CA Paris, 23 January 2018, RG 18/26546
One certainly remembers the decision of the French Competition Authority (hereinafter referred to as the “Adlc”) of 24 October 2018 which ordered for the first time since the Coty case of 6 December 2017 a clarification of the restrictions applicable to online sales within a selective distribution network.
Indeed, last October, the Adlc considered that, by demanding a hand-over for its products (eg: chainsaws, pole-saws, electric pruners, brushcutters), STIHL de facto forbade the sales of its products on its selective distributors' websites, thus removing any interest in online retail for distributors and consumers.
By ordering the hand-over, the Adlc considered that STIHL disproportionally limited competition breaching Articles 101 TFEU and L.420-1 of the French commercial Code.
Consequently, STIHL was fined 7,000,000 euros.
Moreover, the Adlc issued four injunctions against STIHL:
- STIHL was requested to amend, within 3 months from the notification of the decision, its selective distribution contracts in order to stipulate in clear terms that the authorized distributors had from now the possibility to sell all STIHL & Viking’s products online, without requiring a “hand-over” to the buyer.
- STIHL was ordered to formally notify all its authorized distributors within 3 months from the Adlc’s decision of all the changes made to the selective distribution contracts.
- STIHL was asked to publish, at its own expense, the summary of the Adlc’s decision in the printed editions of certain newspapers (ie: les Echos, Matériel et Paysage, Rustica).
- STIHL was also required to do this same publication on the websites of the said newspapers.
Following the Adlc’s decision, STIHL grounded an action before the Paris Court of Appeal on the provisions of article L464-8 of the French commercial Code in order to obtain a stay of execution regarding the four injunctions - the fine was outside the scope of STIHL’s requests.
The first President of the Court of Appeal considered several elements in order to appreciate the existence of “manifestly excessive consequences” for STIHL implementing the four injunctions, as required by article L464-8 of the French commercial code.
First, the injunction to amend the selective distribution contracts would have the effect to substantially modify the system and nature of the selective distribution of STIHL’s current network composed of 1 200 distributors in France. Such changes in the contracts imply substantial costs: 181 000 euros are estimated for the administrative costs, between 400 000 and 450 000 euros are estimated for the development of new logistic and special packaging for each type of machine, to which must be added the costs of investments for the purchase and storage of the new packaging.
According to the judge, such a change at the national level is likely to have consequences at the EU level where STIHL is engaged into contractual relationships with 8 500 distributors. Otherwise this would imply a distortion of competition with 2 different levels of services depending on the geographical location of the authorized distributor.
Moreover, alternative measures that may have been implemented by competitors are still costly and whether STIHL would implement them, such costs could neither be recovered nor compensated in the event of annulment or review of the Adlc’s decision.
Finally, the first President underlined the legal risk that may result from litigation based on the liability of the applicant companies before commercial and civil courts because of the absence of precontractual information provided to consumers in case of online purchases as well as the damage to reputation that may result from a lower quality of the service provided.
For all these reasons, the first President of the Court of Appeal pronounced a stay of execution order for all the injunctions considering they were all indivisible.
On 6 June 2019, the Paris Court of Appeal will have to rule on the merits of the Adlc’s decision of 24 October 2018.
The Court of Appeal, by reassessing the case, could:
- Confirm the Adlc’s decision pronouncing the exact same sanctions,
- Confirm the Adlc’s decision regarding the anticompetitiveness of the distribution scheme, however, the Court could also decide to modify the sanctions pronounced by the Adlc such as reducing the amount of the fine,
- Annul the Adlc’s decision considering that STIHL selective distribution scheme is not anticompetitive.