On 21 December 2016, the European Court of Justice (ECJ) handed down an interesting interpretation of jurisdictional issues in cross-border competition law and online sales. The ECJ ruled that courts of a Member State have jurisdiction to hear an action to establish liability for infringement of a prohibition on sales via marketplace websites based outside such State where such sales are alleged to have harmed the party in the first Member State.
On 16 March 2012, “Concurrence”, a French retailer of consumer electronics products based in Paris, well-known for its litigiousness, entered into a selective distribution agreement with Samsung regarding high-end Samsung products called “Elite products”. This agreement, entitled “Specialist Elite Retailer”, stipulated a prohibition on online sales. However, despite the prohibition, Concurrence made sales not only through its Paris store but also via its website.
Predictably, a dispute arose between the parties, and Samsung terminated the agreement alleging that Concurrence breached the contract by selling the products on its own website. For its defence, Concurrence claimed that under EU competition law, bans on online sales are prohibited as hardcore restrictions. Additionally, Concurrence argued that Samsung was not applying its prohibition uniformly due to the fact that these same products were sold on several other websites outside France including well known on line market platforms without any reaction from Samsung.
In this context, Concurrence brought summary proceedings against Samsung and one of those on line market platforms before the Paris Commercial Court seeking a ruling that the prohibition of online sales was unenforceable, and also seeking an injunction for the withdrawal of the products from that on line market platform in several Member States on the ground that Concurrence was suffering harm as a result of that platform’s breach of the online prohibition. After having been dismissed by the commercial and appeals courts, the proceedings came before the French Supreme Court which referred to the ECJ the question as to the French courts’ jurisdiction to hear matters involving alleged harm suffered in France due to internet sales irregularly operated outside of France.
Concurrence argued (i) that the on line market platform’s sites were accessible in France and equipped to deliver products to France, even though they were not specifically targeted to the French consumer and (ii) in any event, the alleged harm was suffered in France.
The ECJ ruled that the Member State where the plaintiff suffered a loss as a result of a reduction in its sales, albeit caused by actions outside such State, must, under Article 5(3) of Council Regulation (EC) N° 44/2001, be regarded as the place of jurisdiction. Thus, the European Court did not consider it necessary to determine whether the online platforms on which the products were offered for sale were specifically targeted to consumers in the plaintiff’s territorial market (so-called “active sites”) or whether such platforms were merely accessible to such market (so-called “passive sites”) in order to confer jurisdiction.
The aftermath of this ruling for the proceedings brought by Concurrence is that the French courts should now be considered to have jurisdiction to assess whether Concurrence suffered harm as a result of sales made by sites of the on line market platform based outside France.
While the availability of the cross-border injunctive relief sought by Concurrence remains somewhat unclear, the ruling of the ECJ effectively renders unnecessary the application of the active vs. passive website theory of jurisdiction.
In parallel with the court proceedings it initiated, Concurrence has also initiated a still ongoing investigation as to whether or not Samsung was entitled to restrict online sales before the French Competition Authority.