On 31 January 2013, the Paris Court of Appeal upheld the fine of € 17,000 imposed by the French Competition Authority (Autorité de la concurrence) on Pierre Fabre for banning online sales of its cosmetics, following guidance provided by the Court of Justice of the European Union ("ECJ") in a preliminary reference ruling handed down on 13 October 2011 (see VBB on Competition Law, Volume 2011, No. 10, available at www.vbb.com).
In the national proceedings, the French Competition Authority had found that Pierre Fabre breached Article 101 TFEU and the equivalent provision of French law by de facto prohibiting its distributors in its selective distribution system from selling cosmetic products over the internet through the requirement that its products had to be sold in a physical space where a pharmacist was present. The French Competition Authority found that the total ban on internet sales imposed by Pierre Fabre amounted to a restriction of active and passive sales which constituted a hardcore restriction within the meaning of the 1999 Vertical Agreements Block Exemption ("1999 VABER") and which could not benefit through an individual assessment from the exemption under Article 101(3) TFEU.
Pierre Fabre appealed the decision to the Paris Court of Appeal, which subsequently made a reference for a preliminary ruling to the ECJ, essentially asking it to rule on whether a ban on internet sales amounted to a hardcore restriction of competition. On 13 October 2011, the ECJ found the de facto prohibition on online sales imposed by Pierre Fabre in the context of its selective distribution for its cosmetic products would amount to a restriction of competition by object within the meaning of Article 101(1) TFEU unless it could be objectively justified. While such an obligation could not benefit from the applicable exemption under Regulation No 2790/1999, it was for the national court to decide whether or not it could benefit, on an individual assessment, from the exemption under Article 101(3) TFEU (see VBB on Competition Law, Volume 2011, No. 10, available at www.vbb.com).
The judgment of the Paris Court of Appeal is of particular interest in a number of respects. The Court first recalled that the prohibition of online sales constitutes a restriction by object, as confirmed by the ECJ in its preliminary reference ruling. The Court then went on to consider whether the prohibition could be objectively justified. In making this assessment, the Court referred to EU case-law on the free movement of goods, where the ECJ had not been persuaded that a need to provide advice and protect consumers against incorrect use of the product was sufficient to justify a ban on internet sales. The Court further noted that personalised advice and information on products could instead be offered via an interactive video link or an online discussion with a pharmacist. Accordingly, Pierre Fabre's clause prohibiting online sales was not objectively justified.
The Court then turned to the question of whether the clause could nevertheless benefit from exemption under Article 101(3) TFEU and examined the three arguments put forward by Pierre Fabre in this respect relating to the need to provide tailor-made advice to consumers, prevent counterfeiting and overcome free-riding. Regarding personalised advice, the Court recalled that a prohibition of online sales was not indispensable to the provision of personalised advice and that this aim could be achieved by other, less restrictive ways. Regarding counterfeiting, the Court considered that a prohibition of online sales was not a solution to counterfeit products and that, quite to the contrary, some competitors of Pierre Fabre had decided to fight against counterfeiting by allowing online sales. Regarding free-riding, the Court considered that Pierre Fabre had not provided sufficient evidence to demonstrate that allowing online sales would result in consumers taking advantage of the advice and service provided in bricks and mortar shops but ultimately choosing to make their purchases online. The Court therefore concluded that the clause could not benefit from exemption under Article 101(3) TFEU.
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