COURT OF JUSTICE OPENS UP INTERNATIONAL JURISDICTION FOR ONLINE SALES
The Court of Justice of the European Union (“CJEU”) issued a ruling on 21 December 2016 (Case C-618/15) concerning jurisdiction to block sales on foreign websites. The CJEU ruled that a distributor can file a claim in his ‘domestic’ court for the damages suffered from online sales organized by websites operated in other Member States. This case involves a mix of selective distribution, online sales and the interpretation of the Brussels I Regulation (n° 44/2001).
Context: selective distribution agreement
SAMSUNG appointed CONCURRENCE, a French retailer of consumer electronics, as one of its selected distributors for some of SAMSUNG’s products in France. In a selective distribution system, the appointed distributors can only sell to end-users or other appointed distributors in their territory. CONCURRENCE sold SAMSUNG products in its Paris shop and on its French website. However, in the selective distribution agreement SAMSUNG prohibits all distributors to sell products online. SAMSUNG then terminated the agreement with CONCURRENCE because the latter had breached this prohibition. CONCURRENCE then contested the legality of the contractual terms with SAMSUNG before the Commercial Court in Paris on the basis that SAMSUNG did not apply its contractual terms uniformly to all its selected distributors: CONCURRENCE alleged that other distributors also marketed the SAMSUNG products online through AMAZON in the EU. However, SAMSUNG did not respond to these sales, which were also online sales and thus contrary to the selective distribution agreement.
French Courts initially refuse jurisdiction
It seems that the online sales through AMAZON set up by distributors in other Member States can easily interfere with CONCURRENCE’s distribution territory in France. CONCURRENCE alleges there is a direct or indirect involvement in contravening the prohibition on reselling outside of the selective distribution network. When CONCURRENCE filed a demand to block the foreign AMAZON websites from selling the SAMSUNG products in its ‘territory’, the Commercial Court, and later the Court of Appeal in Paris dismissed the claim on the basis that it had no jurisdiction to rule over the foreign AMAZON websites. After an appeal to the highest French Court (Court of Cassation), the following question was referred to the CJEU for a preliminary ruling: do the French courts have the power to block the online sales of SAMSUNG products by websites originating from other Member States, without the presence of an additional ‘clear connecting factor’ than the mere fact that the online content is accessible in France ?
Important ruling for online sales
Article 5 (3) Regulation n° 44/2001 (‘Brussels I’), stipulates that an action relating to tort, delict or quasi-delict can be brought in the courts for the place where the harmful event occurred or may occur. On this basis, the CJEU ruled that the French courts may have jurisdiction as the actual harm caused by the foreign AMAZON websites is located in France. France was the territory in which CONCURRENCE was selected to distribute the SAMSUNG products, and thus the only territory in which CONCURRENCE had any rights to protect. CONCURRENCE alleges before the French courts that it suffered a reduction in its sales and loss of profit in its ‘protected’ territory. The CJEU ruled that Article 5 (3) Regulation n° 44/2001 must be interpreted as meaning that the place where the damage occurred is to be regarded as the territory of the Member State which protects the prohibition on resale by other distributors. As such, CONCURRENCE can bring an action in the courts for the place where the harmful event occurred or may occur. The nationality of the websites that cause the harmful event is irrelevant (§ 34).
Next: back to France
The judgment of 21 December 2016 only answered the question whether the French courts may have jurisdiction in this case according to Brussels I. The French courts, knowing how to interpret the Brussels I Regulation, have to decide on whether they actually have jurisdiction in the present case. If so, they will have to decide on the substance.
On the substance, we identify a possible tension between:
- The prohibition to ban online selling: as the Commission set out in its Guidelines to Vertical Restraints, online sales are a form of passive selling and every distributor must be allowed to use internet to sell products (§ 52 Guidelines, 2010/C 130/01). Moreover, the CJEU already ruled that in the context of a selective distribution system it is forbidden to impose a total ban on online sales by the distributor (Pierre Fabre, Case C-439/09) as it restricts competition within the internal market (art. 101, 1 TFEU).
- The fact that, if not prohibited, the AMAZON online sales organized in other Member States can easily interfere with CONCURRENCE’s territory, and that the French courts may need to hold AMAZON liable for the direct or indirect involvement in contravening the prohibition on reselling outside of the selective distribution network.
It seems that the challenge remaining for the French Courts at the moment is nothing less than internet’s globality: as selective as SAMSUNG’s distribution network may be, the internet is not selective at all: online content can be accessed from everywhere and distributors that sell online can interfere in each other’s protected territory.
Marc Picat and Clément Claesens