Apple: Record fine by the Autorité de la Concurrence reduced by two thirds

The French competition authority ("Autorité de la Concurrence", or "Autorité") had imposed a record fine of approximately EUR 1.1 billion on Apple on 16 March 2020 (see Law-Now article). Apple announced its appeal in advance. It has now been mostly successful. In its judgment of 6 October 2022 (Arrêt de la Cour d'Appel de Paris du 6 octobre 2022, case ref. 20/08582), the Cour d'Appel de Paris partially modified the decision of the Autorité and rejected the allegation of prohibited price fixing.

The fine

As a reminder, the Autorité had sanctioned with the fine the unlawful product and customer splitting, the price fixing of the independent "premium" distributors ("APRs") and the abuse of the APRs' economic dependence. According to the Autorité's findings, from 2005 until March 2013, Apple had split products and customers between two wholesalers, Tech Data and Ingram Micro, thereby eliminating competition between wholesalers for the Apple brand in the wholesale market. In addition, Apple had allegedly left the APRs with no economic room for manoeuvre through strict contractual clauses and business practices, thus depriving the end consumer of effective price competition. Finally, the Autorité had found several business practices which, taken together, constituted an offence under Art. L.420-2 Code de commerce.

The appeal

The Court of Appeal reduced the fine imposed on Apple to approximately EUR 370 million. The former highest fine imposed by the Autorité, both in total and against a specific company, has thus been reduced by almost two thirds.

The court overturned the charge of price fixing in its entirety (para. 488 ff.). The Autorité had not been able to provide the necessary evidence that there had been a binding direct or indirect price recommendation by Apple. In particular, the distribution agreements (including their clauses on rebates and refunds) between the APRs and Apple did not contain any agreement on price maintenance.

Moreover, the Autorité had not been able to provide sufficient evidence that the APRs had actually adhered to a price maintenance system. Rather, the APRs' price-setting behaviour to match the sales prices of Apple's own network was due to their free choice or competitive behaviour. The mere parallelism of the conduct was not sufficient to imply a prohibited price fixing. The behaviour could be owed to current market developments or the characteristics of the top products in question. In addition, the APRs were able to carry out independent advertising campaigns.

The court did not confirm the division of products and customers between the two wholesalers Tech Data and Ingram Micro for the entire period from 2005 to March 2013. The division was only provable from 25 November 2009 onwards on the evidence of emails. With the reduced temporal scope of the infringement, the fine was also reduced accordingly.

However, the Court of Appeal confirmed that the supply conditions set by Apple for the APRs were capable of affecting the functioning or structure of competition. Apple had thus exploited the economic dependence of the APRs and infringed Art. L.420-2 Code de commerce. The court emphasised that the facts did not require proof of a dominant position.

Reactions

Apart from the amount of the record fine, the decision of the Autorité can be distinguished above all by the fact that it sanctioned a whole series of business practices which, taken together, fulfilled the elements of prohibited price fixing. The imbalance of power to the detriment of the customers played a decisive role. However, the Autorité's loud political statement against retail price maintenance has lost much of its force with the appeal decision.

Apple is not satisfied with its partial victory. It has announced an appeal to have the fine decision quashed completely. Meanwhile, the authority continues to insist on the deterrent effect of high fines: Especially, when it comes to big Silicon Valley companies. Stay tuned to follow the controversy.