In a recent decision, the French Competition Authority (FCA) ruled that Sanicorse, the only medical waste treatment company in Corsica, abused its dominant position by imposing excessively high prices on health care establishments. While very few excessive pricing cases were brought in the past, this decision follows a very recent surge in interest for high prices by competition authorities across Europe.
Sanicorse, a de facto monopolist
Under French law, health care establishments have to dispose of medical waste in a precisely defined manner, using specialist service providers. According to the FCA, the fact that Sanicorse is the only provider of such service on the island of Corsica gives it a de facto monopoly in this market.
Unjustified price increases
In its decision, the FCA fined Sanicorse for increasing abruptly, significantly, durably and in an unjustified manner the prices charged to health care establishments.
First, the increase in price was abrupt as it was suddenly imposed on Sanicorse’s clients without prior notice. Secondly, the increase on previous prices was significant (ranging, on average, from 60% to 88%, and reaching up to 135%). Third, the change in price was persistent as it lasted for 4 years. Finally, the FCA found that none of the arguments put forward by Sanicorse (i.e., the threat of potential entry of a new player in the market and increases in its costs and investments) could justify such change in its prices.
In a nutshell, the FCA found that the unjustified, long-lasting and significant increase of Sanicorse’s prices constituted excessive pricing and could be considered as an abuse of dominant position.
The strategy of the company as a key factor in the FCA’s decision
The FCA consistently relied on the strategy of Sanicorse to establish the existence of excessively high prices. The increases in price were introduced at a time when Sanicorse was threatening to terminate contracts or was opting not to bid for tenders in the sector, leaving its clients with no choice but to accept its newly increased prices and deterring them from developing alternative solutions for the disposal of medical waste.
Consequently, according to the FCA, Sanicorse’s excessive prices were also aimed at excluding any potential new entrant in the market and, thus, constituted both an exploitative abuse and an exclusionary conduct.
France’s test for abusive pricing
In reaching its decision, the FCA largely relied on the recent decision of the Court of Justice of the European Union (CJEU) in case C-177/16 AKKA/LAA. In its judgment, the CJEU stressed that to establish excessive prices a comparison of prices across markets was sufficient and that a difference in price was abusive as long as it was significant and lasted for a certain length of time.
Interestingly, by merely comparing prices over time, the FCA departed from its previous decisions and from the usual test applied by the CJEU (as defined in its United Brands case), which involves:
- determining whether the difference between costs actually incurred and the price actually charged is excessive (cost-price analysis); and
- if so, determining whether the price is unfair in itself (intrinsic economic value analysis) or when compared to competing products (benchmark comparison).
In fact, the establishment of whether prices are excessive usually involves using a cost-price analysis and several benchmarks, such as (i) the price charged by the dominant undertaking over time, (ii) the prices it charges in other geographic markets or for comparable products, and (iii) the prices charged by other companies in other geographic markets or for comparable products.
While certain excessive pricing cases are still ongoing in Europe, it remains to be seen how this test will be applied by various competition authorities in the future.
How Reed Smith can help
Reed Smith’s EU, Competition & Regulatory team can assist you in assessing whether your prices comply with EU and French competition law and defend your interests before French courts and the French competition authorities.
Client Alert 2018-195
