Rolex fined $100M by France’s anti-trust agency for ‘illegal’ ban on distributors selling online

😜

Yes, I was about to post about this. Clearly, this is a very serious challenge to Rolex's business model. It's interesting to note that this trade authority has a high success rate in having their rulings upheld on appeal. I think Rolex is in serious trouble!

It’s suggested that Rolex may double production in the next decade or so. It would have to buy 50 Bucherers and expand its network to countless ADs for that to happen. That speed and scale of expansion isn’t tenable. Online sales will be inevitable.

Interesting. Where did you read about doubling production? I would love to read the details.

It’s guesswork. People are extrapolating from news of the new factory.

Ah ok, I read about the new facilities opening up. I do think that increased production is something that would benefit all watch collectors. Plus online sales.

I guess a price hike will be coming up! That $100M needs to come from somewhere! 😜

I break down all the implications in this video: https://youtu.be/hQmN5BJ_idE?si=iqMlN44J098LooTJ

Quick summary:

Rolex just got slapped with a massive €91 million fine by the French trade authority. The reason? They've been blocking online sales of their watches. This is a huge shake-up for Rolex's traditional business model. We're talking about implications for the grey market, potential shifts in how Rolex operates, and what it means for the luxury watch landscape. This ruling could change the game for how high-end watches are sold.

I’ve never understood the pleasure of buying a watch that everyone, including the neighbor’s dog, has. Not only are they ugly, but they also no longer produce some of the less ugly models. I don’t understand this hype at all. just ignore them.

Marketing. Humans are emotional beings.

Wow. I’m not a huge Rolex fan but this really would have quite far reaching implications for the manufacturers who’s control of channels keeps their brands exclusive.

Inverted commas or apostrophes?

Inverted commas: 'Illegal.'

Speech/quotation marks: "Illegal."

Apostrophe: Illegal's.

A modern Rolex watch is brilliantly made. It's a triumph of industrial production methods, and a whole lot more.

I've owned two and they didn't work for me. There were maybe two reasons for this. First, I was too conscious of them, and that detracted from my enjoyment. I like to not be aware of a watch until I need to look at it, which in a normal day is not often. Second, their modern, premium feel was at odds with their functional origins. They're now out-and-out trophies, which I had difficulty connecting with. So off they popped.

The materials and methods used by Rolex are more generally available throughout the industry these days. It's one reason Rolex invests so much in R&D to make up stuff no-one else has or can use: product differentiation.

That said, some US$500-1,000 watches today are better made than a Rolex of 30 years ago. In other words, the original feel and look of a vintage Rolex tool watch can be had at a snip from elsewhere, rather than from Rolex itself. The pricing of such watches is also closer to how Rolex used to be.

A Rollie is now more than ever a status symbol for people who need status symbols. It's a seductive piece of kit for people disposed to being seduced.

My take on the ruling is that the distribution agreement is seen to artificially limit supply. By banning a sales channel. This would be similar to monopolistic collusion that written into the contract.

My take: even if they exit the French market (unlikely I think), leaving this ruling unchallenged would open the door to similar legal action in EU member countries. They really need to fight this.

I don't see how this is similar. Rolex doesn't wanna sell online. That's their business! And if artificially limiting supply is illegal...the whole diamond industry is guilty as hell! 😂

Yeah that’s not how Europe works mate. Second largest economy in EU. If Rolex waved two fingers at the French the EU would rule against Rolex faster than you could say “exhibition only”.

All the people saying Rolex could exit France are so so wrong.

What other luxury brands don’t retail online?? Patek? AP?

Be so easy to pop a Shopify store onto Rolex website and limit it to 1:10000 checkouts tho 😂

This is absolutely fantastic news for all the watch community.

God bless the French 😂🙌

Cant wait to see the French visiting outer countries to buy their Rolex. 🤣

I imagine a challenge / appeal will be coming

Here's a quick and dirty summary of arguments made yesterday by posters who haven't grasped the gravity of this news, and my reading of each one.

1. Rolex can up sticks and leave France - LOL. Wrong. This is the argument of a 14yo boy who kicked his football through a window, had it taken from him, and reacted, "I'm not goint to play here anymore." France wants Rolex and Rolex needs France. This will not be a negotiation because the law is the law, and Rolex broke it. The parties will however find a middle ground.

