In December 2012 the Competition Authority fined Bang & Olufsen €900,000 for de facto prohibiting itsr approved distributors from selling the brand's products online.
Bang & Olufsen appealed against the authority's decision, claiming the benefit of an individual exemption. It relied specifically on the argument – which has become a classic in selective distribution – that a total absolute prohibition of online sales protects the network against the passing off from which bricks-and-mortar sales outlets suffer.
On March 13 2014 the Paris Court of Appeal dismissed the argument, finding that Bang & Olufsen had failed to demonstrate why less restrictive solutions than a total absolute prohibition could not have been chosen to limit the alleged risk of passing off.
However, the court also clarified that, unlike the complex products in the Bang & Olufsen range, its less costly, less elaborate products are suited to being sold online as they do not require a demonstration by a sales assistant in a bricks-and-mortar store or generate high storage or distribution costs. By suggesting this distinction between simple and complex products, the appeal court appeared to say that – in practical terms – a judge might accept that an individual exemption can justify the online selling prohibition, but it is the defendant which must initiate the discussion properly.
The contribution made by the judgment is of particular interest since it follows a Supreme Court judgment in another case (Pierre Fabre), in which the court dismissed the appeal because the manufacturer "had merely" claimed the benefit of the individual exemption without producing proof that the obligation for a pharmacist to be present in the bricks-and-mortar sales outlet contributed to – and was indispensable for – economic progress.
Finally, the appeal court turned its attention to the gravity of the infringement, considering that it should be put into perspective since, at the time of the authority's decision, the law and case law on prohibiting online sales were still fluctuating. Consequently, it significantly reduced the fine from €900,000 to €10,000.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide.
Emmanuelle van den Broucke and Sara Pomar