TerraLex Cross-Border Guide to Pre-Merger Notification Guide

Yes. A “concentration” (acquisition, merger, creation of a full-function joint venture) must be notified and approved prior to its implementation pursuant to Article L. 430 et seq. of the French Commercial Code.

Any concentration which meets the applicable turnover thresholds must be approved by the French Competition Authority (hereinafter “FCA”), regardless of the legal set-up of the transaction. Notification is incumbent on the party taking control.

No. There is no voluntary merger notification mechanism. When a concentration meets the thresholds, the operation must be notified. Reversely, a concentration which does not meet the thresholds cannot be notified.

There is however the option to file an informal “pre-notification” with the FCA. This optional phase is triggered at the initiative of companies wishing to submit their concentration project to the FCA, either when there are uncertainties regarding the controllability of the transaction or to anticipate discussions on market delimitations or complex competitive analyses. A pre-notification may also be filed when the notifying party is considering a referral to the European Commission.

Mandatory notification to the FCA concerns any “concentration” between parties meeting three cumulative turnover thresholds. A concentration occurs when there is a change of control of a company or assets on a lasting basis, resulting from:

(a) the merger of two or more previously independent undertakings or parts of undertakings, or

(b) the acquisition, by one or more undertakings (or natural persons already controlling at least one economic activity), of direct or indirect control of all or part of another undertaking. The concept of control under French law is aligned with the definition set out in the European Union Merger Regulation (hereinafter “EUMR”). Control is obtained primarily through the acquisition of an equity interest or the purchase of assets, but it may also be obtained, in specific circumstances, through the conclusion of a contract or by any other means conferring decisive influence on another company on a lasting basis.

(c) the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity.

The target must have been previously independent of the person/company gaining control: a transaction that does not change the ultimate control of a target, such as a simple internal restructuring, does not constitute a concentration.

To be subject to French merger control regime, a transaction must meet three conditions based on the total turnover of the parties:

Main thresholds

To be subject to French merger control regime, a transaction must meet three conditions based on the total turnover of the parties: • First, the parties’ combined worldwide turnover must be > EUR 150 million • Second, at least two parties must achieve an individual turnover in France > EUR 50 million • Third, the transaction must not fall within the scope of the European Union merger control regime, i.e., must not be caught by the thresholds of the EUMR. Where EU merger control thresholds are met, the concentration must be notified only at EU-level to the European Commission.

Reduced thresholds

Reduced thresholds apply in the retail sector or if at least one of the parties achieves significant turnover in one or more French overseas territory: • First, the parties’ total worldwide turnover is > EUR 75 million, • Second, at least two parties achieve an individual turnover > EUR 15 million in the retail trade sector in France or in at least one French overseas territory (> EUR 5 million if both true), and • Third, the operation does not fall within the scope of the EUMR.

Review of mergers below thresholds

Following the recent decision of the European Court of Justice (ECJ) clarifying that Member States cannot refer transactions to the European Commission under the referral mechanism of the EUMR (so-called ‘Article 22 Referral’) if their national notification thresholds are not met (ECJ, 3 Sept. 2024, C-611/22 P, in the Illumina/Grail case), the only possibility of merger control below thresholds results from the application of the ECJ Towercast ruling (ECJ, 16 March 2023, C-449/21) which allows ex-post control of a transaction which does not meet EU or Member States merger control thresholds.

The Towercast ruling makes it possible to challenge a closed transaction as an abuse of a dominant position per se in the light of the structure of competition on the market (by virtue of the prohibition on abuse of a dominant position - articles 102 of the TFEU and L.420-2 of the French Commercial Code). The mere creation or strengthening of a dominant position is not sufficient to identify an abuse. However, an abuse per se can be found if the degree of dominance achieved through the transaction substantially hinders competition, in that only those companies whose behavior depends on the dominant company would remain on the market.

In 2024, the French Competition Authority (FCA) also examined for the first time whether a series of cross-divestments, which were not subject to ex ante notification under EU or national merger control, could constitute a per se anticompetitive agreement contrary to the prohibition on anticompetitive agreements (under Articles 101 of the TFEU and L. 420-1 of the French Commercial Code). This approach was presented by the FCA as an application of the above-mentioned Towercast ruling, which recognized the possibility for national competition authorities to control mergers ex-post under the general rules prohibiting anticompetitive practices.

The creation or the acquisition of a joint venture is notifiable if the joint venture is “full function.” A joint venture is deemed to be full function when (a) it is jointly controlled, (b) it performs all the functions of an autonomous entity and (c) it operates on a lasting basis.

