French Court of Appeal asks ECJ to decide whether prohibition on online selling imposed on authorised resellers constitutes a hardcore restriction

14 December 2009

Romain Ferla

In decision 08-D-25, dated 29 October 2008, the Conseil de la concurrence condemned Pierre Fabre Dermo-cosmétique for prohibiting its selected distributors from selling personal care and cosmetic products under the Klorane, Avène, Ducray and Galénic brands on the internet. The Conseil de la concurrence considered that this constituted a hardcore restriction which could not benefit from block exemption under Regulation 2790/1999 on vertical restraints. Pierre Fabre Dermo-cosmétique was thus ordered to modify its selective distribution agreements so as to allow its distributors to sell contractual products on the internet.

The decision follows a previous decision 07-D-07, dated 8 March 2007, regarding the personal care and cosmetic products sector, in which ten companies committed to modify their selective distribution agreements so as to allow selected distributors to sell their products on the internet, since such a prohibition could violate the French and EU’s ban on cartels and restrictive business practices (Article L.420-1 of the commercial Code and Article 101 TFEU).

Pierre Fabre Dermo-cosmétique was the only company which did not choose to engage in the commitment procedure but rather opted for the litigation procedure which resulted in the decision.

Pierre Fabre Dermo-cosmétique decided to appeal this decision on the grounds that it considered that internet sales were not compatible with the specific nature and qualities of personal care and cosmetic products which require the presence of a pharmacist at a physical sale point.

On 29 October 2009, the Paris Court of Appeal finally decided to refer the case to the ECJ for a preliminary ruling to decide whether “the general and absolute prohibition to sell on the internet contractual products to final users imposed on approved distributors within the framework of a selective distribution network actually constitute a hardcore competition restriction by object as in Article 101(1) TFEU that escapes from the block exemption regulation n. 2790/1999 but that could possibly benefit from an individual exemption as in Article 101(3) TFEU”.

The ECJ will determine whether this issue must be resolved by the Autorité de la concurrence on a per se approach or through an analysis of the effects of the practice on competition.

Source: Paris Court of Appeal, 29 October 2009, Pierre Fabre Dermo-cosmétique S.A.S.