European General Court rules on selective distribution in relation to EU antitrust rules

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The European General Court (EGC) rendered a judgement on 23 October 2017[1] in which it was confirmed that a selective distribution system can be in conformity with EU antitrust rules in case specific requirements are met.

The judgement was given in an appeal brought by the European Confederation of Watch Repairers’ Associations (CEAHR) against a July 2014 decision of the European Commission on a complaint by the CEAHR against a restriction imposed by luxury watch manufacturers on their authorized repairers to supply independent non-authorized repairers.

The ECG considered that the aim of maintaining a prestigious image is not a legitimate aim for restricting competition and in relation thereto referred to the judgement of the European Court of Justice (ECJ) of 13 October 2011 in the case Pierre Fabre Dermo-Cosmétique[2].

This consideration is contrary to the recent opinion of the Advocate General Wahl in the pending proceedings before the ECJ in the case Coty/Akzente [3].

The EGC however also considered that that it follows from the above judgement that, although preserving a brand image cannot justify a restriction of competition by the establishment of a selective distribution system, the objective of preserving the quality of products and ensuring their proper use may, in itself, justify such a restriction.

The EGC then found that the maintenance of a specialist trade capable of providing specific services as regards high-quality and high-technology products is a legitimate requirement and that, if aimed at such an objective, the organisation of a selective distribution network is not prohibited by European antitrust law (article 101 (1) TFEU), to the extent that resellers are chosen on the basis of (1) objective criteria of a qualitative nature, laid down uniformly for all potential resellers and not applied in a discriminatory fashion, (2) that the characteristics of the products in question necessitate such a network in order to preserve its quality and ensure its proper use and, finally, (3) that the criteria do not go beyond what is necessary.

The appeal of the CEAHR was rejected.

It is interesting to note that the interpretation of the Pierre Fabre Dermo-Cosmétique case by the EGC remarkably differs from the Advocate General Whahl’s opinion as regards the position of selective distribution networks under European antitrust law. Where the EGC finds that it follows from the ECJ judgement in that case that preserving a luxury brand image alone is insufficient for restricting competition by establishing a selective distribution network, the Advocate General explicitly held that selective distribution systems relating to the distribution of luxury and prestige products, and mainly intended to preserve the ‘luxury image’ of those products are not necessarily caught by the prohibition of agreements, where they meet the three criteria referred to by the EGC.

Please contact our partner Jaap van Till for information on the legal aspects of international selective distribution.

[1] ECLI:EU:T:2017:748

[2] ECLI:EU:C:2011:649

[3] ECLI:EU:C:2017:603