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Selective Distribution and the Internet: Lessons from Case C-439/09 Pierre Fabre Dermo-Cosmétique (13 October 2011)

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Competition on the Internet

Part of the book series: MPI Studies on Intellectual Property and Competition Law ((MSIP,volume 23))

Abstract

In Pierre Fabre, a system of selective distribution for cosmetics was in issue which demanded that sales be made exclusively in a marked, specially allocated outlet and in the presence of a qualified pharmacist. Addressing the question whether the prohibition of internet sales pursued a legitimate aim and did so in a proportionate manner, the Court emphasised that the aim of maintaining a prestigious image was not a legitimate aim for restricting competition. The case Copad v Dior, by contrast, arose from a licensing agreement between a brand owner and a contract manufacturer which specifically prohibited the manufacturer from selling to discount stores. The Court held that the quality of luxury goods was not just the result of their material characteristics, but also of the allure and prestigious image which bestowed on them an aura of luxury. Therefore, impairment of that aura was likely to affect the actual quality of those goods. Crucially, this meant that no exhaustion occurred with regard to these goods under Articles 7(1) and 8(2) of the Trade Marks Directive. Despite their differences, these two cases address similar questions in incompatible ways. Stefan Enchelmaier shows that the Court’s approach in Pierre Fabre is preferable.

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Notes

  1. 1.

    See the figures reported by Robertson, Online sales under the Commission’s Block Exemption Regulation on vertical agreements, Part 1, (2012) 33 ECLR 132, 132 ff.

  2. 2.

    Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices, [2010] OJ L 102/1.

  3. 3.

    Case C-439/09 Pierre Fabre v Président de l’Autorité de la concurrence, [2011] ECR I-09419, para. 41; Case T-19/92 Leclerc v Commission (“Yves Saint Laurent”) [1996] ECR II-1851, para. 112; Commission, Guidelines on Vertical Restraints, [2010] OJ C 130/1, para. 175, all with further references.

  4. 4.

    Cases 26/76 Metro v Commission (“Metro I”) [1977] ECR 1875, para. 21; 107/82 AEG Telefunken v Commission [1983] ECR 3151, para. 42; 75/84 Metro v Commission (“Metro II”) [1986] ECR 3021, para. 45.

  5. 5.

    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, [1999] OJ L 336/21.

  6. 6.

    Recital 8 and, in particular, Rec. 10: “severe restrictions of competition such as minimum and fixed resale-prices, as well as certain types of territorial protection”.

  7. 7.

    Guidelines (supra note 3), para. 23: “hardcore restrictions of competition, which are restrictions of competition by object”, and similarly para. 96: “restrictions of competition by object and in particular hardcore restrictions of competition”.

  8. 8.

    [2000] OJ C 291/1; para. 51 is the only passage in which the Commission deals with the internet.

  9. 9.

    Brenning-Louko/Gurin/Peeperkorn/Viertiö: Vertical agreements: new competition rules for the next decade, (2010) 2 Competition Law Newsletter 14, 18–19 (http://ec.europa.eu/competition/publications/cpn/2010_2_4.pdf).

  10. 10.

    Guidelines (supra note 3), para. 52; this was already its position in the Guidelines of 2000 (supra note 8). This position is criticised as “over-inclusive and not reflective of the complexities of modern e-commerce” by Velez, Legislative Comment – Significant changes to the block exemption on vertical restraints, (2011) 32 ECLR 212, 216, who argues (at 217) that a distributor would not take on the cost of setting up its website in languages that are not spoken in its territory if it were not actively targeting customers outside its territory, so that language should be determinative in labelling an activity as passive or active selling. Pischel, Der Internetverbrieb nach der neuen Schirm-Guppenfreistellungsverordnung für den Vertikalvertrieb und deren Leitlinien, (2010) GRUR 972, 973, is concerned that “foreign”-language versions of websites blur the distinction between active and passive sales. His concern seems exaggerated: specific language versions might be seen as no more than the electronic equivalent to a notice to customers saying, “We speak English/Man spricht Deutsch” etc.

  11. 11.

    Guidelines (supra note 3), para. 53.

  12. 12.

    Guidelines (supra note 3), para. 54.

  13. 13.

    Guidelines (supra note 3), para. 56.

  14. 14.

