Paris Court of Appeal confirms: Pierre Fabre breached competition law by banning internet sales within its selective distribu…

In 2006, the French Competition Authority (the Conseil) started to investigate whether a number of manufacturers of cosmetics and personal care products had violated competition law by preventing internet sales of their products. Of the eleven companies concerned, ten agreed to amend their distribution agreements. Pierre Fabre, the sole undertaking refusing to amend its policy, was imposed a fine of € 17,000.

After Pierre Fabre lodged an appeal against the decision of the Conseil, the Paris Court of Appeal made a preliminary reference to the ECJ (Case C-439/09). The Court of Justice provided the following guidance:

- A contractual clause requiring sales of cosmetics and personal care products to be made in a physical space in the presence of a qualified pharmacist, resulting in a ban on internet sales, amounts to a restriction by object in the meaning of Article 101(1) TFEU where, having regard to the properties of the products at issue, such clause is not objectively justified.

- A clause prohibiting de facto internet sales cannot benefit from the Vertical Block Exemption Regulation. It can nonetheless benefit from an individual exemption insofar as the four cumulative conditions of Article 101(3) TFEU are met.

In its judgment of 31 January 2013, the Paris Court of Appeal essentially applies the two cited principles to the selective distribution network of Pierre Fabre.

As to the existence of an ‘objective justification’, the arguments of Pierre Fabre are rebutted one by one. Thus, the arguments related to the protection of consumer harm are deemed unconvincing. Similarly, the need to offer personalized advice to the customer does not constitute a valid justification, since such advice can also be provided on a webpage – as the practice of Pierre Fabre’s competitors illustrates. The Court concludes that the clauses qualify as ‘restrictions by object’.

The Court next denies that the clauses meet the cumulative requirements of Article 101(3) TFEU. In particular, it dismisses the three efficiency gains invoked by Pierre Fabre, i.e. the guaranteeing of personalized advice, the prevention of imitation products and the prevention of parasitism. As to the first and third elements, the Court finds that an absolute ban on internet sales is not indispensable to meet these objectives. As for the second one, it holds that there is no causal link between the permitting of internet sales and the trade in imitation products.

The decision of the Conseil is accordingly upheld.