Competition Authority Preliminary M

In a continuation of its recent bold streak, the Egyptian Competition Authority (“ECA”) issued decision No. 27 of 2018 against Apple Inc,[1] and its Middle East agent ABM (Arab Business Machine), for restricting its regional distributors from selling to Egyptian resellers and customers, forcing Egyptian customers to buy Apple products from local retailers at higher prices than are available from the UAE or Saudi Arabian distributors. Manufacturers are generally free in most jurisdictions to set geographical regions for their distributors, subject to certain conditions, and they may restrict distributors from offering products outside of their area – known as active selling - but they may not restrict distributors from selling outside of their geographic area to a customer who solicits the sale, known as passive selling. In its statement, ECA also claimed that Apple restricts parallel imports, which is the practice of importing products from abroad from parties other than the intellectual property holder, i.e. from Apple distributors rather than from Apple itself, but it made no findings related to this allegation. In its press release,[2] ECA confirmed that it sees intra-brand competition as equally important to inter-brand competition, as both impact consumer welfare. Neither passive nor active selling are explicitly addressed in Egyptian Competition Law,[3] so the emergence of the recognition of these concepts in ECA’s official communications and decision represents a significant development in the interpretation of Article (7) of the Egyptian Competition Law. Parallel imports are also not explicitly addressed in the law, and are restricted by other jurisdictions, so the fact that ECA did not make any findings about that claim may indicate that it does not wish to read it into the law. In common with some of its recent decisions, this decision is extra-territorial in jurisdiction, as its scope is Apple companies and distributors abroad as well as within Egypt. Apple have been given 60 days to remove all offending clauses from their distribution contracts at every level of the supply chain down to the end consumer, or face criminal charges. The fine for such a violation is 1-10% of the total revenue of the product in question during the period of the violation, with a maximum of EGP 300 million, to be doubled in the event that Apple refuses to implement ECA’s decision within its deadline. The issue may be complicated by the involvement of various other regulators, who have complied with foreign manufacturers’ restrictions on the importation of their products into Egypt by other than designated distributors without a legal basis on which to do so.   [1] ECA Decision No. 27/2018 on taking preliminary measures against Apple’s P in accordance with Article 20 (1) of Law No. 3/2005, Egyptian Gazette, Issue No. 227 (cont.) (a), 9 December 2018. [2] Egyptian Competition Authority, Press Releases, “Apple and its Distributors Contravened the Protection of Competition and the Prevention of Monopolistic Practices Law”, 9 December 2018, available through this link (in Arabic). [3] Law No. 3/2005 on the protection of competition and the prevention of monopolistic practices, Official Gazette, Issue No. 6 (bis), 15 February 2005.