1 - The French Competition Authority imposes heavy fines on Rolex France, Mariage Frères, and De Neuville for hindering their distributors' commercial freedom

In less than two months, the French Competition Authority has handed down three penalty decisions concerning online resale restrictions, including a 91.6 million euros fine against Rolex.

The Rolex case follows referrals in 2017 from the Union de la Bijouterie Horlogerie and the specialist watch retailer Pellegrin & Fils. The investigation services had notified Rolex of two objections concerning generalized unlawful agreements between Rolex and its distributors, the first of which had led to a ban on the online resale of the brand's products by distributors, and the second to the fixing of retail resale prices for Rolex watches.

In its decision of December 19, 2023, the French Competition Authority dismissed the second objection, considering that the evidence in the file had not demonstrated that Rolex had invited its distributors to restrict their pricing freedom, nor that the distributors had accepted such an invitation. Despite Rolex's communication of recommended prices, and its wish to see the level of discounts granted by distributors contained, the French Competition Authority recognized that distributors had "total leeway" in determining their pricing policy.

However, with regard to the first objection, the French Competition Authority found that the vertical agreement aimed at prohibiting the online sale of Rolex brand watches was characterized. In the Authority's view, this was the result, on the one hand, of the provisions of the selective distribution agreement entered into  between the French subsidiary and its distributors, which stipulated in particular that "all sales outside the sales outlet or by mail order" (Article IV.3.b of the agreement) were prohibited, and on the other hand, of the distributors' agreement not to resell the brand's products online, as expressed in particular in their declarations. This was also clear from Rolex's communications to its distributors, which were explicit about the impossibility of reselling the brand's products online.

In an attempt to demonstrate the absence of a restriction of competition, Rolex had put forward a number of justifications, including the need to guarantee a satisfactory purchasing experience for consumers, the need to combat the growing incidence of counterfeiting on resale platforms, and the risks associated with the parallel market. These arguments were rejected by the French Competition Authority, which observed, that Rolex's main competitors authorized online sales under certain conditions, and that banning online sales was not a proportionate response to the concerns expressed by Rolex.

The French Competition Authority ruled that the ban on online sales of Rolex watches contained in the selective distribution agreements set up within the Rolex network over a period of more than 10 years constitutes an infringement by object. It therefore imposed a fine of no less than 91.6 million euros on Rolex.

This decision was handed down a few days after a decision against Mariage Frères, one of France's leading producers of premium teas. 

The producer of premium teas was fined 4 million euros for having, for almost 15 years, (i) forbidden its distributors to resell the brand's products online, and (ii) forbidden the distributors to resell the products to other retailers. This meant that only the Mariage Frères group could sell the products online and make wholesale sales.

Even more recently, in a decision dated February 6, 2024, the French Competition Authority handed down a penalty of the same amount in the high-end chocolate sector, against De Neuville, for similar practices, namely a ban on distributors online resale. As in the two aforementioned cases, the French Competition Authority found that the restriction on online sales was expressly set out in the contractual documentation, in this case the distribution contracts.

Given the paucity of decision-making practice in this area, it is interesting to note that the De Neuville franchisor was also criticized for restricting sales by franchisees to professional customers, even though no resale territory had been reserved exclusively for franchisees. As a result, franchisees should normally have been able to sell actively and passively to any professional customer.

2 - The Digital Markets Act applies to companies designated as gatekeepers from March 7, 2024 

Adopted on September 14, 2022, Regulation (EU) No. 2022/1925, known as the "Digital Markets Act" ("DMA"), aims to "contribute to the proper functioning of the internal market by rules to ensure contestability and fairness for the markets in the digital sector in general, and for business users and end users of essential platform services provided by gatekeepers in particular". 

While certain Articles of the DMA have been applicable since May 2, 2023, Articles 5, 6 and 7, which apply to gatekeepers, have been applicable since March 7, 2024 (Article 3). 

As a reminder, the companies to which these obligations apply were designated by the European Commission in September 2023. They are Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft. 

The aforementioned Articles lay down a number of obligations to be met by gatekeepers for each of the core platform services they offer, in order to re-establish a level playing field between companies operating on digital platforms. By way of illustration, gatekeepers must now allow business users to promote their offers and conclude contracts outside their platform services, or make it as easy to unsubscribe as it is to subscribe to a service, and enable end-users to easily uninstall applications. On the contrary, they can no longer favor their services and products over those of sellers using their platform or exploit sellers' data to compete with them.

