On 13 October, in response to a reference from the French
courts, the ECJ ruled
that a restriction on online sales in a selective distribution
agreement for cosmetics and personal care products restricts
competition unless objectively justified (which it indicated was
unlikely to be the case) and falls outside the Vertical Agreements
Block Exemption (VABE).
Pierre Fabre is a manufacturer of cosmetics and personal care
products. Its selective distribution included an obligation that
sales must be made exclusively in a physical space with a qualified
pharmacist present. The French Competition Authority investigated,
and ordered Pierre Fabre to remove the restrictions. On appeal, the
Cour d'Appel de Paris referred a question to the ECJ:
"Does a general and absolute ban on selling....goods....via
the internet, imposed...in the context of a selective distribution
network, in fact constitute a "hardcore" restriction of
competition by object...which is not covered by the [VABE] but
which is potentially eligible for an individual exemption under
The ECJ concluded that in the context of a selective
distribution network, a prohibition on online sales of cosmetics
and personal care products is a restriction by object (and
therefore prohibited under Article 101(1) without the need to
examine its effects) if the prohibition can not be objectively
justified. It will be for the French courts to assess whether that
is the case, but the ECJ noted that it had previously not accepted
that face to face advice was needed for sales of non-prescription
medicines or contact lenses. It also stated that the aim of
maintaining a prestigious image is not a legitimate aim.
The ECJ then ruled that the VABE does not apply to a selective
distribution system if distributors are de facto
prohibited from using the internet as a method of marketing - such
a restriction amounts to a restriction of passive sales which
prevents the block exemption from applying. Although the judgment
related to the 1999 VABE, the principle will apply equally to the
2009 VABE which maintains the provisions of its predecessor on
Finally, the ECJ ruled that Article 101(3) could apply if the
conditions were met.
A complete ban on selective distributors making online sales
will therefore only fall outside Article 101(1) if it is
objectively justified. That will be the case where there are
regulatory requirements prohibiting online sales (for example in
the case of medicines). The Advocate General indicated in his
opinion that it may also be the case where the legitimate aim
is not a regulatory requirement but is of a "public law
nature" aimed at protecting a public good. Unfortunately, he
gave no examples. If the restriction is not objectively justified,
it is possible that it will be individually exempt under Article
101(3). It is disappointing that the ECJ gave no guidance as to how
the Article 101(3) conditions might apply in this situation.
The ECJ's judgment therefore supports the European
Commission's emphasis (for example, in its Guidelines on
Vertical Restraints) on permitting online sales, as a key tool for
breaking down national barriers and optimising a single internal
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