Competition restrictions, beware of abuse (ROLEX & MARIAGE FRERES)!

In a decision dated December 19, 2023 (Decision no. 23-D-13 of December 19, 2023 concerning practices implemented in the luxury watch distribution sector), the French Competition Authority sanctioned Rolex France SAS, as perpetrator, the company Rolex Holding SA and the Hans Wilsdorf Foundation, as parent companies, and Rolex SA as the company exercising decisive influence over the author company, for having implemented a vertical agreement aimed at prohibiting the online sale of Rolex watches by its authorized distributors, a practice contrary to articles 101, paragraph 1 of the TFEU and L. 420-1 of the French Commercial Code.

This decision follows referrals in January 2017 from the Union de la Bijouterie Horlogerie and the company Pellegrin & Fils, and visit and seizure operations carried out on January 17, 2019.

Firstly, Rolex France SAS was accused of taking part in a generalized agreement with its distributors aimed at prohibiting Internet sales.

Secondly, Rolex France SAS was accused of having entered into a generalized agreement with its distributors to fix the retail price of Rolex brand watches.

With regard to the first grievance notified, the Autorité found that the vertical agreement aimed at prohibiting the online sale of Rolex brand watches was characterized as followsIn this case, by the stipulations of the selective distribution contract between Rolex France SAS and its distributors, and by the agreement of its authorized distributors not to sell these products over the Internet.

The Authority also took the view that this ban constituted a restriction of competition by object, in the light of the economic and legal context in which it took place.

In particular, it noted that all the manufacturers competing with Rolex whose selective distribution contracts were analyzed authorized online sales by their authorized distributors, and that the objective, invoked by Rolex France SAS, of combating counterfeiting and parallel trade could be achieved by means less restrictive of competition.

As a result, the Authority imposed a fine of 91,600,000 euros on Rolex France SAS, jointly and severally with its parent companies and Rolex SA.

With regard to the second grievance notified, the Authority considered that the evidence in the file did not demonstrate that Rolex France SAS had invited its distributors to restrict their pricing freedom, nor that the distributors would, if necessary, have acquiesced to this invitation.

The Authority therefore concluded that the practice covered by the second grievance had not been established, and dismissed the case.

In short, the French Competition Authority has ruled that the ban on online sales of Rolex watches by its distributors constitutes a restriction of competition by object, thus infringing competition rules. This type of restriction is considered particularly serious, as it prevents consumers from accessing an important sales channel. The Authority considered that this practice was not necessary to preserve Rolex’s brand image and combat counterfeiting, especially given the existence of online sales programs for pre-owned watches certified by Rolex itself.

This decision comes just days after Mariage Frères was condemned on a similar issue (Decision 23-D-12 of December 11, 2023).

Mariage Frères was fined 4 million euros by the French Competition Authority for hindering the commercial freedom of its distributors.

This sanction follows practices that had been going on for around 15 years, including a ban on distributors selling Mariage Frères products online and reselling them to other retailers.

These restrictions have limited competition and partitioned markets.

Mariage Frères justified these prohibitions by preserving the prestige image of its products, but the Autorité ruled that these practices constituted an anti-competitive agreement.

In conclusion, in sectors where online sales are experiencing strong growth, a ban on marketing the products concerned on the Internet is likely to restrict the development of distributors’ business and consumer rights.