In 2012, eBizcuss, Apple's largest premium reseller in France, complained to the French Competition Authority (FCA) about Apple's abuse of dominant position and a volley of unfair competitive practices. eBizcuss, which had operated as an Apple Premium Reseller (APR) in France from 2008 to 2012 before going into liquidation, publicly blamed Apple for its financial difficulties, and specifically Apple's decision to reduce shipments to it of the iPad 2, MacBook Air, and iPhone 4S.1
On March 16, 2020, the FCA fined Apple EUR 1.1 billion for resale price maintenance and abusing the economic dependence of its commercial partners. It also levied fines of EUR 76 million (Tech Data) and EUR 63 million (Ingram Micro) on two of Apple's wholesalers for conspiring with it to allocate products and customers.2
The FCA's Decision
Resale price maintenance. The FCA found that Apple took a series of measures that meant that the retail prices charged by APRs were the same as the prices offered in its own stores, thus restricting price competition between different distribution channels for Apple products. Apple controlled the resale prices charged by APRs in four ways: i) Apple's website displayed the prices offered in Apple stores as "suggested prices"; ii) a number of clauses relating to the use of the Apple trademark for marketing and communication purposes strictly regulated promotions; iii) Apple monitored APR prices and penalized resellers which offered unauthorized promotions by withholding deliveries of Apple products; and iv) Apple's control of the flow of supplies of in-demand products to APRs ensured that their margins were so thin that it would be financially prejudicial to offer promotions. APRs and pricing data confirmed that Apple store prices were effectively followed. According to the FCA, Apple's conduct led to the alignment of prices to final consumers for nearly half of the retail market for Apple products (excluding iPhones).
Abuse of economic dependency. French commercial law includes a provision, not found in EU competition law, that prohibits the abuse of a commercial partner's "economic dependency," without the need to establish a dominant position.3 Given that APRs generated at least 70 percent of their revenues from sales of Apple products, the FCA found them to be economically dependent upon Apple. The FCA ruled that Apple abused this dependency by treating APRs differently from its own sales channels, e.g., by making inventory available first to its own stores and only later to APRs, by making arbitrary changes to the terms on which APRs were remunerated (discounts and outstanding balances), and by implementing certain rules in a discretionary fashion.
Partitioning products and customers with wholesalers. The FCA found that Apple allocated products and customers between its two wholesalers between 2005 and 2013. Apple intervened in the commercial policy pursued by its wholesalers by instructing them what volumes of Apple products they were to supply to which reseller outlets. The FCA concluded that this allowed Apple to privilege its own distribution channels by controlling how both direct and indirect resellers were supplied with products.4 The FCA ruled that, as a result, Apple reduced competition i) between its wholesalers, ii) between Apple and its wholesalers, and iii) between final retailers and resellers. Apple's wholesalers, Tech Data and Ingram Micro, were fined for their role in this market sharing arrangement.
Although the press release does not disclose details of the fine calculation,5 it constitutes the highest aggregate fine ever imposed in France in a competition case (EUR 1.24 billion) and the highest against a single undertaking (EUR 1.1 billion). The FCA's president, Isabelle de Silva, further stressed that Apple's "extraordinary dimension"—in other words, its sheer size—was considered relevant to the fine calculation.
Wilson Sonsini Observations
The FCA's ruling is rich in learning points for tech firms doing business in Europe, notably in France.
1. Since the U.S. Supreme Court's ruling in Leegin in 2007, there has been no presumption that vertical price fixing is per se illegal as a matter of U.S. federal antitrust law. As a result, some U.S. suppliers have taken a keener and more hands-on interest in the prices charged by their resellers than they did pre-Leegin. The FCA's decision is a sharp reminder to businesses that there is still a presumption that independent distributors are free to determine the price at which they resell products in the European single market, and that zealous suppliers expose themselves to a fine risk should they over-meddle in the business of their wholesalers—and in particular if they exert significant influence on the resale price of their products.
