The French competition authority ("Autorité de la Concurrence", or "Autorité" in the following) imposed a record fine of around EUR 1.1 billion on Apple on 16 March 2020. It found Apple was involved in restrictive agreements with distribution partners and abuse of market power as against independent "Apple Premium Resellers" ("APRs"). Apple has already announced it will appeal the decision. Although the proceedings are still open, significant lessons can already be learned from the decision. The decision stands in considerable contrast to a ruling by the Higher Regional Court of Düsseldorf (OLG) of 18 September 2019, which allowed discussions on pricing with retailers in individual cases (see also here).

The case

The Autorité assumes an upstream wholesale market in which Apple and two wholesalers are active. In the downstream market, sales are made through a network of 2,000 dealers. These are divided into two main categories, "retailers", which are supplied directly by Apple, and "resellers", which are generally small to medium-sized companies that sell electronic equipment and provide services. Resellers may join a premium network of Apple Premium Resellers ("APRs").

In 2012, the APR eBizcuss complained about alleged antitrust violations by Apple to the Autorité and then withdrew from the French market.

Product and customer allocation

According to the Autorité's findings, Apple has shared products and customers between the two wholesalers Tech Data and Ingram Micro from 2005 until March 2013. Apple had determined the exact product quantities and the dealers to be supplied. Apple had thus eliminated competition between the wholesalers on the wholesale market for the Apple brand. This was particularly problematic because, in a situation of free competition, APRs would be able to purchase their products either from Apple or from the wholesalers. The wholesalers would, therefore, be in direct competition with Apple with regard to the APRs. The Autorité has also imposed fines on the wholesalers for their alleged involvement in product and customer allocation.

Price maintenance

The Autorité made the following findings: Apple had used strict contractual clauses and business practices to limit the APRs economic room for maneuver. Apple communicated prices, controlled advertising campaigns and monitored invoices. Furthermore, non-compliance with the relevant contractual provisions entitled Apple to terminate the contract without notice. Finally, Apple threatened to impose sanctions against the APRs in the form of non-delivery if unauthorised promotions were carried out. In practice the APRs had, therefore, hardly ever carried out any advertising campaigns.

As a result, the Autorité found that Apple restricted competition not only between the APRs, but also between the APRs and Apple's own distribution channels. Apple had thus deprived the end consumer of effective price competition.

The alleged tying of retail prices for Apple products (except the iPhone) affected almost half of the entire retail market (Apple stores, the website, and about 2,000 retailers).

Abuse of the economic dependence of APRs

The Autorité considered it proven that Apple had abused the APRs' economic dependence. It found several business practices which, taken together, fulfilled the offence of Art. L 420-2 Code de Commerce. Art. This provision of the Code de Commerce not only prohibits the abuse of a dominant position, it also catches companies which exploit the economic dependence of other companies, regardless of a dominant position. In this respect it resembles section 20 of the German Act Against Restrictions of Competition (ARC).

The Autorité held that the economic dependence resulted, among other things, from the fact that APRs were subject to a non-competition clause and were only allowed to sell almost exclusively Apple products. Furthermore, during the term of the contract and for six months after the termination, the opening of shops geared to the exclusive sale of a competing brand was prohibited.

Apple had allegedly abused the APRs' dependency, in particular, by refusal or delay of delivery, discrimination and unstable remuneration conditions. For example, the Autorité accused Apple of having systematically discriminated against disobedient APRs by refusing or delaying delivery to Apple stores and the Apple website, which were supplied with products at all times. Apple had discriminated against APRs for new products or in the booming year-end business. In these cases, the APRs sometimes had no choice but to purchase the goods from the Apple stores at end-consumer conditions.

The Autorité also criticised Apple for subjecting the APRs to strict, binding terms without subjecting itself to the same. The APRs would distribute the products nationwide and invest accordingly in local presence, while Apple would concentrate on particularly lucrative locations and sell via the Internet at lower distribution costs.

Consequences for practice

As the Higher Regional Court of Düsseldorf (OLG Düsseldorf, judgment of 18 September 2019 - VI-U [Kart] 3/19) has ruled, not every exchange of information on pricing violates applicable law. In particular, the pricing sovereignty of a large customer is not affected by the fact that a small manufacturer asks for consideration of its economic interest concerning retail pricing. On the other hand, the Autorité's decision is based on a significant power differential to the detriment of the dealers. The Autorité sanctions a whole series of business practices which, at least when taken together, constitute prohibited price fixing. Such actions, which are carried out over a long period of time, leave considerable traces. It then only takes an unsatisfied retailer to report this. As in the Apple case, this was also the basis for the case decided by the Higher Regional Court of Düsseldorf. In this case the plaintiff asserted claims for damages against the price fixing party, a small manufacturer, for loss of sales. The Higher Regional Court of Düsseldorf dismissed the case. Suppliers with market power in particular are, however, well advised not to take any measures that exert undue pressure on the freedom of their customers to determine the retail prices freely.