On July 13, 2018, the Paris Court of Appeal (Cour d’appel de Paris) finally upheld Caudalie’s marketplace ban, putting an end to a five-year legal saga. This judgment is highly interesting in that it goes beyond the landmark 2017 Coty judgment by ruling that platform bans may, under certain circumstances, apply to non-luxury products – a question that was left open in Coty.

Quick Recap

The dispute involves Caudalie, a French cosmetic manufacturer, and eNova, on online platform. Caudalie distributes its products via a selective distribution network. As per Caudalie’s selective distribution contracts, distributors may resell Caudalie’s products online, on the condition that they do so via their own websites. Accordingly, distributors are de facto prohibited from distributing on online platforms.

Despite the prohibition, eNova commercialized Caudalie’s products on its platform. Caudalie opposed this commercialization and applied for interim measures against eNova, requesting the cessation of sales of the products on eNova’s online platform as well as the award of damages.

The Paris Court of Appeal initially rejected Caudalie’s application for interim measures, on the basis that platform bans may amount to a hardcore restriction under European competition law. However, this ruling failed to persuade the French Supreme Court (Cour de Cassation), which ruled in favor of Caudalie and referred the case back to the Paris Court on September 13, 2017 – that is, a couple of months before the Coty judgment was adopted.

Caudalie’s Platform Ban Is Justified

Since then, in December of last year, the European Court of Justice (CoJ) delivered its judgment in the Coty case (see our article here). Unsurprisingly, the Paris Court of Appeal took stock of the Coty judgment and vetted Caudalie’s platform ban. In support of this conclusion, the Paris Court of Appeal noted that:

In the light of the CoJ’s view that luxury is also the result of the products’ “allure and prestigious image which bestow on them an aura of luxury”, Caudalies’ cosmetic products qualify as luxury products. Crucially, the Paris Court of Appeal also noted that, in accordance with DG Comp’s comments on the Coty case, platforms bans may, in certain cases, apply beyond luxury goods.

Given (i) the absence of contractual relationships between Caudalie and eNova which would compel eNova to comply with Caudalie’s quality requirements and (ii) the fact that eNova’s platform was selling Caudalie’s products next to completely non-related items (e.g. fire alarms and video surveillance cameras), the Paris Court of Appeal considered the marketplace ban appropriate and proportionate to preserve the luxury image of Caudalie’s products.

On the basis of the above, the French Court upheld Caudalie’s platform ban.

Extending Coty to Non-Luxury Goods

The Coty judgment ruled that a supplier of luxury goods can prohibit its authorized distributors from selling those goods on marketplaces. This ruling came as a surprise to a number of commentators and put a hard stop to a line of national cases, including from the French and the German competition authorities, which had taken strong positions against platform bans. Coty also left a number of open questions, in particular concerning the scope of the judgment: was it really limited to luxury goods, or could it be extended to other types of products?

One year on, national courts are progressively aligning behind the CoJ – as illustrated by the Caudalie case (which is arguably a fairly uncontroversial case, due to its obvious resemblance with Coty). In addition, a consensus appears to emerge as to non-luxury goods: platform bans may also be justified for these products. Beyond the Paris Court of Appeal’s ruling in the present Caudalie judgment, this is apparent from various recent developments:

  • DG Comp issued in April 2018 a competition policy brief in which it expressed the view that a prohibition on sales of non-luxury goods through online marketplaces would also not infringe Article 101(1), provided that the Metro criteria are satisfied;
  • In the same line, the French Competition Authority (FCA) recently validated a platform ban imposed in the chainsaw sector, due to safety concerns (see our briefing here);
  • Even in Germany – where more resistance was expected due to initial comments of the head of the Federal Cartel Office (FCO), – a recent judgment allowed for a small opening of platform bans beyond luxury goods (Aloe2Go case, validating a platform ban in the sector of food supplements, cosmetics and fitness drinks, on the basis of safeguarding proper customer advisory services).

Going forward, it will be interesting to see whether these precedents, which broaden the scope of permissible online restraints, hold up before the CoJ.

With Halloween around the corner, the French Competition Authority (FCA) is revisiting chainsaw massacre: on October 24, 2018, it adopted a decision imposing a 7 million euros fine on chainsaw manufacturer Stihl for imposing a de facto ban on online sales to its distributors (see press release here). Even more importantly, contrasting with previous French cases, the Stihl decision also clears a platform ban that the manufacturer imposed on its distributors, thus extending the reach of the Coty judgment well beyond the luxury world.

Want to learn more? Check our briefing here.