On December 19, 2023, The Autorité De La Concurrence (The Competition Authority of the French Republic) issued a press release announcing that they were fining Rolex €91.6 million (about $100 million) for prohibiting its authorized dealers from selling Rolex watches online. Rolex has long maintained that online sales would be bad for their image, and their ability to mitigate counterfeiting. The Autorité has apparently had their eye on Rolex regarding this issue for a long time, noting that disallowing online sales amounts to “closing a marketing channel, to the detriment of consumers and retailers.” Doesn’t Rolex have a right to choose what marketing channels it thinks are best for its consumers? Well, apparently not in France. Let’s dive into the implications of this massive fine.
First of all, we should establish that Rolex does not deny that they prohibit their authorized dealers from selling new Rolexes online. It’s no secret, and the French Competition Authority even quoted a Rolex letter in their press release:
We confirm that under no circumstances can our Authorised Retailers, who are the only parties authorised to sell our products, do so via the Internet or by mail order. Any sales via the Internet contravene the provisions of Article IV.3.b of the Selective Distribution Agreement signed by all our Authorised Retailers.Rolex, in a letter to a retailer quoted by French authorities
Rolex is far from the only luxury brand shying away from full-blown online sales, but their authorized retailer agreements apparently run afoul of French law.
So What French Law Did Rolex Break Exactly?
It appears that Rolex, in the Autorité’s opinion, is in violation of Article L420-1, which prohibits groups of companies from making concerted efforts to do any of these four things:
- Limit market access or the free exercise of competition by other companies.
- Obstruct the setting of prices through the free play of the market by artificially favoring their increase or decrease.
- Limit or control production, market outlets, investments, or technological progress.
- Allocate markets or sources of supply among competitors.
The French authorities clearly don’t like that Rolex is “limiting market access” and the “free exercise of competition” with their offline-only sales model. But, keep in mind that these laws are designed to prevent groups of companies from colluding; these restrictions likely wouldn’t apply if Rolex owned all of their own stores and was simply making internal decisions about how to sell its own watches. The involvement of other companies–its authorized retailers, in this case–seems to be the problem. But Rolex’s behavior in this regard is nothing new.
Why is France Doing This Now?
Well, it’s possible that the French government feels it has a strong case now that Rolex has fully implemented its CPO program (which includes online sales) with the help of some of its authorized dealers. Since Rolex guarantees authenticity of these online-sold CPO watches, well, it sort of undermines Rolex’s claim that they need to sell their watches in physical stores in order to assure authenticity. The Autorité mentions this directly in the press release, in fact: “Rolex, in conjunction with one of its retailers, has developed a programme for the online purchase of pre-owned watches, whose authenticity it guarantees. An absolute ban on the online selling of its products cannot therefore be justified.”
The French authorities acknowledge the need to combat counterfeiting, but they also assert that “Rolex’s main competitors, who themselves face this type of risk, have implemented (primarily technological) solutions to reconcile online selling with the fight against counterfeiting and off-network sales” but…have they? Frankly it’s unclear what they mean by that.
What Will Rolex Do Next?
Well, now that the €91,600,000 fine has been issued, we can think of five possibilities for Rolex’s next steps:
- Rolex fully complies, pays the fine, and starts letting its French retailers sell online.
- Rolex challenges this in court and wins. Rolex is not beyond the stage of appeal just yet. Even if they don’t get the case dismissed outright, the figure could conceivably decrease.
- Rolex challenges this in court and loses, leading it to become precedent. It’s not unthinkable that other brands like Audemars Piguet and Patek Philippe would have to start allowing their authorized retailers to do online sales in France, too.
- Rolex pulls its resellers out of France and sells only through Rolex-owned boutiques. After all, brands like Goyard seem to get away with an online-free sales strategy this way.
- Rolex pulls out of France altogether. This would be extreme, and rather unlikely, but then again a $100 million fine is pretty extreme too.
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Will This Help the Consumer?
Well, no, probably not. The same total number of Rolexes will be available for consumers. The Rolex supply chain won’t magically become any more productive. In fact, as much as people complain about the frustrations of the Rolex waitlist, think about the bot-filled nightmares of popular sneaker releases. Putting sales onto the internet doesn’t instantly make everything more equitable. But, it has yet to be seen if France’s actions will make buying a Rolex in France easier–or if it will just make it more like fighting for Taylor Swift tickets on Ticketmaster. In the meantime, we’ll have to wait and see how Rolex’s lawyers react.