In a decision of 28 November 2014, the French Competition Authority (FCA) offered comfort to France’s main online private sales shopping store (Private Sale Website), when a prosecution against the company failed on the basis of the FCA’s inability to define the relevant market, which is key to identifying the boundaries of competition between firms.
Vente-privee.com (Vente Privée) is a Private Sale Website present throughout the EU and available only to members registered free of charge. Private Sale Websites - enabling brands to clear some, if not all, of their stock of unsold goods and services at discount prices - have become increasingly popular with consumers.
Brandalley, one of Vente Privée’s competitors in France, seized the FCA, claiming that the existence of exclusivity clauses in most contracts entered into between Vente Privée and its suppliers was an abuse by Vente Privée of its dominant position, in violation of Article L.420-2 of the French Commercial Code. The exclusivity clauses in question provided for a commitment by suppliers not to sell the products in question to other Private Sale Websites, during periods that could be as short as the duration of the online sale or as long as two years, so as to safeguard the attractiveness of Vente Privée’s business model.
The FCA found that EU provisions on the abuse of a dominant position – i.e. Article 102 of the Treaty on the Functioning of the European Union (TFEU) - were applicable to the case at hand. The FCA considered that the potential anti-competitive behaviour of Vente Privée, whose business activity covers the entire French territory, could ultimately bar EU competitors from entering the French market.
Accordingly, the FCA applied EU Commission Notice 97/C 372/03 on the definition of relevant market (the Commission Notice) in its evaluation of the relevant market of Private Sale Websites.
As set out in the Commission Notice, the relevant market combines the product market and the geographic market.
i. A relevant geographic market is defined as the area in which the firms concerned are involved in the supply of products or services and in which the conditions of competition are sufficiently homogeneous.
In the case at hand, although the Private Sale Websites grant access to foreign market consumers, the FCA established that the relevant geographic market was limited to France. This limitation is due to the fact that the FCA noted that Vente Privée provides different websites per country, in different languages, and with differing individual shipping conditions.
ii. A relevant product market includes all those products and/or services which are regarded as interchangeable or substitutable by the consumer due to the products' characteristics, their prices and their intended use.
In the present case, the FCA conducted a detailed analysis based on the concept of product substitutability for consumers. The main question being whether - in response to a small but lasting price increase of the product under scrutiny - consumers would switch readily to another similar product.
To assess the relevant product market of Private Sale Websites, the FCA analysed a number of their purported characteristics such as price attractiveness, the high-end quality of the goods and services offered, and the breadth of their product offering. However, the FCA held that these features were not sufficient to properly establish a relevant market for Private Sale Websites. In fact, the FCA considered that most of the assumed distinctive characteristics can also be found in other businesses such as physical stores. The FCA further set aside the alleged exclusive nature of online, invitation-only sales as a distinctive feature, given that Private Sale Websites have in fact attracted millions of subscribed members.
The FCA thus concluded that, in the absence of a definable relevant market, no dominant position could be ascertained for Private Sale Websites. Consequently, no abuse of a dominant position by Vente Privée could potentially be found.
Nevertheless, the FCA pointed out that, had Vente Privée been found to be in a dominant position, the exclusivity clauses it stipulated for periods exceeding 4 months could have been considered abusive due to their excessive length. Furthermore, the FCA specified that its findings cover only the period from 2005 to 2011, suggesting that a different conclusion might be reached for other periods. Notably, the FCA decision alludes to the recent development of traditional online shopping stores offering discount prices on unsold merchandise, hinting that a relevant product market might now be capable of definition.
Baffled by the FCA’s hot-and-cold resolution to a five-year long procedure, Brandalley has openly criticized the FCA decision, arguing it was illogical, and has decided to challenge the decision before the Paris Court of Appeal