    Guidelines (supra note 3), paras 52(a), (c), 54. Concerning a cap on turnover generated via the internet, it can only be noted in passing here that the Bundesgerichtshof, Germany’s highest court in matters of civil law, allowed a cap of 50 % imposed by a manufacturer of luxury perfumes on its selected distributors: BGH, judgment of 4 Nov. 2003, KZR 2/02 “Depotkosmetik im Internet”, GRUR 2004, 351. For the time being, there is no immediate necessity to revise this jurisprudence: mere guidelines, such as the ones on vertical restraints, do not force national courts to fall in line in accordance with Articles 3(2) and 16 of Reg. 1/2003; on this point, see Case C-226/11 Expedia v Autorité de la concurrence, judgment of 13 Dec. 2012, not yet reported, paras 24–33. At any rate, the case before the Bundesgerichtshof concerned the abuse of a dominant position.

  15. 15.

    Guidelines (supra note 3), para. 57.

  16. 16.

    We learn from Advocate General Mazák’s opinion that in fact, pharmacies accounted for 80 % of Pierre Fabre’s sales (para. 6 of the opinion).

  17. 17.

    Pierre Fabre (supra note 3), paras 9–14.

  18. 18.

    Pierre Fabre (supra note 3), paras 20–21, 24–26.

  19. 19.

    Opinion, paras 24–26.

  20. 20.

    Opinion, paras 28, 30.

  21. 21.

    This also works the other way round, i.e. some shoppers research products online but then buy them in a physical outlet. Some might even search online, and compare prices, while they are out shopping in the physical world. The question need not be pursued here.

  22. 22.

    Opinion, para. 40.

  23. 23.

    Opinion, para. 44.

  24. 24.

    Opinion, para. 54.

  25. 25.

    Opinion, para. 61.

  26. 26.

    Pierre Fabre (supra note 3), paras 32, 33.

  27. 27.

    Case T-61/89 Dansk Pelsdyravlerforening v Commission [1992] ECR II-1931, para. 98.

  28. 28.

    Guidelines (supra note 3), paras 47, 60.

  29. 29.

    Pierre Fabre (supra note 3), para. 38.

  30. 30.

    Pierre Fabre (supra note 3), paras 39, 40.

  31. 31.

    Pierre Fabre (supra note 3), paras 43, 44 with references to Deutscher Apothekerverband, paras 106, 107 and 112, and Ker-Optika, para. 76.

  32. 32.

    Pierre Fabre (supra note 3), para. 46.

  33. 33.

    See, e.g., Commission Decision 85/616/EEC Villeroy & Boch [1985] OJ L 376/15, paras 24, 25.

  34. 34.

    Case T-19/91 Vichy v Commission [1992] ECR II-415, paras 69–71.

  35. 35.

    Pierre Fabre (supra note 3), paras 53, 54.

  36. 36.

    Pierre Fabre (supra note 3), paras 56–58.

  37. 37.

    Cour d’Appel de Paris, judgment of 31 January 2013, case no. 2008/23812, p. 19. Thanks to Rechtsanwalt Mark E Orth for making the judgment available to me.

  38. 38.

    Case C-59/08 Copad SA v Christian Dior SA [2009] ECR I-3421.

  39. 39.

    Copad v Dior (supra note 38), para. 8.

  40. 40.

    Directive 2008/95/EC to approximate the laws of the Member States relating to trade marks (Codified version) [2008] OJ L 299/25.

  41. 41.

    The Article reads: “Article 7–Exhaustion of the rights conferred by a trade mark. 1. The trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent.

    2. Paragraph 1 shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialisation of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market.”

  42. 42.

    Opinion in Copad v Dior (supra note 38), paras 31–33 and 35.

  43. 43.

    Opinion in Copad v Dior (supra note 38), paras 46–47 and 50–52.

  44. 44.

    Similar reasoning can already be found in Cases C-469/00 Ravil v Bellon and Biraghi [2003] ECR I-5053, and C-108/01 Consorzio del Prosciutto di Parma et al. v Asda Stores and Hygrade Foods [2003] ECR I-5121, with a critical discussion by Enchelmaier, (2004) 41 CML Rev. 825.

  45. 45.

    Copad v Dior (supra note 38), paras 23–26 and 32.

  46. 46.

    Opinion in Copad v Dior (supra note 38), para. 31.

  47. 47.

    Opinion in Copad v Dior (supra note 38), para. 25.

  48. 48.

    See, e.g. Case C-206/01 Arsenal Football Club v Matthew Reed [2002] ECR I-10273, paras 47–48.

  49. 49.

