding information. Companies should therefore be very cautious when being investigated by competition authorities.  While it is of course always important to mount a defence – and to challenge any breach of an authority’s powers –cooperation with the investigation is still of paramount importance.