As a reminder, in the event of non-compliance with the provisions of the DMA, gatekeepers are liable to a fine of up to 10% of the total worldwide turnover in the preceding financial year, or 20% in case of repeated infringement. The European Commission may also impose a daily penalty payment of up to 5% of the company's daily worldwide average turnover for the previous fiscal year.

For information, on 25 March 2024, the European Commission has announced the opening of investigations against several gatekeepers for alleged non-compliance with their new obligations. 

3 -The Commission publishes a new version of its Notice on the definition of the relevant market for the purposes of EU competition law

On February 8, 2024, the European Commission published a new version of its Notice on the definition of the relevant market for the purposes of Union competition law (hereinafter the "revised Notice"). The Notice had never been amended since its adoption in 1997. 

The revised Notice takes up the main principles set out in the initial 1997 version and adapts them to societal and technological developments, taking particular account of the specific features of digital and innovation-intensive markets. 

As a preliminary comment, while the substance of the definition of the "relevant market" remains unchanged from the 1997 version, the revised Notice makes a number of useful adjustments to adapt this theoretical framework to the significant developments that have taken place since the first version was published. It is also intended to reflect the decision-making practice of the Commission and competition authorities in recent years.

The main changes resulting from the revised Notice are presented below. 

1. Greater consideration of non-price competitive parameters in defining relevant markets

The revised Notice stresses the importance of taking into account competition parameters other than price when defining relevant markets. Thus, the Commission indicates that the degree of innovation, durability, value and variety of uses offered by the product, the possibility to integrate the product with other products, the security and privacy afforded, and reliability of supply may all be taken into account by customers in making their choices.  

2. Guidelines for defining a market in specific circumstances

In its revised Notice, the Commission clarifies how to define certain markets in the light of the specific circumstances of each case. These include markets with significant research and development ("R&D") activity, multi-sided platforms, after-markets, bundles and digital ecosystems. 

To take the example of R&D and the case of pipeline products, it will be examined in particular whether these products, which are not yet on the market but for which it can already be established with which other products the pipeline products are likely to be substitutable, will belong to a new market or to an existing relevant product market. The intended use of the pipeline product and its projected substitutability with other products play a particular role in defining the relevant market. 

The Commission also stresses that innovation is often a "key parameter of competition", and that it takes account of the specific features of highly innovative sectors characterized by frequent R&D activities. 

3. Details of the SSNIP test and qualitative techniques 

While the SSNIP test ("Small but Significant Non-transitory Increase in Price") remains relevant to market definition, the Commission now regards it merely as a "conceptual framework" for the interpretation of available evidence, which it is not obliged to apply empirically. The revised Notice thus acknowledges that other types of evidence are equally valid for informing market definition.

In addition, the Commission indicates that when companies compete on parameters other than price, other solutions, such as the assessment of customer behavior in response to a small but significant and non-transitory decrease in product quality ("SSNDQ" for "Small but Significant and Non-Transitory Decrease of Quality"), may be preferred. The Commission is particularly concerned here with innovative industries and zero-price products.

4. Clarification of geographic market definition

The Commission also clarifies the definition of the geographic market, for example, in cases where imports may be sufficient to define a global market. It explains that the mere existence of imports does not necessarily lead to the enlargement of the geographic market when trade between certain territories or other considerations relating to supply and demand are insufficient to achieve sufficiently homogeneous conditions of competition.

5. More detailed explanations of the evidence and its probative value

The revised Communication reminds us that the evidence used to define markets must be reliable and, to the extent possible, recent. 

The Commission lists the various types of evidence that can be used: evidence from public authorities, evidence received following written requests for information from market participants, internal documents from the relevant entities, ad hoc surveys conducted for the purpose of the investigation and covering a representative sample of customers or suppliers, or public information and market statistics. 

6. Clarification of the role and method of calculating market share

The revised Notice also provides more detailed guidance on the Commission's approach to calculating market shares. 

While the Commission generally relies on market shares based on merchant sales, the revised Communication indicates that other metrics may be taken into account to provide or more useful information. These metrics vary, however, according to the type of market (digital markets, innovative markets, or those involving calls for tenders, transport markets, etc.). Without being exhaustive, we can mention capacity or production, number of suppliers, number of contracts awarded, level of R&D expenditure or number of patents. 

Finally, the revised Communication indicates that market shares are not the only indicator of a undertaking’s strength in the market, and that other factors, such as barriers to entry or expansion, notably those deriving from scale or network effects, access to specific assets and inputs, or the degree of substitutability, may also be relevant. 