2. The FCA's decision also represents a rare application of the prohibition of abuse of economic dependency laid out in French domestic law. While it has always been understood that the threshold for intervention under the French "dependency" rule is lower than that for the EU "dominant position" test, the strict cumulative conditions (including, notably, the absence of an alternative source of supply) meant that the provision has not been applied by the FCA in any case since 2011.6 A close reading of the decision will be needed to reveal how the FCA established that APRs had no alternatives to Apple products and were therefore "economically dependent," and why the FCA chose not to find that Apple was dominant on the wholesale market and therefore guilty of textbook monopolization.
3. Finally, the fines levied on Ingram Micro and Tech Data serve as a reminder that all the parties to an anticompetitive agreement—including those which might be portrayed as victims of the agreement—can be sanctioned for their role in the conspiracy. In this case, the FCA characterized the customer and product allocation arrangements as an anticompetitive agreement between competitors at the wholesale level of trade. To the layman, the ruling may appear somewhat harsh as it seems unlikely that the wholesalers unreservedly agreed to the restrictive terms proposed and, in the FCA's words, "piloted" by Apple. The FCA's press release only states that both Ingram Micro and Tech Data "acquiesced" in the agreement.
Enforcement priorities and fines. The French agency's fining decision highlights its recent enforcement focus on Google, Apple, Facebook, Amazon (GAFAs). Following its Google Ads decision in December 2019,7 this is the second decision against a large tech company in three months. More importantly, both cases appear to signal that the FCA stands ready to use its current antitrust toolbox and to apply innovative theories of harm to capture potentially abusive conduct, including by non-dominant undertakings.
In addition to be the largest fine ever imposed by the FCA on a single undertaking, the FCA's fine is also the largest fine ever imposed in a case involving Article 101 TFEU in the EU (ahead of the EC's EUR 1 billion fine on Daimler in the 2016 trucks cartel).8 The case also illustrates an important shift in the FCA's enforcement policy. Although Apple's practice lasted for about eight years (which is likely to have had a significant multiplying effect in the fine calculation), the FCA's fine stands out in comparison to its previous cases, indicating that the gravity factor must likely have been substantial too. Notably, the FCA's second and third largest fines (EUR 951 million and EUR 672 million respectively) both concerned hardcore cartels and were imposed in 2014 and 2015 on 13 and 21 undertakings.9 The FCA's fine in the Apple case appears to signal its willingness to follow the EC's approach in making full use of its fining powers.
[1] Le Figaro, Le revendeur eBizcuss se dit victime d’Apple, April 11, 2012. Available in French at :https://www.lefigaro.fr/societes/2012/04/11/20005-20120411ARTFIG00700-le-revendeur-ebizcuss-se-dit-victime-d-apple.php.
[2] This Wilson Sonsini Alert is based on the FCA’s press release, March 16, 2020: https://www.autoritedelaconcurrence.fr/en/press-release/fines-handed-down-apple-tech-data-and-ingram-micro. The full decision is not yet available.
[3] French Commercial Code, Article 420-2, para. 2.
[4] Although the details of Apple’s conduct are not known, it bears some resemblance with the conduct for which Google was fined in Shopping by the European Commission. In both cases, Apple and Google were found to have favored their own services and treated downstream competitors discriminatorily. See European Commission (EC) Case AT.39740, Google Search (Shopping), decision of June 27, 2017.
[5] This is the second time that the FCA sanctions Apple’s distribution network. See Conseil de la concurrence (now FCA), Decision 08-MC-01, December 17, 2008 (Apple/Orange/iPhone distribution).
[6] FCA, Decision 11-D-04, February 23, 2011 (Carrefour/Food distribution and retail).
[7] FCA, Decision 19-D-26, December 19, 2019 (Google Ads).
[8] EC, Cartel statistics, November 8, 2019, available at: https://ec.europa.eu/competition/cartels/statistics/statistics.pdf.
[9] FCA, Decision 14-D-19 (Reckitt Benckiser, Unilever, and others/Cleaning and hygiene products), December 18, 2014; Decision 15-D-19 (Alloin, BMVirolle, and others/Delivery services), December 15, 2015.
