On June 29, 2016, the Paris Court of Appeals dismissed the claim of the French subsidiary of Coty, a company specialising in the creation and distribution of cosmetics and perfumes, which had filed a claim against Brandalley, an internet fashion retailer, for unfair competition. This follows another decision, of May 25, 2016, in which the same court rejected a similar claim by Coty against Marvale - an online perfume retailer - and France Televisions, the French public national television broadcaster.

Both claims were similar in that they revolved around the existence and legality of a selective distribution network. EU Regulation 330/2010 offers block exemptions to certain vertical agreements, i.e. agreements between businesses at different levels of the supply chain such as distribution contracts, provided that such agreements contain no “hard-core” restrictions of competition (“black clauses”) and none of the parties to the agreement have more than a 30% market share.

In both cases, Coty had brought claims of unfair competition against the online retailers for selling products reserved, according to Coty, for Coty’s selective distributors only, which Brandalley and Marvale were not. France Televisions was also sued for broadcasting shows in which a Marvale executive presented its website.

The court dismissed Coty’s appeals in both cases as (i) Coty was held to have failed to prove that its selective network fell within the scope of the block exemption regulation, and was therefore legal, and (ii) the standard contract between Coty and its distributors revealed the existence of three black clauses which restricted the sale to purchasing associations, distributors located outside of the selective distribution territory and active sales to certain end consumers. The Court considered moreover that Coty did not bring any compelling proof of its falling under the 30% market share cap.

The useful reminder which can be drawn from these two cases is that a whole selective distribution network can be put in jeopardy by the presence in a single distribution contract of any “black clause”, as defined in the EU Regulation:

  • the restriction of the buyer's ability to determine its sale price;
  • certain territorial restrictions;
  • the restriction of active or passive sales to end users;
  • the restriction of cross-supplies between distributors;
  • the restriction of the supplier’s ability to sell components as spare parts.