Antitrust Law Daily Apple fined €1.1 billion by French antitrust authority for cartel conduct
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Monday, March 16, 2020

Apple fined €1.1 billion by French antitrust authority for cartel conduct

By Linda O’Brien, J.D., LL.M.

The French competition authority has fined Apple €1.1 billion for anticompetitive behavior toward its distribution network.

The French antitrust authority has ordered Apple to pay a €1.1 billion (approximately U.S. $1.2 billion) fine for anticompetitive behavior. The Autorite de la concurrence announced today that the iPhone maker engaged in creating cartels within its distribution network and abused the economic dependence of its premium independent distributors. The fine is the largest ever levied by the French regulator against a business for anticompetitive conduct. Two wholesalers, Tech Data and Ingram Micro, were also fined, €76.1 million and €62.9 million respectively, for one of the cartel practices.

The fines stem from a complaint filed in 2012 by eBizcuss, a distributor of specialized Apple products, known as a "Apple Premium Reseller" or "APR." The decision to impose fines followed litigation which ended in December 2017.

The distribution of Apple products is carried out through a network of approximately 2,000 distributors, who can be divided into two main categories – large generalist/specialized distributors ("retailers") and specialized dealers ("resellers"). Apple also has its own physical Apple retail stores and sells its products directly online to consumers through its website. Most resellers are authorized by Apple and include Apple Authorized Resellers (AARs) who have standard distribution agreements and Apple Premium Resellers (APRs) who join a premium network if they specialize in the distribution of Apple products.

Apple was accused of having implemented three anticompetitive practices within its distribution network of electronic products:

  1. From 2005 to March 2013, Apple allocated products and customers between its two wholesalers, Tech Data and Ingram Micro, which hampered their businesses since they were totally dependent on the supply decided by Apple at both the wholesale and reseller levels;
  2. Apple fixed prices through its binding contractual clauses with the APRs in which Apple controlled pricing, discounts, and promotions; and
  3. Abused a situation of economic dependency of the APRs who were required to almost exclusively sell Apple products, lacked an alternative to the distribution of Apple products, and had customers who were strongly attached to the Apple brand, such that leaving the Apple brand would result in significant costs and losses.

According to the Autorite, "it is prohibited for a manufacturer who heads a network to undermine competition between its wholesalers by pre-allocating customers to them, to have an agreement with its distributors on the retail prices charged to end consumers, or to abuse the situation of economic dependency of its trading partners, in particular by placing them at a disadvantage compared with its own internal distribution network.""In the course of this case, the Autorite untangled the very particular practices that had been implemented by Apple for the distribution of its products in France (excluding iPhones), such as iPad," Isabelle de Silva, President of the Autorite de la concurrence, stated. "Given the strong impact of these practices on competition in the distribution of Apple products via Apple premium resellers, the Autorite has imposed the highest penalty ever pronounced in a case (€1.24 billion). It is also the heaviest sanction imposed on an economic player, in this case Apple (€1.1 billion), whose extraordinary dimension has been duly taken into account."

Apple response. "The French competition authority’s decision is disheartening," Apple responded in a statement announcing its plan to appeal the decision. "It relates to practices from over a decade ago and discards 30 years of legal precedent that all companies in France rely on with an order that will cause chaos for companies across all industries."

Companies: Apple Inc.

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