Such a joint venture may result from:

• the creation of a completely new joint structure, or
• the contribution to an existing joint venture of assets that the parent companies previously held individually, provided that these assets enable the joint venture to expand its activities, or
• the acquisition of joint control of an existing business by one or more new shareholders, provided that the joint venture resulting from this acquisition of joint control is full function.

Please note that the transaction may be notifiable even if the joint venture has or will have a very low turnover in the short term, since the notification thresholds can be reached by the parent groups.

The FCA has jurisdiction over any concentration meeting the applicable thresholds (provided that the transaction does not fall within the scope of EU merger control regime), irrespective of where the parties to the transaction are established.

Moreover, even when a concentration has an EU dimension (i.e. is subject to merger control by the European Commission), the European Commission may decide to refer the examination of the transaction to the national competition authority which is best placed to assess its effects on competition : the applicable test is whether the concentration may significantly affect competition in a specific market within a Member State (e.g. on October 22, 2022, the EC referred the examination of Michelin’s acquisition of Allopneus to the FCA).

To notify a concentration, the acquiring party must fill in a form and include all relevant information and supporting documents required by law, notably:

• A description of the proposed concentration, including a copy of the corporate documentation bringing about the change of control and the board resolution or minutes of the deliberative bodies relating to the concentration;
• A presentation of all legal and financial aspects of the transaction, as well as a presentation of its economic objectives;
• A non-confidential summary of the concentration to be published on the FCA website;
• A description of the parties, including: a list of the main shareholders, relevant company accounts and latest annual reports, a list of all concentrations carried out over the last three years, a list and description of the significant and lasting contractual links which the parties have in the market concerned by the concentration;
• Financial data for the last three years;
• A very precise definition of the relevant market(s) based on previous decision-making practice and on the competitive analysis of the proposed concentration.

A translation into French may be required for all relevant supporting documentation. This is usually not the case however when the documentation is in English.

Two to three weeks are usually required to collect all relevant information.

To avoid problematic sharing of sensitive commercial information before the concentration is approved, it is necessary that both parties communicate their respective data to the external counsel in charge of the filing procedure on a confidential basis.

In case the concentration qualifies for the simplified procedure (“procedure simplifiée”), the notifying party is not required to provide certain information (e.g., reduced financial data and no information on the significant and lasting contractual links in the market concerned).

To qualify for the simplified procedure, the concentration should not be likely to affect competition. Prima facie, it is the case where:

• The parties combined market share on a same market is < 25%;
• The parties combined market share on a same market is < 50% and the increment resulting from the transaction is less than 2 points;
• The parties operate on upstream, downstream, or related markets and they have a market share < 30% in all these markets;
• The acquirer of sole control previously exercised joint control over the target;
• The transaction consists in the creation of a full-function joint venture that is only active outside the national territory;
• The transaction consists in the acquisition of control over a real estate asset for sale in a future state of completion.

No, there is no fee to file a notification in France.

No, there is no specific deadline for the filing of a notification. However, parties must wait for the final approval of the concentration by the FCA before implementing any of its aspects. A penalty for “gun jumping” may be imposed otherwise.

The parties to a transaction subject to merger control must consider the fact that the FCA's decision may come after a certain period of time necessary for its review. This period of time must be factored into the negotiations between the parties to the transaction.

There is a stand-still obligation: the transaction cannot be implemented by the parties before the FCA grants its approval (clearance decision).

In exceptional circumstances, the FCA may grant a derogation from the stand-still obligation and authorize the acquirer to take control over the target before the clearance decision. This essentially concerns the takeover of a target in insolvency proceedings (e.g., FCA decision No 21-DCC-183 of October 13, 2021)

The concentration may be approved by the FCA either after a phase I assessment or after a phase II assessment. (i) Simple assessment (Phase I assessment)

Examination by the FCA: Maximum 25 working days from reception of a complete notification (“Initial Period”). In practice, it is highly recommended – save in very straightforward cases – to file an informal “pre-notification” to ensure that the notification will be considered complete on the day of its official filing.

Commitments: If commitments are presented to the FCA, the Initial Period is extended by 15 extra working days.

Suspension requested by the parties: Parties may ask for a suspension of the procedure for no longer than 15 working days, mainly to finalize their commitments.

Stop-the-clock: At the initiative of the FCA, when the notifying party (a) fails to inform the FCA of a new relevant and material fact, or (b) fails to provide the requested information within the allocated time. The running of the clock resumes as soon as the cause justifying the suspension has disappeared.

