December was a particularly eventful month on the subject of online sales bans, following two decisions handed down by the French Competition Authority (Autorité de la Concurrence), one on December 11, 2023 concerning Mariage Frère, the other on December 19, 2023 concerning Rolex.
On these occasions, the Autorité is sending a clear message regarding its policy of sanctioning restrictions on online sales.
The luxury goods sector under the Authority’s attention
The two decisions concern two high-end product sectors in their respective markets, namely high-end tea for Mariage Frères and luxury watches for Rolex. Through its detailed investigations, the Autorité notes that each of these markets has seen strong growth in online sales, and that there is considerable potential for development in this area for distributors.
Luxury goods are not immune to the issue of vertical agreements based on the prohibition of online sales. In short, the online sales channel, now largely equivalent to the physical sales channel in most situations, should not be prevented absolutely on the basis of the objective of preserving the luxury image of the products sold.
Heavy penalties
Mariage Frères was fined 4 million euros by the French competition authority (Autorité de la Concurrence) for having hindered the commercial freedom of its distributors for almost 15 years, by forbidding them to sell its products online and to resell its products to other retailers.
Rolex, for its part, was fined a colossal 91 million euros for this practice alone, given the amount of sales made and the duration of the ban of at least 10 years.
General terms and conditions or contracts: it doesn’t matter
One of the specific features of Mariage Frères’ ban on online sales was that the prohibition clauses were stipulated in the GCTS’s communicated to distributors. These were the sole basis of Mariage Frères’ contractual relations with its distributors. The mere mention of a ban on online sales in the General Terms and Conditions of Sale is therefore sufficient evidence in the event of an inspection to lead to possible prosecution.
Showcase site: is that all?
As part of its distributors’ digital strategy, the watch manufacturer had set up an “e-corner” aimed at “increasing their visibility on their website, without authorizing online sales”. This leads the Autorité to consider that these sites, presented as commercial showcases for Rolex products, which do not allow customers to purchase the products on display due to Rolex’s prohibition, constitute an obstacle to development for distributors.
It is not enough to allow distributors to have a showcase site.
What are the consequences for networks?
These decisions are a reminder of the need for networks to carefully consider the provisions of their contractual corpus relating to online sales.
While an absolute prohibition is prohibited, contractual adjustments can be made to ensure – as far as possible – that the online sales strategy is harmonized across the entire network.
