Likely impact on GAFAs of the new Fining Guidelines published by the French Competition Authority

Following the publication in July of new Guidelines on the method for how it sets fines, it is likely that the French Competition Authority will start imposing more significant fines than it used to. And this is even more likely with regards to GAFAs for at least four reasons:

1. Widening the scope of the value of sales in two-sided or multi-sided markets

In principle, for the determination of the value of sales, the French Competition Authority takes into account the last complete year of the company’s participation in the anti-competitive practice(s) for which the fine is being issued. 

However, the new Guidelines introduce a concept of  two-sided or multi-sided markets, which are markets where a platform connects two or more user groups, such as Facebook, which allows users to connect and advertising companies to publish ads for these particular users. 

For these markets, on which GAFAs are often operating, the new Guidelines now explain that the French Competition Authority will take into account the value of sales made by the company concerned in the upstream market, in the downstream market and also on related markets, whether these markets are directly or indirectly related to the infringement (Guidelines, para.26). 

While the fines imposed are calculated as a percentage of the value of sales, if the market in which value of sales is calculated widens then, as a result, the fine will also increase.  

2. The new “entry fee”

Secondly, as indicated in our recent  client alert, an “entry fee” has been introduced for the most serious cases of abuse of dominance and horizontal cartels (price fixing, market sharing and output limitation agreements) (Guidelines, para.31). 

In practice, right after the application of the severity coefficient, the French Competition Authority will be able to add a sum of between 15% and 25% of the value of sales to ensure the deterrent effect of the fines and further dissuade companies from participating in such practices.

3. Doubling of the duration factor

Thirdly, as previously explained, the first year of the practice previously counted for a full year and this remains the case. But, where the following years previously counted for 0.5 each, they will now also count as full years (Guidelines, para.34). So, for infringements that lasted more than a year, the duration will double for each additional year.  

4. Fine increase in case of illicit gains 

Finally, the Authority may now increase the amount of the fine where it appears from the evidence at its disposal that the estimated illicit gains made by the company nevertheless exceed the fine’s amount incurred by such company (Guidelines, para.42).