Governments remind tech giants they are not above the law

After almost ten years of investigation, Apple and two of its wholesale distribution partners have been fined a total $1.24 Billion. Apple will pay a record $1.1 Billion – now, the highest fine ever, issued by the French Competition Authority. Tech Data will have to pay €76,107,989, and Ingram Micro €62,972,668.

The companies have been found guilty of fixing prices, using binding contractual clauses to overshadow competition, and keep prices fixed at a profitable rate for a range of Apple products such as computers and tablets, excluding iPhones. This would keep profits coming in, while still maintaining Apple’s high-price, high-quality brand image.

According to the French watchdog, Apple’s anti-competition operations can be summarized in three parts:

• By agreeing to no competition between Ingram Micro and Tech Data, and preventing other distributors from competing with each other, Apple effectively choked the market on its own products.
• Premium distributors were found to be unable to safely offer promotion, sales or lower prices in general. This leads to an alignment of retail prices between both independent premium distributors, and Apple’s integrated distributors, while keeping customer loyalty.
• The watchdog found that Apple had abused the economic dependence of distributers. Independent distributors would get unfavourable commercial conditions, such as delays following a new product launch or lack of supplies compared to Apple’s integrated distributors.

“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” said President of the French Competition Authority, Isabelle de Silva “It is also the heaviest sanction pronounced against an economic player, in this case Apple (€1.1 billion), whose extraordinary dimension has been duly taken into account. Finally, the Authority considered that, in the present case, Apple had committed an abuse of economic dependence on its premium retailers, a practice which the Authority considers to be particularly serious”.

Shortly after the ruling, Apple issued a statement stating that they strongly disagree with the ruling, and will attempt to appeal against it. Although the French Competition Authority concedes that Apple is free to operate and manage its supply chains and distributors any way it wishes, it persists in reminding the tech giant that it is not above the law.