The Advocate General of the European Court recently issued an opinion in a case referred by the French court regarding distribution of Pierre Fabre cosmetics. In its agreements for the distribution of its Avène, Klorane, Galénic and Ducray brands, Pierre Fabre had included a clause banning its distributors from selling on the internet.
The Opinion of the Advocate General is interesting in that it takes a somewhat more flexible approach to an absolute ban on internet selling in a selective distribution agreement than might otherwise have been expected. In particular:
- The French Court had been concerned that a ban on internet selling would constitute a “hardcore restriction” – in particular, because it seemed to constitute a restriction on active or passive sales to end users in a selective distribution system. The Advocate General underlined that the concept of a “hardcore restriction” is not derived from the Treaty, or even from the Vertical Restraints Block Exemption, but from the Commission’s Guidelines on Vertical Restraints. Whilst, after examination of the agreement, including its economic and legal context, such a restriction might be found to constitute a restriction on competition by object, an individual examination of the agreement would always be required. In other words, the concept of a “hardcore” restriction is not strictly part of European law, and a restriction which has been classified by the Commission as a hardcore restriction needs to be examined like any other.
- Pierre Fabre had argued that because its products had particular dermatological applications, the presence of a qualified pharmacist was required at the point of sale. As such, the products could not be sold via the internet. Fabre also argued that the internet sales ban was needed to reduce the risk of counterfeit sales. Whilst the Advocate General did not accept that the health reasons or risk of counterfeiting justified the internet sales ban in this case, he did say that it might be possible in other cases to justify a restriction on internet selling which did not go beyond what was necessary to achieve a legitimate objective. Again, the Advocate General is emphasising the need for an individual examination of each case, and rejecting the idea that a ban on internet selling will always be impossible to justify.
- The Advocate General also considered whether an internet sales ban could be justified on the ground that it protected the image of the goods by requiring that they be sold in a physical space in the presence of a pharmacist. Again, the Advocate General does not reject this argument out of hand, and is of the view that it should be examined by the national court. Selective distribution by its nature permitted the imposition of certain restrictions for the purpose of protecting the image of the product. A restriction on internet sales which was proportionate might be justified as a way of protecting the image of goods under selective distribution, even though the effect might be to restrict parallel trade. A manufacturer could impose appropriate, reasonable and non-discriminatory conditions regarding internet sales to protect the image of its product and even an absolute ban on internet sales might be proportionate in very exceptional circumstances.
- The Opinion provides some useful reminders of the necessity always to analyze restrictions on competition against basic principles rather than slavishly following published views of the Commission. The Opinion will please luxury brand owners by its nuanced views on the permissibility of restricting internet sales by selective distributors. It will be interesting to see what the Court makes of this Opinion when it hands down its judgment. The Advocate General’s implied underlining of the fact that it is the Court, rather than the European Commission which is constitutionally entitled to the final say may well find favor.