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Internet Sales Ban Breaches Competition Law

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A French firm that manufactures cosmetics and requires them to be sold only in a physical space and when a qualified pharmacist is present has found that its de facto ban on sales of its products over the Internet is a breach of EU competition law, a decision which may have serious implications for a number of businesses.

The company argued that the requirement was necessary because of possible dermatological reactions to its products and the need to protect a ‘quality’ brand image. The French national court disagreed and referred the matter to the European Court of Justice (ECJ) for a ruling.

The ECJ concluded that the imposition of criteria on resale had to represent a proportionate way of pursuing a legitimate aim. The maintenance of a superior brand value was not such an aim. Nor could the refusal to authorise a ‘place of establishment’ for the sale of the goods constitute a reason to exempt the products from the usual competition rules.

The European Commission’s guidance on Internet sales says that any criteria for authorising sales must operate in a broadly equivalent way for ‘bricks and mortar’ sales outlets and Internet sales, and must give a retailer the ability (in principle) to be free to conduct online sales.