In December 2012 the French Competition Authority fined the Bang & Olufsen companies €900,000 forde facto prohibiting their approved distributors from selling the brand’s products online.
Bang & Olufsen lodged an appeal against the Authority’s decision, claiming the benefit of an individual exemption. The companies 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 brick and mortar sales outlets suffer.
The Court of Appeal judgment of March 13, 2014 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 risk of supposed passing-off.
However, the Court also took pains to clarify that, unlike the complex products in the Bang & Olufsen range, its less costly and less elaborate products are suited to being sold online as they do not require a demonstration by a sales assistant in a brick and mortar store or generate high storage or distribution costs. By suggesting this distinction between simple and complex products, the Court of Appeal would seem to be saying that – in practical terms – a judge might accept that an individual exemption can justify the online selling prohibition, but it is the defendant who has to initiate the discussion properly.
The contribution made by the judgment is of particular interest since it follows a French Supreme Court judgment in another case (Pierre Fabre), in which the Supreme Court judges 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 brick and mortar sales outlet contributed to – and was indispensable for – economic progress.
Finally, the Court of Appeal 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 granted a spectacular reduction of the fine from €900,000 to €10,000.