4-The French Competition Authority publishes a new Procedural Notice on its leniency program

On December 15, 2023, the French Competition Authority published its new leniency program procedural notice (the "Notice"). The Notice applies from December 15, 2023 to applications for exemption from financial penalties for which a leniency notice has not been adopted before that date.

The Notice takes into account changes resulting from the ECN+ Directive, Law no. 2020-1508, known as DDADUE, and the Decree No. 2021-568 of May 10, 2021, and provides clarifications on (i) the conditions of eligibility for type 1A exemption applications, (ii) the marker request, (iii) the procedure for filing and collecting leniency applications and declarations, (iv) the action to be taken on the leniency application and (v) the guarantees conferred on the leniency applicant in particular.

1. Conditions of eligibility for type 1A exemption applications

As a reminder, there are various types of exemption, namely total exemption from financial penalties ("type 1 cases") and partial exemption from financial penalties ("type 2 cases"). Among the type 1 cases, a distinction should be made between the "type 1A case", which is available to the company that first provides the French Competition Authority with information enabling it to carry out dawn raids , and the "type 1B case", which is available to the company that first provides the French Competition Authority with information enabling it to establish the existence of the practice in question. 

While the conditions for type 1B and type 2 exemptions remain unchanged, the Notice clarifies the conditions for type 1A exemptions.

Taking up the criteria set out in decree No. 2021-568 of May 10, 2021, the Authority specifies that total type 1A exemption is granted when:

• Neither the DGCCRF nor the French Competition Authority are in possession of information they consider sufficient to conduct a dawn raid; or,
• No such raid or searches have already been conducted in connection with criminal proceedings relating to the practice in question.

2. Marker request

Given the importance of the leniency applicant's rank in determining the portion of the exemption to which it is entitled, the Notice enshrines in writing the existing "marker" practice. 

Thus, an applicant whose leniency application is incomplete will be able to ask the French Competition Authority to be granted a period of time to gather the relevant information in support of its application. During this period, the applicant will retain the position of its application in the order of arrival. 

The Notice sets out the procedures for requesting a marker. The request for a marker must be made in the leniency application or at the meeting with the leniency officer in the case of an oral leniency application. 

In theory, the time allowed is one month, and may be extended by the General Rapporteur depending on the circumstances of the case.

3. Procedures for filing and collecting leniency applications and statements

Until now, it was only possible to submit a leniency application to the French Competition Authority by registered letter with return receipt requested, or by calling the leniency advisor to arrange a meeting. In addition to these two methods, it is now possible to submit a leniency application electronically and securely via the French Competition Authority’s website, or to drop it off at the Authority’s reception desk.

With regard to the procedure for collecting leniency applications, the Notice enshrines the possibility for all leniency applicants to send their applications and supporting documents to the Authority via the secure document exchange platform. 

In addition, the notice specifies that the information transmitted to the Authority may include, among other things, "concealed or unconcealed recordings". This is an endorsement of the standard of freedom of evidence, similar to that applicable in criminal matters.

4. The follow-up given by the General Rapporteur to leniency applications

As the DDADUE law has abolished the leniency opinion issued by the French Competition Authority’s College, the Notice no longer refers to it. 

It now stipulates that the General Rapporteur must inform the leniency applicant, in writing and as soon as possible, of its eligibility or lack of eligibility for a total or partial exemption from the financial penalties incurred, of his decision not to open an investigation, or of his decision not to formulate a proposal for self-referral. It is also at this point that the leniency applicant must be informed of its rank and the conditions for cooperation. 

The Notice also states that the General Rapporteur may reconsider his position in the event of a change in legal or factual circumstances. 

5. Guarantees conferred on leniency applicants

Lastly, the Notice clarifies the civil and criminal guarantees conferred on leniency applicants. 

In terms of civil liability firstly, the French Competition Authority recalls that the total or partial exemption from financial penalties granted by the Authority to an undertaking under the leniency procedure protects it from the civil repercussions arising from its participation in the anti-competitive practice only under the conditions of Articles L. 481-11 and L. 483-5 of the French Commercial Code, i.e.: (i) the limitation of the joint and several liability of the company having obtained a total exemption, to compensate for the damage suffered by the victims, together with the other co-debtors, and (ii) the protection of the leniency statement, which the judge cannot order to be disclosed.

In terms of criminal liability secondly, under Article L.420-6-1 of the French Commercial Code, the individuals concerned (notably directors, managers and other company employees) are fully exempt from the penalties provided for in Article L.420-6 of the French Commercial Code, provided however that they have actively cooperated with the French Competition Authority and the Public Prosecutor's office.