Can a manufacturer stop its distributors from selling products online to end consumers? It may want to do so to prevent online resellers from free-riding on the efforts of its brick-and-mortar merchants.
The EU’s Court of Justice will soon decide in the case of Pierre Fabre Dermo-Cosmetique SAS v. President de l’Autorite de le Concurrence & Ministre de l’Economie (C-439/09). An advocate general to the Court, Jan Mazak, recommended on March 3 that the Court hold that an absolute ban on selling goods online has as its “very object” the restriction of competition and so violates Article 101(1) TEFU. (This does not mean that such a ban would be per se unlawful, as that concept is understood in U.S. antitrust law, but it does mean that such a ban would be quite unlikely to satisfy EU competition law.) Under guidelines recently released in connection with the European Commission’s Vertical Block Exemption Regulation, at least in principle, every distributor must be allowed to use the Internet to sell products. If the Court adopts the recommendation, it will highlight yet one more difference between European and U.S. competition/distribution law – for decades in the U.S., non-price vertical restraints have been evaluated under a relaxed Rule of Reason analysis that takes into account all competitive and anti-competitive effects of a restriction. See United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967).