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France – Private enforcement of competition law: French Supreme Courts dismisses nullity and follow-on damages claims of EDF and ERDF

  • France
  • Competition, EU and Trade
  • Procurement strategies

23-11-2017

On 13 September 2017, EDF and ERDF lost their fight to declare null and void the contracts they entered into further to bids that were rigged by Nexans France (“Nexans”), Prysmian Energies Câbles et Systèmes (“Prysmian”) and other suppliers of high voltage range cables. Judges at the French Supreme Court (Cour de Cassation) said that only the agreements characterising the anticompetitive exchanges of information between Nexans and Prysmian could be declared void, but not the subsequent contracts signed by EDF (1). The Court also rejected EDF and ERDF’s damages claims because the claimants failed to establish the damage they suffered with sufficient certainty.

Summary of the case

Between 2001 and 2002, EDF organized two bidding consultations for high voltage range cables designed for aerial and underground networks. Several high tension cable suppliers were invited to put forward their bids, including Nexans and Prysmian.

On 16 December 2001, EDF referred the anticompetitive practices implemented by the cable suppliers during the first tender procedure of September 2001, to the French Competition Authority (the “FCA”). Nevertheless, EDF continued negotiating with these companies and allocated the first market to Nexans, Prysmian and Sagem and the second market to Nexans and Prysmian.

The FCA investigation found that the suppliers’ representatives had met several times and exchanged information on the price of their respective offers and the conduct expected of each bidder during the two invitations to provide bids. All the suppliers involved decided not to challenge the statement of objections of the FCA and submitted commitments to get a fine reduction. On 26 July 2007, the FCA imposed a total fine of €19.5 million on the cable suppliers, including Nexans and Prysmian, for rigging bids organized by EDF (2).

Following this decision, EDF and ERDF brought a claim against Nexans and Prysmian in order to obtain (i) that the contracts signed following the tenders be deemed null and void, (ii) the reimbursement of any payments made to the suppliers and (iii) damages. The case was brought to the Paris Court of Appeal after the Paris Commercial Court dismissed all of EDF and ERDF’s claims. The Court of Appeal rejected the claim of the defendants that the action was time-barred, and considered that the conditions to declare the contracts void were not met and held that the claimants did not bring sufficient proof to establish the damage suffered (3).

EDF and ERDF lodged an appeal to the Supreme Court which upheld the decision of the Paris Court of Appeal. The Supreme Court refused to declare that the contracts signed after the rigged bids were void, and considered that the Court of Appeal sufficiently justified its analysis regarding the non-existence of harm.

Which contracts can be declared anticompetitive under competition law?

The first plea referred to the Supreme Court related to the scope of application of the legal provisions pursuant to which anticompetitive contracts can be declared void.

EDF and ERDF claimed that the contracts with Nexans and Prysmian should have been declared void based on Article 101 Treaty on the Functioning of the European Union (the “TFEU”) and Article L. 420-3 of the French Commercial Code (the “FCC”). According to Article L. 420-3 of the FCC, any undertaking, agreement or contractual clause referring to an anticompetitive practice shall be invalid. Similarly, Article 101 of the TFEU states that any agreements or decisions prohibited pursuant to this Article shall be automatically void. Since the FCA found that both companies colluded to rig the bids organized by EDF and ERDF in breach of Articles 101 TFEU and L. 420-1 of the FCC, the claimants considered that the contracts signed further to the tender should have been declared void.

However, the Court of Appeal had held that the anticompetitive agreement at stake was the ‘exchange of information between the defendants’ and not the subsequent contracts signed by EDF. The contracts could therefore not be declared void since they did not constitute an anticompetitive agreement.

The Court of Appeal also stressed that EDF had reported the practices to the FCA but kept on negotiating with Nexans and Prysmian and finally entered into the contracts. It therefore considered that this sequence of events demonstrated that the contracts at stake did not sufficiently relate to the anticompetitive conduct.

The Supreme Court upheld the analysis of the Court of Appeal: only the anti-competitive agreements are void, not the subsequent contracts unless they are themselves anticompetitive or the instruments of an anticompetitive practice.

The interpretation of Articles L. 420-3 of the FCC and 101 TFEU adopted by the Supreme Court can be considered as rather restrictive since the wording of Article L. 420-3 may have allowed for a broader interpretation. As compared to the approach under EU competition law in previous cases, the European Court of Justice (hereafter the “ECJ”) has not shown reluctance to taking a broader approach regarding the nullity of certain contracts. In its Courage and Crehan decision, the ECJ stated that where a contract is deemed to be void, this is capable of having a bearing on all the effects, either past or future, of the agreement or decision concerned (4).

The difficulty in proving harm

EDF and ERDF submitted an economic analysis to the Court of Appeal as evidence of the harm they suffered. This economic analysis used a counterfactual method consisting in determining the market situation which would have existed if the anticompetitive practices had not been implemented.

The Court of Appeal acknowledged that this method is welcomed by the European Commission but criticised the way in which it had been implemented in the case at stake. According to the Court of Appeal, the analysis should have held as the market price, the prices contained in the offer of NTK, a bidder that did not participate in the anticompetitive behaviour. Moreover, the Court noted that EDF did not always select the company offering the lower price and that EDF declared in a letter addressed to Nexans that it considered the prices resulting from the tenders satisfactory. The Court of Appeal therefore considered that EDF and ERDF did not establish the harm they suffered with sufficient certainty.

The Supreme Court reiterated the main findings of the Court of Appeal and considered that the Court had legally justified its decision.

This decision of the Supreme Court illustrates the difficulties faced by companies bringing damages claims to court after a competition authority has evidenced and sanctioned offences to competition law (so-called “follow-on” actions) in trying to demonstrate the harm they have suffered. This may however change following the recent entry into force of provisions of French Law implementing the Directive No 2014/104 (the “Damages Directive”) (5).

The implementation of the Damages Directive should indeed significantly facilitate proof of harm since a new Article L. 481-7 of the FCC introduces a rebuttable presumption that cartel infringements cause harm. This article is applicable to anticompetitive practices implemented after its entry into force, from 11 March 2017 onwards. Judicial arguments about the proof of harm may therefore decrease in the future.

However, this presumption of harm also raises questions, in particular where a settlement has been concluded between the defendants and the FCA. In such cases the decision of the FCA does not detail the analysis of the infringements of competition law. Moreover, in most of recent cases, the decisions of the FCA mention that the companies entered into a settlements with the FCA due to their own circumstances (6) and/or “without making and admission of liability” (7). The Courts will notably have to clarify whether the presumption of harm also applies in such cases.

(1) French Supreme Court, 13 September 2017, No 15-22837.
(2) French Competition Authority, Decision No 07-D-26 of 26 July 2007 relating to practices implemented on the market for supply of high voltage cables.
(3) Paris Court of Appeal, 2 July 2015, No 13/22609.
(4) European Court of Justice, 20 September 2001, C-453/99, Courage and Crehan, paragraph 22.
(5) Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States.
(6) French Competition Authority, Decision No 16-D-06 of 13 April 2016, paragraph 37 or French Competition Authority, Decision No 17-D-06 of 21 March 2017, paragraph 113.
(7) French Competition Authority, Decision No 17-D-06 of 21 March 2017, paragraph 113.

 

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