Brand owners’ policies on internet distribution continue to sit squarely in the sights of competition authorities in the European Union. Brand owners’ selective distribution policies that in effect prevent authorized retailers from selling via the internet are of particular interest.
The French Supreme Court’s hard line approach in its September 2013 Pierre Fabre Dermo-cosmétique ruling provides a recent example. Pierre Fabre terminated three authorized retailers because they failed to ensure the full time presence of a pharmacist in their stores to advise customers, as required under their selective distribution agreements. The retailers challenged the terminations, claiming that this requirement was anti-competitive.
The Supreme Court found for the retailers, holding that the clause was by its object anti-competitive because it de facto prevented authorized retailers from selling via the internet. In the Court’s view, there was nothing that precluded a more lenient stance, since pharmacists do not have a legal monopoly to sell personal care products in France. As a result, there was no consumer health rationale for the pharmacist requirement. Any shop assistant trained in dermatology or cosmetology could provide customers with tailored information.
The French Supreme Court’s approach follows the EU Court of Justice’s (CJEU’s) 2011 Pierre Fabre ruling, which held (in connection with the French competition authority’s probe into similar clauses) that contractual provisions banning online sales in selective networks will generally violate EU competition law, and is also consistent with the Commission’s position on internet sales set out in its 2010 Vertical Guidelines. While it is possible to objectively justify internet sales bans, it is clear that doing so represents quite a hurdle for brand owners. The CJEU has made clear that protecting a brand’s prestigious image is unlikely to be sufficient.
Similar investigations targeting internet sales restraints in the luxury/branded goods industry are ongoing in a number of Member States. For instance, the German competition authority (FCO) is probing Asics’ and Adidas’ bars on retailers offering their goods on e-commerce platforms. In a similar vein, in late October, the FCO closed an investigation of headphone manufacturer Sennheiser after the company lifted its prohibition on sales via online platforms (platform bans are further discussed in the authority’s report on Vertical Restraints in the Internet Economy). Recently, the FCO also took a strong stance against Gardena’s dual rebate system, which provided for larger rebates on products destined to in-store sales. The UK Office of Fair Trading is likewise closely monitoring online sales restraints; this summer, it condemned Roma Medical Aids and its dealers for agreeing not to offer Roma mobility scooters online.
In this light, brand owners should carefully consider restrictions on distribution that might directly or indirectly prevent or impede retailers from selling via the internet.