Bradley L Joslove June 29 2000 Important Rulings for Online Auctions Franklin | E-commerce - France Bradley L Joslove E-commerce The N@rt Case The Yahoo Case Observations Two recent decisions by the Paris Tribunal de Grande Instance (a court of first instance), both involving online auctions by American companies, go further than past decisions in establishing French jurisdiction over internet activities. The N@rt CaseOn May 3 2000 the Paris Tribunal de Grande Instance issued the first judgment directly concerning online auctions. The scope of this case is not limited to online auctions but extends to more general issues of jurisdiction and applicable law. N@rt Inc, an American company, with the assistance of its French parent company, N@rt SAS, organized an online auction of goods (located in France) and planned to organize another auction. An action was brought by professional auctioneers' organizations seeking, among other things, an injunction against further auctions of goods located in France on the grounds that such auctions are in violation of the French law granting the monopoly to auctioneers. Ruling The Paris court held that it has jurisdiction because the site, albeit American, auctioned goods located in France to potential buyers in France (among other places). Buyers could visualize the goods online in the same way as they could in a Parisian showroom. The court found that these acts constitute an interference with the conduct of auctions in France, which are reserved for authorized auctioneers. Because these acts caused harm to auctioneers located in Paris, the professional auctioneers' organizations were justified in bringing action in Paris where the harm was incurred. Similarly, the court held that since the tortious conduct (violation of the auctioneers' monopoly) caused harm in France, French law applies. The court held that the Internet constitutes a "vast and infinitely adjustable and extendable showroom" and that the auctions are carried out in a manner that falls within the terms of the French law on auctions. As a result, the Paris court enjoined the defendants from any further interference in the conduct of auctions falling within the French auctioneers' monopoly. The judgment has been appealed. A bill is currently before the French Parliament to amend the law on auctions and to specify its application to online auctions. The bill is expected to be enacted before the end of the year. The Yahoo Case On May 22 2000, Justice Jean-Jacques Gomez of the Paris Tribunal de Grande Instance (who also presided over the three-judge panel that ruled in the N@rt Case), acting in urgent proceedings, issued an important judgment concerning the responsibility of internet service providers and jurisdiction, again in the context of online auctions. Yahoo! Inc and its French subsidiary, Yahoo France, were taken to court by a French Jewish students group (UEJF) and the International League against Racism and Anti-Semitism (LICRA). The plaintiffs complained that the yahoo.com site contains an online auction page which exhibits for sale over one thousand items of Nazi memorabilia and hosts the Geocities.com site, which has revisionist and other anti-Semitic pages, in violation of French laws prohibiting the public exhibition of Nazi memorabilia, propaganda negating the holocaust and inciting of racial hatred (collectively, the hate crimes legislation). The plaintiffs further complained that Yahoo France is an accomplice to these violations as its yahoo.fr site provides a link to the yahoo.com site despite knowledge of the illicit content of some of the pages on that site. Ruling on Yahoo! Inc Justice Gomez, going even further than in his decision in the N@rt case, held that the viewing, by French web surfers on their computer screens in France, of the illicit content constitutes a harm felt in France, which is a sufficient basis for French courts to hold jurisdiction. In response to Yahoo! Inc's argument that it is technically impossible to limit access to Nazi objects or propaganda, Justice Gomez concluded that the technical difficulties are not "insurmountable". And he concluded that Yahoo! Inc violates the French hate crimes legislation because it permits French internet users to access and view web pages and even participate in auctions involving Nazi memorabilia and related neo-Nazi items and propaganda. Justice Gomez added that such acts are: "an offence against the collective memory of a country profoundly ravaged by the atrocities committed by, and in the name of, the Nazi criminal enterprise against its nationals and above all against its nationals of the Jewish faith." Justice Gomez ordered Yahoo! Inc to: "take all necessary measures to discourage and render impossible any access via yahoo.com to the service of auctions of Nazi objects and any other site or service which constitutes a defence of Nazism or contests Nazi crimes." Justice Gomez then ordered Yahoo! Inc to report back to the court on July 24 2000, with the measures it intends to take to effectuate the court order. Ruling on Yahoo France As concerns Yahoo France, it was held that by providing a link to a site that it knows has illicit content, it was under a duty to warn its users of the danger of clicking on the link. Justice Gomez therefore ordered Yahoo France to warn each and every visitor to yahoo.fr before any usage of the hypertext link to yahoo.com that if the result of its search: "leads it to sites, pages or forums for which the title or contents constitute a violation of French law, as is the case for consultation of sites that defend Nazism and/or exhibit uniforms, insignias and emblems recalling those that were worn or exhibited by Nazis, or offering for sale objects and works the sale of which is strictly forbidden in France, it [Yahoo France] must interrupt the consultation of the site in question or risk incurring the sanctions provided for under French legislation or being the subject of judicial proceedings." Observations These two decisions are remarkable in their scope. In both cases, Justice Gomez relied solely on the finding that the litigious activity caused harm to people or organizations in France in order to make his ruling. This is the first reported decision involving tortious activity on the Internet in which a French court has taken jurisdiction on such meagre grounds. Although unprecedented, the decision is not wholly without legal foundation. Article 46 of the new Code of Civil Procedure states that in délictuelle matters (delictual faults - a term that is somewhat broader than the US concept of torts), the plaintiff can bring an action in several jurisdictions including the one in which the harm was suffered. Moreover, there is one reported criminal decision, in which the Paris Tribunal de Grande Instance held that it had jurisdiction to try a French national for negationist propaganda found on a web site located in the United States. The court's treatment of Yahoo France is perhaps even more unusual. Yahoo France was found to have participated in violations of French hate crimes legislation, simply because it provides a hypertext link to a site (yahoo.com) which itself does not contain the illicit content, but rather provides links to sites that contain the material in question. Liability for illicit content that is at least two hypertext links away is extraordinary. Such links are the very essence of the World Wide Web, their ease of use being one of the reasons why the Web has become so popular. If site owners are to be held responsible for the content of sites two or more clicks away, the use of the Internet could be greatly affected. Finally, the sanctions ordered by the court in the Yahoo! Inc Case are unprecedented. The court order against Yahoo! Inc not only required the company to block access to illicit sites by French internet users, but more generally to block all access to the incriminated sites. While the international scope of the sanction may not have been intended by the court, the harsh wording of the warning that Yahoo France is to place on its web site certainly was. For further information on the this topic please contact Bradley L Joslove at Franklin by telephone (+33 1 45 02 79 00) or by fax (+33 1 45 02 79 01) or by e-mail ([email protected]). The materials contained on this web site are for general information purposes only and are subject to the disclaimer.