On 12 December 2012, the French Competition Authority (Autorité de la Concurrence) issued its decision fining Danish high-end electronics manufacturer Bang & Olufsen and its French subsidiary € 900,000 for imposing a de facto prohibition on online sales of its hi-fi and audio products, thereby weakening competition between distributors. The entire selective distribution network of the Bang & Olufsen brand in France, comprising 48 distributors, was affected by this sales policy.
The French Competition Authority first examined the terms of the selective distribution agreement entered into between Bang & Olufsen France and its dealers, which was drawn up in 1989. A clause in the agreement prohibited distance selling although no reference was made to Internet sales, which did not, at that time, constitute a sales channel. Subsequently, in a circular sent on 23 August 2000 to all of its dealers in France, Bang & Olufsen indicated that a certain defined category of its dealers could apply for a separate page on Bang & Olufsen's global website, subject to approval by Bang & Olufsen. The circular also stated that any reference to Bang & Olufsen on a dealer's own site should be limited to statements to the effect that the dealer was entitled to distribute Bang & Olufsen products and to provide advice on these products from its brick and mortar outlet. The use of Bang & Olufsen logos and trade marks on a dealer's own website was prohibited. Bang & Olufsen concluded the circular by requesting the dealers to comply with its contents.
In its decision, the Authority referred to the preliminary reference ruling of the Court of Justice of the EU in the Pierre Fabre Dermo-Cosmétique case (Case C-439/09), confirming that a clause in a selective distribution contract that imposes a de facto prohibition on dealers from selling their products online amounts to a restriction of competition by object, unless that clause is objectively justified (see previous issue of Competition Newsletter). In the present case, the Authority considered that the provisions of Bang & Olufsen's selective distribution contract and the statements made by it in, among others, the 23 August 2000 circular amounted to a de facto ban on Internet sales by its authorised dealers. In reaching this conclusion, the Authority noted, among other factors, that the website of Bang & Olufsen France did not make any provision for Internet sales and that the prohibition on the use of Bang & Olufsen logos and trade marks by authorised dealers made Internet sales "materially impossible".
In addition to the fine, the French Competition Authority has ordered Bang & Olufsen France to amend its selective distribution contracts within three months from the date of the decision so as to make it clear that its dealers are authorised to sell online.
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