Possible intervention of the Minister for Economy: The Minister for Economy may request the opening of a Phase II assessment within five working days from the day on which he receives the FCA decision (or is informed of a tacit approval). The FCA has five extra working days to examine this request, which it may deny.

At the end of Phase I, the FCA can either:

• find that the transaction is not subject to the French merger control regime;
• approve (clear) the transaction - with or without conditions; or,
• open a “Phase II,” thereby initiating an in-depth investigation, if serious doubts remain about the anti-competitive effects of the transaction.

(ii) In-depth assessment (Phase II assessment)

Examination by the FCA: Maximum 65 working days from the opening of phase II.

Commitments: If commitments (or modifications of previously transmitted commitments) are presented to the FCA in the last 20 working days of the phase II assessment, the assessment period is extended by 20 extra working days, in the limit of 85 working days from the beginning of phase II.

Suspension requested by the parties: The parties may ask for a suspension for no longer than 20 working days, mainly to finalize their commitments.

Stop-the-clock: At the initiative of the FCA, when the notifying party (a) fails to inform the FCA of a new relevant and material fact, or (b) fails to provide the requested information within the allocated time. The running of the clock resumes as soon as the cause justifying the suspension has disappeared.

Possible intervention of the Minister for Economy: The Minister for Economy has 25 extra working days from the day on which he receives the ADLC final decision to decide on the transaction based on grounds of general interest other than the preservation of competition. This faculty is seldom used.

Both in case of failure to notify a concentration or where the concentration was implemented in violation of the stand-still obligation (so-called “gun-jumping”), the acquirer incurs a fine of up to 5% of its turnover, including the target’s turnover where applicable (e.g., FCA decision No 22-D-10 of April 12, 2022).

In case of failure to notify a concentration, the FCA shall order the parties, subject to daily penalty payments, to notify the concentration or otherwise restore the situation prevailing prior to the concentration.

Tacit approval - If the FCA does not issue a decision within the legal timeframe, the transaction is deemed to have been approved at the end of the period allowed to the Minister for Economy to request the opening of a phase II or to re-examine the transaction.

Withdrawal of approval - The FCA may withdraw its approval:

• If the parties have not complied with an injunction, a prescription or a commitment contained in its decision within the set time limit;
• In the event of an omission or misrepresentation in a notification which the FCA discovers after the clearance decision is granted.

Legal challenge to the decision - Third parties justifying a legitimate interest may challenge the approval obtained before the Conseil d’Etat (Supreme court of the administrative order) within 2 months from the publication of the clearance decision.

Limitation period - The limitation period for the Competition Authority's action in the event of completion of a merger without prior notification or in case of gun-jumping is 5 years from the day the change of control materializes.

Case of abuse - In the event of abuse of a dominant position or of a state of economic dependence made possible by a concentration of economic power, the FCA may enjoin the infringer to modify, supplement or terminate, within a specified period of time, all agreements and all acts by which the concentration of economic power was achieved, including if the transaction has been previously cleared by the FCA (Article L. 430-9 of the French Commercial Code). This mechanism is rarely used.

No.

The FCA (“Autorité de la concurrence”) is an independent administrative authority responsible for enforcing competition rules on the French territory.

It has the power to impose fines for anticompetitive behavior and to review mergers and acquisitions. It has both investigative and decision-making powers and can self-refer any transaction that it suspects should have been notified.

FCA makes a public announcement on the notification within 5 days of receipt of the formal filing. The content is based on the non-confidential summary provided by the notifying party.

The procedure before the FCA is otherwise strictly confidential: the FCA does not publish the notification form or the supporting documentation.

Note that an informal pre-notification, on the other hand, does not give rise to any publicity.

Once the FCA has decided on the outcome of its investigation (clearance with or without conditions, or prohibition), parties will have the opportunity to identify and redact any confidential information in the final decision before it is published on the FCA website.

A concentration will only be challenged if it significantly impedes effective competition, in particular by creating or strengthening a dominant position.

A market share of more than 40% post transaction is the alert threshold that leads to anticipate thorough discussions with the FCA.

The typical approach is to initiate informal “pre-notification” contacts with the FCA a few weeks before the formal filing, to anticipate potential difficulties and to ensure that the FCA will consider that the notification is complete on the day of the formal filing.

Clearance may be required: - From the French Minister for Economy, under the Foreign Direct Investment control regime, if the French target company carries out “sensitive activities” as listed by law, and

• From the Financial Market Authority (“Autorité des marches financiers”), which is an independent public authority, notably in case the transaction concerns a listed company.