Pierre Fabre manufactures and markets cosmetics and personal care products and has several subsidiaries, including, inter alia, the Klorane, Ducray, GalÇnic and Aväne laboratories, whose cosmetic and personal care products are sold, under those brands, mainly through pharmacists, on both the French and the European markets.
In 2007, the Pierre Fabre group had 20% of the French market for those products.
Distribution contracts for those products in respect of the Klorane, Ducray, GalÇnic and Aväne brands stipulate that such sales must be made exclusively in a physical space, in which a qualified pharmacist must be present.
Articles 1.1 and 1.2 of the general conditions of distribution and sale of the brands provide:
‘The authorised distributor must supply evidence that there will be physically present at its outlet at all times during the hours it is open at least one person specially trained to:
- acquire a thorough knowledge of the technical and scientific characteristics of the products (…), necessary for the proper fulfilment of the obligations of professional practice (…)
- regularly and consistently give the consumer all information concerning the correct use of the products (…)
- give on-the-spot advice concerning sale of the (…) product that is best suited to the specific health or care matters raised with him or her, in particular those concerning the skin, hair and nails.
In order to do this, the person in question must have a degree in pharmacy awarded or recognised in France… The authorised distributor must undertake to dispense the products (…) only at a marked, specially allocated outlet (…)’
In June 2006 the French Competition Authority commenced a proceedings against Pierre Fabre and concluded that the abovementioned contractual clause amounts to a ban imposed by Pierre Fabre on its authorised distributors on selling via the internet and therefore to a restriction on competition contrary to Article 81 EC and Article L. 420-1 of the French Commercial Code, and ordered it to remove from its selective distribution contracts all terms that are equivalent to a ban on internet sales of its cosmetics and personal care products and to make express provision in its contracts for an option for its distributors to use that method of distribution. Pierre Fabre was ordered to pay a fine of € 17.000,00.
On 24 December 2008, Pierre Fabre brought an action for annulment and, in the alternative, for amendment of the contested decision before the Paris Court of Appeal claiming, primarily, that the contested decision was vitiated by an error of law in that it denied the contested practice the benefit of both the block exemption provided for in Regulation No 2790/1999 and the individual exemption provided for in Article 81(3) EC.
The French Court of Appeal referred the following question to the ECJ for a preliminary ruling:
‘Does a general and absolute ban on selling contract goods to end-users via the internet, imposed on authorised distributors in the context of a selective distribution network, in fact constitute a ‘hardcore’ restriction of competition by object for the purposes of Article 81(1) EC [Article 101(1) TFEU] which is not covered by the block exemption provided for by Regulation No 2790/1999 but which is potentially eligible for an individual exemption under Article 81(3) EC [Article 101(3) TFEU]’
The ECJ first of all decided that those provisions amounted to a restriction of competition ‘by object’ and therefore fell under the scope of application of Article101(1) TFEU.
Secondly the Court stated that the clause at issue prohibited de facto the internet as a method of marketing and therefore could not be regarded as a clause prohibiting members of the selective distribution system concerned ‘from operating out of an unauthorised place of establishment’ within the meaning of Article 4(c) of Regulation No 2790/1999. Thus the clause could not benefit from the block exemption.
Finally, the ECJ referred to the French Court, in order to assess whether the selective distribution contract satisfied the conditions provided by Article 101(3) TFEU and therefore could benefit, on an individual basis, from the exception provided for in that Article, or not.
Silvia Bortolotti, Council Member and Secretary General IDI.