Paris Court of Appeal, January 31, 2013, Pole 5, Chamber 5-7, n° 2008/23812

French Competition Authority, decision 12-D-23 dated December 12, 2012 relating to practices implemented by Bang & Olufsen in the sector of the selective distribution of Hi-Fi and home cinema equipment.

Through two recent decisions, the French Competition Authority and the Paris Court of Appeal, both applying the analysis grid set by the European Court of Justice ("ECJ") in the Pierre Fabre decision of October 13, 2011, reaffirm the illegal nature of an on-line sales ban imposed by a manufacturer on its authorised distributors.

The Paris Court of Appeal took a stance on this question in a decision dated January 31, 2013 in relation to an appeal brought by Pierre Fabre against decision 08-D-25 of the French Competition Authority dated October 29, 2008. In this case, the Court of Appeal stayed the proceedings in order to submit an interlocutory question to the ECJ seeking to establish whether a general and absolute ban on internet sales imposed on authorised distributors within the framework of a selective distribution network constituted a restriction of competition by object, excluding the benefit of the block exemption on vertical agreements, but capable of benefiting from an individual exemption.

On October 13, 2011, the ECJ ruled that the clause in a selective distribution agreement prohibiting the distributors of a cosmetics company from selling its products online constituted a restriction of competition by object, unless the clause was objectively justified. Such a ban could not benefit from an exemption by category but could benefit from an individual exemption.

In its ruling of January 31, 2013, the Paris Court of Appeal made a direct application of the ECJ reply and confirmed the decision of the Competition Authority condemning Pierre Fabre for having restricted online sales of its cosmetic products by members of its authorised network.

The French Competition Authority had already applied the solution provided by the ECJ in its decision 12-D-23 of December 12, 2012, by imposing a fine of €900.000 on Bang & Olufsen, manufacturer of Hi-Fi equipment, for having prohibited its authorised distributors from selling its products online. It had also ordered the company to modify its existing selective distribution agreements or to issue a general circular, stipulating, in clear terms, that its authorised distributors were entitled to carry out internet sales.

The illegal nature of an online sales ban within the framework of a selective distribution network is now part of well established case law, both at European and at national level.