FRANCE: Crying foul over the prohibition / limitation of online selling.

Didier FERRIER | FRANCE | 2012-11-15

Didier FERRIER

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In an opinion issued on 18 September 2012 regarding the ‘competitive functioning of electronic commerce,’ the French Competition Authority reaffirmed its desire to see the practice of online selling grow freely.

Without waiting for the Paris Court of Appeals’ upcoming decision, i.e. the latest and perhaps last step in the ongoing Pierre Fabre Cosmétique ‘saga’ (Comp. Council, 29 Oct. 2008, no. 08-D-25: Newsletter no. 29; Paris Court of Appeals, 29 Oct. 2009, ord., Case no. 09/01119: Newsletter no. 39; CJEU, 13 Oct. 2011, Case no. C-439/09: Newsletter no. 59), the Competition Authority, under the pretext of ‘evaluating the intensity of the competitive pressure that online commerce exercises over conventional distribution channels’ (a question it had already addressed in a decision dated 1 July 2011!), reasserted the analysis it had put forward in its decision of 29 October 2008 and the CJEU’s response to that analysis in its decision of 13 October 2011.

Based on a study of three business sectors (household appliances, perfumes and luxury cosmetics, cosmetic products sold on the basis of pharmaceutical advice), the Competition Authority makes some observations that were already obvious:

  1. the expansion of electronic commerce in France,
  2. the practice of offering lower sales prices online than offline, while acknowledging that the difference is slight and could be due to cost differences,
  3. the ‘downward price pressure’ exercised by price comparers, marketplaces and pure players,
  4. the fact that online and offline distributors are not perfectly substitutable.

The opinion then points to the principle of commercial liberty – i.e. that suppliers are free to organize their distribution as they see fit – only then to limit its scope by stigmatizing behavior that hinders the development of offline sales, in particular:

  1. refusals to supply distributors who engage in offline selling,
  2. product differentiation between offline and online distribution channels,
  3. price differentiation between the same two channels,
  4. excessive requirements for the operation of physical points of sale in addition to websites.

The Competition Authority concludes by warning that it will be vigilant in assuring a ‘balance’ between the expansion of e-commerce and the preservation of distribution via physical points of sale.

It is quite surprising that the opinion does not address such essential issues as…

  1. whether or not the prohibition or limitation of online sales actually does have anticompetitive effects,
  2. the evaluation of the costs involved in each mode of distribution,
  3. the consideration of the efficiency gains achieved by protecting offline sales,
  4. the recognition of online sellers’ parasitic relationship vis-à-vis physical points of sale, and
  5. the characterization of online points of sale or the definition of passive online sales,

for these issues are key to understanding the ‘competitive functioning of electronic commerce’ and to determining the right dosage of protection to be given to physical commerce.

 

 

Didier Ferrier , agency, distribution and franchising Country Expert for France.

 

 

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