A shift in favor of selective distribution networks in French case law?

On September 13th 2017, the French Supreme Court ruled in favor of French cosmetics company Caudalie in a case regarding the prohibition imposed by Caudalie on its approved distributors to sell Caudalie products on-line via a marketplace platform.

The battle between Caudalie and eNova Santé (the company monitoring the marketplace “1001pharmacies.com” that was selling Caudalie’s products), started in November 2014 when Caudalie brought proceedings against the 1001pharmacies.com marketplace platform to prohibit them from selling Caudalie products via their on-line website on the grounds that 1001pharmacies.com were not an approved distributor of Caudalie, and those pharmacies which were approved Caudalie distributors were authorized to sell on-line only via their own internet sites, as opposed to via on-line marketplaces, and therefore that the activity of 1001pharmacies.com was “manifestly illicit”” (see our April 2016 EU Retail News update).

The Paris Commercial Court had ordered 1001pharmacies.com to remove all references to Caudalie’s products from its website. On appeal however, the Paris Court of Appeal ruled that the prohibition imposed by Caudalie on its approved distributors to sell on-line via a marketplace platform was likely to constitute a hard-core restriction of competition.

Finally, the French Supreme Court held that the Paris Court of Appeal had failed to demonstrate that the sale of Caudalie products on online marketplaces did not constitute a “manifestly illicit” disturbance resulting from the violation by eNova Santé of Caudalie’s selective distribution network, thus ruling in favor of Caudalie.

A decision reinforced by recent EU case law

The Coty decision of the Court of Justice of the European Union (CJEU) dated 6th December 2017 (Case C-230/16 - Coty Germany GmbH v Parfümerie Akzente GmbH) brought clarification as to whether or not a supplier of certain luxury goods running a selective distribution network can lawfully prohibit agreed distributors from selling the products on a third-party internet platform, such as Amazon or eBay.

The CJEU reaffirmed the criteria that a luxury selective distribution network must meet to comply with EU law. Further, the Court found that a clause prohibiting authorized distributors in a selective distribution network of luxury goods from using on-line marketplace platforms to sell the products, does not violate EU Competition Law provided that i) the said clause has the objective of preserving the luxury image of the goods in question, ii) it is laid down uniformly and applied in a non-discriminatory fashion and iii) it is proportionate to the objective pursued.

However, the scope of the decision of the CJEU in the Coty Germany case could be deemed to be confined to the luxury sector and the Paris Court of Appeal in Caudalie v. eNova Santé to which the case was remanded might decide that Caudalie’s products do not belong to the luxury sector.