The Paris Court of Appeals has ruled on an appeal lodged against a decision by the French Competition Authority regarding practices in the field of the selective distribution of hi-fi and home cinema equipment (see IDI monthly newsletter of February 2013). The companies which had been imposed a €900,000 fine argued particularly that “the prohibition of online marketing protects the network of free-riding phenomena” and therefore claimed that they qualified for an individual exemption.
The Court refused to pass judgment on the essential nature of the total and absolute ban of online sales imposed on distributors, as the fined companies had failed to demonstrate “how certain possible alternatives, less restrictive than the total and absolute ban on online sales, would lead to the alleged risk of free-riding; in the instant case, some less elaborate and cheaper products in the range (…) such as earphones, headphones and accessories may be particularly suited to online sales in that, unlike complex products in the range, they do not require in-store demonstration in all cases, thereby reducing the alleged risk of free-riding and, on the other hand, they do not generate significant storage or distribution costs, reducing the investment to be made by the distributors for the creation of a website.”
However, the Court reduced the fine on the grounds that “the applicable law and case law in the area were not clearly settled” at the time of the disputed practices, such that there was “uncertainty in the area” so the Court “put into perspective the severity of the practice” and reduced the fine by over 90%.
Didier Ferrier, agency, distribution and franchising country expert for France