FRANCE: an interesting case law on selective distribution.

Didier FERRIER | FRANCE | 2012-09-17

Didier FERRIER

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Well-known brands have always sought to protect their image by controlling the distribution of their products…. The system of selective distribution networks has been developed to meet this end. In such networks, only distributors selected by the brand owner, based on such criteria as good standing and skill, are authorized to resell the products and, correlatively, are banned from reselling them to anyone other than consumers or selected distributors and, in particular, to non-selected resellers. Article L. 442-6.I.6 of the French Commercial Code prohibits non-selected resellers from participating in any breach of such a ban, by buying products from a selected distributor, for example.

Can the above statutory prohibition apply to an online sales site (e.g., eBay) that enables consumers to resell goods which are covered by a selective distribution arrangement?

In seeking to avoid liability for the sales transactions carried out on its website, eBay argued that its status was that of a mere host. The French Supreme Court, adopting the ruling issued by the Court of Justice of the European Union on July 12, 2011, has found that eBay is not a mere host, because, from a marketing standpoint, it plays ‘an active role of such a kind as to give it knowledge of, or control over, the data relating to the sales.’ In particular, these online sales sites ‘provide all the sellers with information enabling them to enhance their sales and assist them in defining and describing the items put up for sale by giving them the ability, in particular, to create a personalized sales space or to benefit from ‘assistant sellers” and ‘send spontaneous messages to the attention of buyers, urging them to buy, and invite bidders who did not win an auction to take a look at other similar items that they [the eBay companies] have selected.’ (cf. analysis of the Supreme Court’s decision in the IP/IT Newsletter of May 2012).

However, eBay was not held to be liable under Article L.442-6.I.6 of the Commercial Code because ‘sales made by mere private individuals cannot constitute a breach of the ban against reselling outside the selective distribution network.’

While this outcome might appear obvious, it is nonetheless somewhat rash, for it presumes that all sales carried out on the site are mere C2C transactions, whereas (i) the volumes involved in certain offers go way beyond the needs of an average consumer and (ii) certain sellers might be businesses in disguise, within the meaning of Directive 2005/29/EC of 11 May 2005 concerning unfair business-to-consumer commercial practices.

While awaiting more ‘realistic’ case law, heads of selective distribution networks would be well-advised to gather evidence of any such parallel commerce being conducted under the cover of such websites, paying special attention to the quantities offered…or purchased.

 

 

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

 

 

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