Apple is fined for 1.1 billion euros ($1.2 billion) on Monday by France’s antitrust authority “Autorite de la concurrence” for being guilty of creating a cartel within its distribution network. Apple distributors, Tech Data and Ingram Micro were also sanctioned for 76.1 million euros and 62.9 million euros, respectively.
The tech giant, Apple, enforced two of its wholesalers, Tech Data and Ingram Micro, not to compete with each other in the competition. Apple asked them to stay at the same level in the game in terms of pricing. In a nutshell, the blame on Apple is to manipulate prices and limit competition for its products – except iPhone.
Apple sells its products online and via physical Apple Stores. Apple also manages a network of distributors and resellers (premium resellers and authorized resellers; however, we are talking about premium resellers only) where it sells its products in cities and where it does not have physical Apple Stores. However, Apple has forced its distributors not to compete with each other.
Moreover, the distributors were asked to enforce pricing to resellers. Which means the resellers cannot stock out the iDevices on low price or bundle them in any package with other bundles. The resellers were tightly restricted to what they can use and what they cannot as promotional materials. In case a reseller goes its own way, Apple would penalize them by limiting their product supply.
The French law does not allow vendors to limit supply to their distributors. Apple is also blamed for limiting its supply to distributors around the launch of its new products, making a conception that new products are only available at Apple Stores.
Logically, everyone in the distribution network act as an independent entity and not the part of any group. Apple was found abusive of this economic dependence in which its trading partners were disadvantaging its premium distributors with the retail prices charged as of the two French distributors and partners in crime i.e., Tech Data and Ingram Micro.
It began in 2013 when eBizcuss, an Apple premium reseller – part of Apple Premium Reseller program, requested to proceed against Apple Inc and Apple retail in France for the damages that Apple brought in respect of an infringement of Article 102 TFEU. The case highlighted that Apple and its partnering wholesalers violated three competitive practices:
- Distribution of products and customers between its two wholesalers Tech Data and Ingram Micro. Thereby sterilizing the wholesale market for Apple Products.
- Sale prices imposed on premium distributors similar to that of Apple and its wholesalers.
- Apple was abusing the economic dependence of its premium distributors, subjecting them to unfair and unfavorable commercial conditions.
The president of the French Competition Authority, Isabelle de Silva, said in a statement “First, Apple and its two wholesalers agreed not to compete and prevent distributors from competing with each other, thereby sterilizing the wholesale market for Apple products. Secondly, so-called Premium distributors could not risk promoting or lowering prices without risk, which led to an alignment of retail prices between Apple’s integrated distributors and independent Premium distributors.” This way, the premium distributors got no choice but to keep prices high as that of integrated distributors.
Silva further said that “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. It is also the heaviest sanction pronounced against an economic player, in this case, Apple, whose extraordinary dimension has duly taken into account.” With this antitrust complaint, France’s Competition and Fraud body sanctioned Apple and its two wholesalers for 1.24 billion euros in total.
Apple is planning to appeal the ruling. A spokesperson from Apple 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.”
The spokesperson called the French Authority decision to fine as “disheartening” saying, “Apple has been operating in France for over 40 years, and we are proud of our many contributions to job creation and economic development. Our investment and innovation support over 240,000 jobs across the country. The French Competition Authority’s decision is disheartening.”
With the French authorities Monday’s announcement, Apple shares dropped by 13% in the market amid a broad-based move lowering the Apple stocks in the market.
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