The French Competition Authority ("FCA") has imposed a fine of EUR 7 million on Stihl, a manufacturer of mechanical garden equipment, for prohibiting the sale of certain dangerous products on its distributors' websites between 2006 and 2017. The FCA, however, confirmed Stihl's right to ban the sale of its products on online platforms.
| key takeaways - what you need to know |
- The creation of a selective distribution network can be justified for the supply of high quality and technical products that also present a safety risk to end users.
- However, a requirement that goods are delivered by hand by authorised distributors would not be justified as this would amount to a de facto exclusion of online sales.
- Applying the "Coty" criteria, the FCA nevertheless considers that a supplier may prevent its authorized distributors from reselling its products via third party online platforms.
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This is the first case since the European Court of Justice's Coty judgment in which the FCA has considered restrictions on online sales imposed on members of a selective distribution network.
Stihl, a manufacturer of mechanical garden equipment such as chainsaws, brush cutters, and pole-saws imposed two restrictions on online sales by its authorised distributors:
- First, authorised distributors were required to hand deliver those products that Stihl deemed to be "dangerous". In particular, these products either had to be collected by the customer at the distributor's premises or they had to be delivered by the distributor itself to the customer. In particular, the authorised distributors were prevented from using third party logistics companies to deliver any "dangerous" products to their customers. According to the FCA, this amounted to a de facto prohibition of the online sale of the relevant products.
Interestingly, neither EU nor national rules governing the sale of the products which Stihl had described as "dangerous" required those products to be delivered by hand. The FCA also noted that none of Stihl’s competitors imposed such constraints on their distributors. Thus, the FCA held that this de facto restriction on online sales was an infringement of competition "by object" which was not justified by the efficiencies claimed by Stihl (which boiled down to the assurance that customers would listen to the security recommendations).
- Second, Stihl prohibited the resale of all of its products on third party platforms. The FCA considered that this prohibition was justified in light of the Coty precedent. Crucially, the FCA noted that the Coty judgment is relevant not only for luxury products but also for any products where there is a need to protect their quality or intended use.
In the present case, the FCA considered that Stihl was entitled to make sure that its products were sold only by authorised distributors liable to provide timely and relevant advice on the safe use of those products and to control the implementation of its sales criteria. In this regard, authorising the resale of these products on third party platforms could have prevented Stihl from carrying out these controls for two main reasons:
— Stihl may not have been aware of the use of third party platforms by its distributor; and
— it would have had no contractual right to act against a platform that failed to comply with its sales criteria.
The FCA finally noted that the platform ban was not disproportionate given the very limited use of platforms by retailers in general.
The FCA decision is a new illustration of the balance struck by competition authorities between the necessity to protect selective distribution networks and the freedom to sell online.
Whilst the FCA is keen to ensure distributors' freedom to sell online, it confirms that their use of online platforms may infringe quality or safety requirements applying to certain products
