Rolex subject to sanctions by the French Competition Authority

By decision no. 23-D-13 dated 19 December 2023 (the “Decision”), the French Competition Authority (the “Authority”) fined Rolex France SAS, as author, jointly and severally with Rolex Holding SA and the Hans Wilsdorf Foundation, as parent entities, a total of 91,600,000 euros for prohibiting its authorised distributors from selling its luxury watches online.

This Decision follows referrals in January 2017 from the professional organisation Union de la Bijouterie Horlogerie and the company Pellegrin & Fils.

These referrals were made in the context of a dispute between Rolex France and its distributors following the network head’s desire to restructure its distribution network in France, which involved reducing the number of independent points of sale: the number of approved retailers fell 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 Autorité 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 authorised 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 Authority 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 authorised distributors was characterised, according to the Autorité, 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 Authorised Distributors, who are the only ones authorised 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 Authorised Distributors”;
• an internal document dated 3 July 2017 and an e-mail dated 9 January 2018 stating that Rolex France had intervened to remind authorised distributors of the ban on online sales; and
• statements made by the respondents and authorised distributors.

The Authority considered that the ban on authorised 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 Authority 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 Authority could have extended the duration of the practices before the date of the 2011 Pierre Fabre judgment. In fact, as the Authority 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 Authority 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 relativisation 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 authorised 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 AMF. It considered that the objectives cited could be achieved by means that were less restrictive of competition.

Indeed, the Authority notes that all of Rolex France’s competitors authorise online sales, while attaching conditions and guarantees to this authorisation 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 Authority 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 Authority 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 Authority found “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”.

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 AMF 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 AMF, 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).