    See, e.g., Case C-487/07 L’Oréal SA, Lancôme perfums et beauté & Cie SNC, Laboratoire Garnier & Cie v Bellure NV, Malaika Investments Ltd, Starion International Ltd [2009] ECR I-5185, para. 58: apart from the function as a guarantee of origin, the CJEU also recognises the functions of communication, investment, advertising; for a critical discussion of this see Enchelmaier, The Smell of Success: L’Oréal v Bellure in the European Court of Justice and in the Court of Appeal, (2010) 12 European Current Law xi–xiv.

  50. 50.

    Velte, Verbot des Vertriebs von Produkten über das Internet als Wettbewerbsbeschränkung, (2012) EuZW 19, 21, in the context of Art. 101(3).

  51. 51.

    Joined Cases 56 and 58/64 Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission of the European Economic Community [1966] ECR 429.

  52. 52.

    Guidelines (supra note 3), para. 7; the italicised passage is a paraphrase of Consten and Grundig (supra note 51), 340.

  53. 53.

    Case C-10/89 SA CNL-SUCAL NV v Hag GF AG (“Hag II”) [1990] ECR I-3711, para. 13: “Trade mark rights are, it should be noted, an essential element in the system of undistorted competition which the Treaty seeks to establish and maintain”; idem in Case C-9/93 IHT Internationale Heiztechnik GmbH and Uwe Danzinger v Ideal-Standard GmbH and Wabco Standard GmbH [1994] ECR I-2789, para. 45.

  54. 54.

    Case 19/84 Pharmon v Hoechst [1985] ECR 2281, para. 23, and the opinion of Mancini AG at 2288, right col.

  55. 55.

    See, e.g., Cases C-348/04 Boehringer Ingelheim v Swingward [2007] ECR I-3391, C-276/05 Wellcome v Paranova [2008] ECR I-10479; Joined Cases C-400/09 and C-207/10 Orifarm and Paranova v Merck Sharp & Dohme, [2011] ECR I-07063, with ever more intricate questions regarding colour schemes, fonts, font sizes and other minute details of packaging design.

  56. 56.

    Supra note 49.

  57. 57.

    Endorsed by the (then) Court of First Instance in Case T-168/01 GlaxoSmithKline Services v Commission [2006] ECR II-2969, paras 118–122, 273–274, reversed on appeal by the Court of Justice in Joined Cases C-501/06 P et al. GlaxoSmithKline Services v Commission [2009] ECR I-9291, paras 62–63, and with additional reasoning in Joined Cases C-468/06–C-478/06 Sot. Lelos kai Sia EE et al. v GlaxoSmithKline [2008] ECR I-7139, paras 53–57.

  58. 58.

    Seeliger and Klauß, Auswirkungen der neuen Vertikal-GVO und Vertikal-Leitlinien auf den Internetvertrieb, (2010) GWR 233, sub 4d, are critical of the requirement of equivalence, and instead suggest that here, too, the question should be whether the criteria regarding the website are necessitated by the characteristics of the product. An even more radical stance is taken by Velez, Legislative comment – Recent developments in selective distribution, (2011) 32 ECLR 242, 246: “While it is still young, the internet is now a mature distribution channel that does not warrant special protection. Suppliers should be able to place similar restrictions on online sales rather than having to comply with confusing equivalency requirements in some cases but not in others.”

  59. 59.

    See on the permissibility of this Joined Cases C-2/01 P and C-3/01 P Bundesverband der Arzneimittel-Importeure and Commission of the European Communities v Bayer (“Adalat”) [2004] ECR I-23, paras 83–89, 102–103, 110, 123, 141; Sot. Lelos v GlaxoSmithKline (supra note 57), paras 68–73; on permissible controls by manufacturers as to which of their distributors have “leaked” goods to outsiders, see Case C-244/00 van Doren & Q [2003] ECR I-3051, paras 32–41.

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  1. Faculty of Law, Lincoln College, University of Oxford, Oxford, UK

    Stefan Enchelmaier

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Correspondence to Stefan Enchelmaier .

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  1. Max Planck Institute for Innovation and Competition, Munich, Germany

    Gintarė Surblytė

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Enchelmaier, S. (2015). Selective Distribution and the Internet: Lessons from Case C-439/09 Pierre Fabre Dermo-Cosmétique (13 October 2011). In: Surblytė, G. (eds) Competition on the Internet. MPI Studies on Intellectual Property and Competition Law, vol 23. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-55096-6_2

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