Caudalie wins their case against the 1001pharmacies platform

In their quest to valorise brand image, companies may have recourse to a selective distribution network, which was considered legal in a decision of the Paris Court of Appeal on 13 July 2018, subject to the choice of the resellers being made according to objective criteria of a qualitative nature.

In its economic definition, the trademark constitutes a rallying sign for the customers. When acquiring a product bearing such a trademark, the consumer is in a position to expect to find the associated quality, and particularly so regarding luxury goods.

In a strategy to preserve the luxury image of their products, Caudalie set up a selective distribution network with the pharmacists, organised around two types of contracts:

-One for sales within the pharmacy,

-The other linked to the first, allowing the addition of online sales over the Internet.

The aim of the strategy was therefore to exclude the commercialisation of their products via third party platforms.

Pursuant to the implementation of this process, Caudalie ordered the company Enova Santé, creator of the 10001pharmacies platform through which pharmacists can sell their products to the public, to cease commercialisation of Caudalie brand products and delete any references to these products from the site.

From several court decisions, a lengthy debate emerged on whether or not Caudalie was entitled to prohibit the pharmacists in their network from visibly using the third party platforms for internet sales of their products.

The litigation ended with a decision on 13 July 2018 from the Paris Court of Appeal which considered that prohibiting online sales of Caudalie products on a platform such as 1001pharmacies did not constitute a hardcore restriction of competition.

In the case at hand, Caudalie brand products are classified as luxury products and the mere fact that they are parapharmacy products does not confer on them the characteristic of banal (sic) products, contrary to the statements of Enova Santé. Thus, the prohibition to sell via third party platforms appears proportionate to the aim of preserving the luxury image of these products. It was in fact appropriate to observe that the display conditions on was of a nature to harm the luxury image that Caudalie may legitimately wish to protect. As an example, alongside the Caudalie products, the platform proposed products with vastly differing characteristics such as fire alarms and CCT cameras.

This decision reminds us of the Coty affair of 6 December 2017 (The case Coty of 6 December 2017) in which the European Court of Justice stated that “the quality of such goods is not just the result of their material characteristics, but also of the allure and prestigious image which bestow on them an aura of luxury, that that aura is essential in that it enables consumers to distinguish them from similar goods.

Thus, while this decision confirms the jurisprudence according to which only an objective justification can legitimize a ban on sales in a selective distribution network, a nuance should be added. The decision demonstrates that an analysis must be carried out on a case by case basis, in particular concerning the hypotheses where a company restricts its distribution network for questions of image. For indeed, an assessment of whether or not something harms a brand image necessarily induces an element of subjectivity.