Apple fined record 1.1bn euros for anti-competitive behaviour

It is the biggest-ever fine levelled against a business over such “sterilising the market”

Photo: Flickr

France’s competition watchdog (Autorité de la Concurrence) on Monday fined iPhone maker Apple €1.1bn for anti-competitive behavior in its distribution network and an abuse of economic dependence on its resellers. Apple wholesalers Tech Data and Ingram Micro were also fined €76m and €63m, respectively, for unlawfully agreeing on prices, the authority said. Together, the three have achieved the dubious distinction of getting the highest-ever fine for anti-competitive sales tactics.

“Apple and its two wholesalers have agreed not to compete with each other and to prevent distributors from competing with each other, thereby sterilizing the wholesale market for Apple products,” the authority’s head Isabelle de Silva said.

The announcement follows reports last week that the fine was forthcoming, and caps off years of work since investigations into the case started as far back as 2012, in the wake of the collapse of Apple’s biggest seller in France, eBizcuss, in 2011, and a subsequent lawsuit filed by the company accusing Apple of starving it of inventory after its CEO publicly accused the company of unfair price competition. Litigation related to that case ended in 2017.

In particular, Apple, along with its wholesale distribution partners Ingram Micro and Tech Data, have been accused by the French competition authority, over operating a cartel - affecting pricing and who could sell products - for virtually all Apple products including computers and tablets, but not the iPhone (which is often sold via mobile phone distributors and carriers). 

At issue in the case were the three kinds of resellers that typically distribute Apple-branded technology: large retailers (such as mega-supermarkets and big-box retailers), of which there are about 1,800 in France; smaller resellers that tend to be independent businesses that also provide services alongside sales (these tend not to be the norm in the US but are still common in Europe, albeit less so in countries like the UK); and Apple itself, by way of its Apple Stores online and in shopping areas. 

The competition commissioner then noted that Apple and its partners violated three specific areas. Apple and the two wholesalers agreed not to compete with each other and also to prevent other distributors to compete on price, “thereby sterilising the wholesale market for Apple products". Secondly, premium distributors were forced to keep prices high to keep them at the same level as those of integrated distributors. Third, Apple has “abused the economic dependence” of these premium distributors, by subjecting them to unfair and unfavorable commercial conditions compared to its network of integrated distributors. (These last two points relate specifically to the accusations eBizcuss had lodged against the company.)

The commission also noted that Apple’s actions resulted in “supply difficulties, discriminatory treatment, unstable conditions of remuneration for their activity (discounts and in progress),” which in turn had an effect on squeezing their margins.
"Given the strong impact of these practices on competition in the distribution of Apple products via Apple premium resellers, the Authority imposes the highest penalty ever pronounced in a case (1.24 billion). It is also the heaviest sanction pronounced against an economic player, in this case Apple (€1.1bn), whose extraordinary dimension has been duly taken into account," de Silva added.

Apple said that it plans to appeal the ruling.

“The French Competition Authority’s decision is disheartening. It relates to practices from over a decade ago and discards thirty years of legal precedent that all companies in France rely on with an order that will cause chaos for companies across all industries,"  a spokesperson said.  “

"We strongly disagree with them and plan to appeal. We are extremely proud to serve our French customers and believe they should be allowed to choose the product they want, either through Apple Retail or our large network of resellers across the country. We will continue to work hard to deliver the best products and services in the market,” it was added.

Apple’s defence will likely highlight that the claim that Apple worked to diminish competition for Apple products between its distributors and resellers hasn’t been proven, and that its collective ambitions are the same: better prices and better service.

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