CJEU: prohibition on Internet sales breaches Art. 101(1) TFEU unless objectively justified

Although a case focussed on EU competition law, the CJEU's ruling in Case C-439/09 is of particular relevance in an eCommerce context, since it relates to a ban on online trade.

Pierre Fabre Dermo Cosmétique - as the name suggests, a French cosmetics company - had included a clause in its selective distribution contracts, that its appointed distributors were prevented from selling its cosmetics and personal care products via the Internet.

PFDC had argued (paragraphs 23-26 of the CJEU decision) that restricting online sales:

• contributes to improving the distribution of dermo-cosmetic products whilst avoiding the risks of counterfeiting and of free-riding between authorised pharmacies


• is justified since there is need for a pharmacist to be physically present when the products at issue are purchased, in order to ensure the consumer’s well-being


• visual contact between the pharmacist and the users of the product ensures ‘cosmetovigilance’, which requires health-care professionals to record and communicate any adverse reactions to cosmetic products


• does not lead to a reduction in prices, so no need to prevent such a clause

The French competition authority has methodically denied each of the claims, and ruled against PFDC. PFDC appealled to the French cour d'appel, which referred the following question to the CJEU:

"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 CJEU ruled that:

Article 101(1) TFEU must be interpreted as meaning that, in the context of a selective distribution system, a contractual clause requiring sales of cosmetics and personal care products to be made in a physical space where a qualified pharmacist must be present, resulting in a ban on the use of the internet for those sales, amounts to a restriction by object within the meaning of that provision where, following an individual and specific examination of the content and objective of that contractual clause and the legal and economic context of which it forms a part, it is apparent that, having regard to the properties of the products at issue, that clause is not objectively justified.

Article 4(c) of Commission Regulation (EC) No 2790/1999 of 22 December 1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices must be interpreted as meaning that the block exemption provided for in Article 2 of that regulation does not apply to a selective distribution contract which contains a clause prohibiting de facto the internet as a method of marketing the contractual products. However, such a contract may benefit, on an individual basis, from the exception provided for in Article 101(3) TFEU where the conditions of that provision are met.