2. Rolex doesn't have an incentive to change its distribution model - Wrong. French anti-trust regulation is harmonised with national regulations across the European Union. If this case is adopted by the European Commission (think GPDR) then Rolex is in deep doo-doo. Such matters usually do make it to the European level. It's part of the European Commission's mandate to protect and promote the common market, so if something flies in one jurisdiction, it becomes an active issue across the Union. And this is not any jurisdiction. This. Is. Spar... France. As such, Rolex has every incentive to demonstrate compliance ahead of time before Le Shit hits Le Fan.

3. Rolex will win the appeal - Almost certainly wrong. The French regulator reportedly has a 93% success rate for its rulings being upheld. So far Rolex' defence has been astonishingly lame; if anything the chances of it pulling a legal rabbit out of the hat at appeals are slim.

4. Rolex and other luxury brands are special and can't do direct sales online - Wrong. This argument seems to be unaware that there has been a multibillion dollar industry in online auctions in art and collectibles for more than 25 years. Auction houses do not authenticate lots because they don't want to deal with liability. Rolex, on the other hand, authenticates every single one of its products.

5. Rolex' brand will lose lustre if it includes online sales corridors, Part Un - Wrong. Some people might be put off but Rolex doesn't care about some people. It's CPO programme is a success because if provides buyers with that most valued of feelings: peace of mind. The enormous latent market for Rolex watches will flock to buy, supply permitting.

6. Rolex will lose its lustre if it includes online sales corridors, Part Deux - Wrong. People with actual wealth buy high-end precious metal Rolex models that cost tiny fractions of their net worth. If they want one, they'll get one any way they like. Conversely, aspirational arrivistes will want their entry level steel Rolex, and they don't care how they get them.

7. Rolex's current sales model will survive - Wrong. It's on life support. and may already be dead. Rolex is actively trying to reach beyond it, though maybe not fast enough. Eventually people who submissively jumped through Rolex' hoops like circus monkeys will look back on their own masochism, not with nostalgia but with private embarrassment.

As someone who's helped countries develop regulatory frameworks applicable to goods and services, and have also been on the receiving end of regulatory orders, I can assure anyone reading that Rolex is currently in damage limitation mode. It's also likely looking to ways to adjust its sales model to comply with the ruling of French authorities.

To emphasise a point made at the outset, it's in the interest of both parties to arrive at compliance on amicable terms. Without knowing what schedules might be in discussion, I would guess that we'll see some Rolex models available for direct purchase online within the next five years or so.

__

p.s. Yesterday I made a snide remark about Time & Tide. I take it back. They appear to be one of a few outlets to have covered the biggest news in the watch industry of 2023. They deserve commendation for that.

Yep. Appeals are part of due process. Based on the regulator's historical success rate, Rolex has a 7% chance of amending or nullifying the order. They'll have to refine their case to do so, because their initial argument was rather poor.

I've just written a summary of yesterday's fun and games. It begins with a response to the suggestion that Rolex can ragequit their way out of this lol.

Sigh. I've just written a general response to a lot of yesterday's commentary. Feel free to have a look! :)

Nice summation :-).

I’m no expert either.

However the fundamentals are clear: there’s considerably more demand than current supply and distribution can meet. There aren’t enough Bucherers, boutiques and ADs. Bricks and mortar are expensive too, and require their own skills set. Bricks and mortar won’t suffice. If Rolex increases production, which is a possibility, it’ll need to find additional ways to shift units.

The skepticism surrounding online sales corridors expressed under this post is the same as Amazon faced in the late 1990s when it began to sell books online. People simply couldn’t see it.

Unlike Amazon though, there’s an established precedent of art, sculpture, and collectibles such as expensive watches selling online. Far from denting Rolex’ brand allure, it’ll boost its popularity.

Arrivistes who bask in newly-found exclusivity don’t like the idea. This is animal behavior. Such buyers don’t like the idea that their years of masochistic suffering with waiting lists and thankless pursuit might be made redundant by a sales method involving less friction.

The super wealthy don’t care. They will drop Rolex if they see plebs buying all-gold day dates to add to their Richard Milles and high complication Pateks. The Great Unwashed are not operating in that segment so it’s not going to happen. Collectors of vintage won’t care either, because retail buyers aren’t interested in the niceties of antique references. Rolex’ brand allure will stay intact.

When a sovereign state weighs in on something like this, companies are obliged to respond. I don’t know when Rolex will respond, but they’ll have to. So it’s not if, it’s when.