On December 26, 2019, the New Caledonian Competition Authority issued its first decision to impose sanctions, fining four undertakings, two suppliers and two distributors for having established exclusive import rights in the elevator sector (Decision 2019-PAC-05). The Authority issued a total fine of CFP 7.6 million (approx. 63,688 euros) and accepted the binding commitments offered by the four undertakings.

Following a complaint, the New Caledonian Competition Authority ( the “Authority”) began ex officio proceedings on January 29, 2019 relating to exclusive practices in the elevator sector. The alleged practices involved four elevator suppliers, Koné, Otis, Sodimas and ThyssenKrupp (none of which manufactured the products locally, except for a few spare parts) and their local distributors, Intec, Pacific Ascenseurs, Semep and Socometra. The local distributors import elevators and spare parts and ensure their installation and maintenance.

In its Decision, the Authority found that the suppliers had implemented exclusive import rights in New Caledonia to the benefit of local operators, a practice banned under the local Law of October 24, 2013. Such exclusive rights, which were granted in the supply agreements between the suppliers and their local distributors, or sometimes even formalized through a simple letter, are inconsistent with Article Lp. 421-2 of the Commercial Code in its version applicable locally, as well as the local Law of October 24, 2013.[1] These provisions incorporate into New Caledonian law a broad prohibition of exclusive import agreements imposed by the so-called “Lurel Law” of November 20, 2012 on Economic Regulation in French overseas “départements”.

Although these provisions make exclusive import rights a form of restriction by object in French overseas territories, the Authority did provide, in its Decision, a summary analysis of their effects on the New Caledonian market. In substance, the Authority noted the remoteness and tightness of the local market (only 1,100 elevators, which are typically installed for 10 years, on average). These characteristics, combined with the exclusivity clauses, have reinforced the market power of local distributors and their potential ability to raise prices with respect to maintenance operations.

Koné, Otis, Pacific Ascenseurs and Socometra did not dispute the charges and offered commitments to (i) end their exclusive distribution agreement or ongoing exclusivity relating to elevators and spare parts in New Caledonia; (ii) ensure that future distribution agreements would not include any exclusivity clauses and non-compete obligations and (iii) inform customers of the termination of the exclusivity. Koné and Otis also offered commitments to (iv) submit to the Authority any new agreement with an operator from New Caledonia and (v) define the minimum criteria that distributors would have to fulfil in order to sell their products in New Caledonia, including the number of training modules and training hours, consistent with European and local security standards. As a result, they benefited from the negotiated procedure established under Article Lp. 464-2 (III) of the Commercial Code in its version applicable locally, and their fines were reduced by 50%. The fines were further reduced because of the commitments undertaken by the Parties by 20% for the manufacturers and 30% for the distributors, respectively.

While the overall amounts of the fines remain modest, this case is a useful reminder that the prohibition of exclusive imports to overseas territories constitutes a priority issue for the New Caledonian Authority as well as the French Competition Authority, as discussed in its Opinion relating to competition in overseas territories of July 4, 2019 (Opinion 19-A-12). Operators should therefore be careful to avoid transposing into French overseas départements and territories exclusivity clauses that might be otherwise acceptable in mainland France.

[1]              Law of New Caledonia No. 2013-8 of October 24, 2013.