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General Court rules that luxury watchmakers can limit supply of parts to approved repairers

General Court rules that luxury watchmakers can limit supply of parts

General Court rules that luxury watchmakers can limit supply of parts to approved repairers

01.11.2017 NL law

On 23 October 2017, the General Court (GC) dismissed an appeal of the Confédération européenne des associations d’horlogers-réparateurs (CEAHR) against the European Commission's decision to reject its complaint.

CEAHR had complained to the Commission that LVMH Moët Hennessy-Louis Vuitton, Rolex and the Swatch Group (the "luxury brand watchmakers") had engaged in anticompetitive conduct and abused their market power by setting up selective distribution systems for repair services and refusing to supply spare parts to watch repairers that were not part of their authorised repair and maintenance network.

The GC reiterated that selective distribution systems are not considered anticompetitive when they are objectively justified, non-discriminatory and proportionate. Contrary to the appellant's claim, when these conditions are met, there is no need to examine whether selective distribution systems have the effect of "eliminating all competition". In determining whether the selective distribution systems are objectively justified, the Court held, contrary to the view expressed by AG Wahl in the Coty case, that the protection of the brand image alone cannot be a valid justification for the restriction of competition. However, the objective of preserving the quality of the products and ensuring their proper use may justify such a restriction, in which case selective distribution systems are allowed. The Court concluded that the selective distribution systems in place met all the necessary conditions.

The GC also rejected a claim by CEARH that the refusal to supply amounted to an abuse of dominance because the selective distribution systems lacked any objective justification. In order to establish an abuse under Article 102 TFEU, the refusal to supply by a dominant undertaking must (i) not be objectively justified, (ii) be related to goods and services that are indispensable for the requesting person's activity, and (iii) be likely to eliminate all competition. Consequently, the lack of an objective justification is not in itself sufficient ground for finding an abuse under Article 102 TFEU. The GC confirmed the Commission's finding that there was a very low probability of all effective competition being eliminated.

Finally, CEARH claimed that the Commission did not properly appreciate the market power of the luxury watchmakers. The GC dismissed that claim and ruled that since the Commission had held that the watchmaker's conduct did not qualify as an abuse, the degree of market power of the watchmakers was irrelevant.

This article was published in the Competition Law Newsletter of November 2017. Other articles in this newsletter:

  1. General Court annuls UPC/Ziggo merger decision
  2. General Court upholds fine for 'gun jumping' EU merger control procedure
  3. European Commission orders the recovery of State aid of around EUR 250 million from Amazon
  4. Nike can restrict sales via online platforms within its selective distribution system
  5. Dutch Trade and Industry Appeals Tribunal rules on cover pricing
  6. KLM and Amsterdam Schiphol airport offer commitments to reduce competition concerns

Team

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