The CNMC (National Commission for Markets and Competition -Acronym in Spanish-) has agreed to impose fines for a total value of €194,150,000 on different companies belonging to the Amazon and Apple Groups by infingements against the Law to protect free competition in Spain.
Both companies have signed some contract clauses on brandgating, as well as advertising and marketing limitations causing significative restrictions on the free competition for retailers and Apple’s rival brands in the Amazon’s online marketplace (website) for Spain.
The CNMC confirms that the mentioned agreements and practices have harmed independent retailers, rival Apple brands, such as Samsung, and consumers, who have seen their search capacity limited, their possibility of switching between brands reduced. Lower competition pressures on Apple have resulted in higher prices foth this brand’s products than in the absence of such anti-competitive clauses and practices.
As explained by the CNMC in its press statement published today, “both companies agreed that only a series of distributors designated by Apple itself could sell Apple brand products through the Amazon website in Spain, with a not justified cut in the number of resellers of Apple products in Amazon’s website in Spain (exclusion practices or ‘brand gating’)”.
“In addition”, continues the communication published by the Spanish competition watchdog, “both companies limited the advertising spaces where competing Apple products can be promoted on the Amazon website in Spain.
Finally, Amazon and Apple limited the possibility of Amazon directing marketing campaigns to customers of Apple products on its website in Spain to offer them competing products from other brands.”
The CNMC considers that these clauses, which jointly contribute to changing the sales dynamics of Apple products on the Amazon website in Spain, restrict intra-brand and inter-brand competition and are a plain and continuous violation of article 1 of the Law for the Defense of Competition (LDC) and the article 101 of the Treaty on the Functioning of the European Union (TFEU) in force since October 2018.
The CNMC orders Amazon and Apple the cease on these practices and fines the concerned companies belonging to the Apple Group with €143,640,000 and the concerned companies belonging to the Amazon Group with €50,510,000.
Against this resolution, the finned companies may directly file a an appeal before the National Administrative Court within a period of two months from the day following the notification of the resolution issued by the Spanish Competition Watchdog.
Restrictions on competition and damages to third parties derived from brand gating practices
As a result of the application of the brand gating clauses:
1.- More than a 90% of the resellers who had been using the Amazon website in Spain for the retail sale of Apple products were excluded from the main online market for these kind of products in Spain.
2.- Sellers not authorized by Apple to sell their products on the Amazon website in Spain lost an important sales channel, to the extent that Amazon’s said website is the channel where for most of the online purchases of electronic products in Spain are carried out.
3.- Sales of Apple-brand products in Amazon’s said online market were concentrated in Amazon itself, drastically reducing competition between resellers of products of this brand.
4.- Sales of Apple products through the Amazon website in Spain by sellers based in other EU countries were reduced, thus limiting trade between Member States.
5.- There was an increase in the relative prices paid by consumers for the purchase of Apple products in Amazon’s online marketplace in Spain.
6.- The resellers most affected by this clause were non-authorized Apple distributors (called Non-Authorized Resellers), generally small-sized operators that do not have a direct commercial relationship with Apple but sell their products with their consent. These non-authorized Apple distributors were the most active on the Amazon website in Spain and, therefore, the ones that exerted the most competitive price pressure on Amazon’s said website.
Restrictive effects on competition derived from advertising clauses and marketing limitation clauses
Through the advertising clauses, Amazon and Apple limited the possibility that brands competing with Apple could acquire advertising space on the Amazon website in Spain to advertise their products when certain searches for Apple products are carried out, as well as during the purchase process. these products (see example at the end of the press release).
The marketing limitation clauses establish that Amazon is not allowed to carry out, without the consent of Apple, marketing and advertising campaigns targetting customers who have purchased Apple products on the Amazon website in Spain and aimed at encouraging these consumers to change from an Apple product to a competitive one.
As a result of the joint action of the contract clauses described, Apple achieves a reduction of the competitive pressure generated by the ads of rival brands on the Amazon website in Spain, due to the fact that Apple can carry out marketing campaigns that the rest of the brands must bear, while competing brands or Amazon can’t do the same.
In addition, these limitations directly harm consumers’rights since:
1.- They limit their ability to discover new brands and/or alternative products to those of Apple;
2.- they increase their search costs and
3.- They reduce their ability to change (switching).