This Decision follows the referrals made in January 2017 by the professional organisation Union de la Bijouterie Horlogerie and the company Pellegrin & Fils.
These referrals come in the context of a dispute between Rolex France and its distributors following the network head’s wish to restructure its distribution network in France, which involves reducing the number of independent sales outlets: the number of approved retailers has thus fallen significantly between 2010 and 2021, from 114 to 66. As a result, Rolex France terminated several distribution contracts, including the one with one of the plaintiffs, Pellegrin & Fils, in 2013. Pellegrin & Fils then brought an action against Rolex France in 2015 for anti-competitive agreements and brutal severance of established commercial relations. When the Paris Commercial Court dismissed Pellegrin & Fils’ claims, the ousted distributor appealed. The Paris Court of Appeal stayed the proceedings pending the Authority’s decision (CA Paris, 30 August 2019, no. 15/17059).
Absolute prohibition
The FCA complained that Rolex France had taken part in a widespread agreement with its distributors aimed at prohibiting Internet sales and fixing the retail price of Rolex brand watches, in breach of Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article L.420-1 of the French Commercial Code.
As a reminder, the absolute prohibition on selected distributors selling on the internet constitutes a restriction of competition by object, incompatible with Article 101§1 of the TFEU, since the Pierre Fabre judgment handed down by the Court of Justice of the European Union (CJEU) on 13 October 2011 (Case C-439/09). The FCA applied the Pierre Fabre judgment for the first time in its Decision No. 12-D-23 of 12 December 2012 concerning practices implemented by Bang & Olufsen. This prohibition is enshrined in Article 4(e) of European Regulation 2022/720, which has been in force since 1 June 2022.
As regards the imposition of selling prices, it is clear from the wording of Article 101§1 TFEU L. 420-1 of the French Commercial Code and from case law that this practice is anti-competitive by nature.
Vertical agreement
In the Rolex France case, the vertical agreement aimed at prohibiting the online sale of Rolex watches by its selected distributors was characterized, according to the FCA, by the following elements:
– certain clauses in the selective distribution contract in force since 1999 prohibited, in particular, “any sale outside the sales outlet or by mail order”;
– a letter sent by Rolex France in 2006 to a jewellery store stating that “under no circumstances may our Selected Distributors, who are the only ones authorized to sell our products, do so over the Internet, or by mail order. Any sale over the Internet contravenes the provisions of Article IV.3.b of the Selective Distribution Agreement entered into by all our Selected Distributors”;
– an internal document dated 3 July 2017 and an e-mail dated 9 January 2018 stating that Rolex France had intervened to remind selected distributors of the ban on online sales; and
– statements made by the respondents and selected distributors.
The FCA considered that the ban on selected distributors selling on the Internet had been in place for around ten years, “at the very least from 13 October 2011 until the supplementary statement of objections was sent on 23 March 2022”. However, in light of the elements listed above, the alleged anti-competitive practice appears to have started at least in 2006. It seems that the FCA wanted to make the starting date of the practice coincide with the date on which the CJEU’s Fabre judgment was handed down. However, the FCA could have extended the duration of the practices before the date of the 2011 Pierre Fabre judgment.
In fact, as the FCA points out, the Paris Court of Appeal has already ruled that if the law and case law applicable to restrictions on online sales in the context of selective distribution networks were not clearly established before the Pierre Fabre judgment, it cannot be deduced from this that no infringement could be asserted against the companies sanctioned by the FCA prior to that judgment (Paris Court of Appeal, 13 March 2014, no. 2013/00714 and 17 October 2019, no. 18/24456). Uncertainty in this area should only lead to a relativization of the seriousness of the practice for the period prior to the Pierre Fabre judgment.
In this case, Rolex France argued that the ban on online sales of its products had several objectives. First, the absence of online sales was necessary to preserve its high value-added business model, based on brand image and customer experience. In addition, only purchases made in the boutique of one of its selected distributors would enable it to effectively combat counterfeiting and parallel networks. Finally, according to Rolex France, the ban on online sales made it possible to avoid problems in terms of image and security during remote shipping.
These justifications did not convince the FCA. It considered that the objectives cited could be achieved by means that were less restrictive of competition.
Indeed, the FCA notes that all of Rolex France’s competitors authorize online sales, while attaching conditions and guarantees to this authorization aimed at preserving the luxury image of the products, the level of which appears to be similar to that demanded by Rolex France of its distributors. With regard to the fight against counterfeiting and parallel networks, the FCA considers that suitable tools exist to ensure the traceability of products sold online, such as blockchain, which is used by several of Rolex France’s competitors. Lastly, with regard to problems relating to the security of shipments, the FCA considers that Rolex France could use carriers that guarantee the security of shipments or offer in-store collection of products purchased online, following the example of its competitors.
With regard to the second complaint against Rolex France for fixing the retail selling price of Rolex brand watches, the FCA found “that the evidence in the file did not show 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”.
This Decision, which is fully in line with case law in this area, comes just a few days after Decision 23-D-12 of 11 December 2023, in which the FCA fined Mariage Frères, a producer of top-of-the-range teas, €4 million for banning the online sale of its products.
Given the significant amount of the fine imposed on Rolex France by the FCA, the latter is likely to appeal the decision, which will not exempt it from paying the fine, as the appeal does not have suspensive effect (article L. 464-8 of the French Commercial Code).
What about franchising? The principle of not preventing online sales also apply in relationships between franchisor and franchisee:
Provisions of European Regulation 2022/720 of 10 May 2022 and in particular Article 4 e), provide as well that the franchisor cannot prevent the effective use of the Internet by the franchisee from selling the contractual goods or services : as an example, the FCA recently imposed a €4 million fine on franchisor active in the chocolate distribution industry for having, inter alia, implemented practices restricting the online selling by its franchisees.
However, it is possible to provide for some minor restrictions on online sales, in particular to ensure the homogeneity of its network, an essential condition for the sustainability of a franchise network: for example, the possibility of imposing quality requirements for the franchisee’s website, or prohibiting him from selling on marketplaces. In this case, it is recommended to justify the need for such restrictions and explain why they do not prohibit nor discriminate the effective use of the Internet.
Link to the decision here.
Olivier Binder, IDI Country Expert for franchising in France
Amélie Poulain
