A chainsaw manufacturer cannot force its distributors to hand-deliver its products when the sale was made online, according to the FCA decision 18-D-23 of October 24, 2018. However, the first President of the Paris Court of Appeal ordered a stay of execution regarding the FCA injunctions which required it to modify the manufacturer’s distribution agreements.
On January 23, 2019, the first President of the Paris Court of Appeal ordered a stay of execution of all of the injunctions issued by the FCA against Stihl for having restricted the online sales of its authorized distributors by demanding a hand-over for its power equipment, including products purchased online.
Background
On October 24, 2018, the FCA sanctioned the Stihl group, a manufacturer of power tools for gardening (chainsaws, brushcutters, trimmers), for having restricted online sales by its authorized distributors. More specifically, Stihl required its distributors to hand-deliver its products to clients, including when they were purchased online.
In line with the Pierre Fabre case,[1] the FCA decided that requiring in-store pick-up or hand-delivery to the home of the purchaser de facto prevented online resale and constituted a restriction by object of competition law. Despite Stihl’s user- safety justification, the FCA considered that requiring hand-delivery was not necessary since, on the one hand, the law in force only required that a user manual be provided to customers and, on the other hand, other competing manufacturers did not require hand-delivery. In addition to a financial penalty of €7 million, the FCA ordered Stihl to amend its existing distribution agreements to stipulate, in clear terms, that authorized distributors who are members of its selective distribution network have the right to sell all of the manufacturer’s products online, without any requirement to hand-deliver them to the purchaser.
For the first time since the ECJ’s Coty judgment,[2] the FCA also (i) upheld the legality of the application of selective distribution to this type of product, given the necessity of ensuring proper use and (ii) approved the prohibition of resale through third-party online platforms in a sector other than luxury goods, owing in particular to user safety and product quality requirements.
The stay of execution of the injunctions
Following this decision, Stihl filed a request for a stay of execution on the basis of Article L464-8 of the French Commercial Code. This provision allows for a suspension of the obligation to comply with the FCA injunctions if their implementation potentially has manifestly excessive consequences in the event of annulment or alteration of the FCA decision.
The first President of the Paris Court of Appeal, in its order on January 23, 2019, granted Stihl’s request and ordered a stay of execution of the injunctions. The order states that the implementation of the injunction measures would require significant investments, including, in particular, new logistics, special packing arrangements for each type of machine and new packaging, as well as the creation of packaging storage areas. If the FCA decision were to be annulled, a return to the initial distribution arrangement would, in practice, be impossible.
Moreover, the first President of the Paris Court of Appeal notes that the implementation of injunctions only in France would lead to a distortion of competition within the distribution network, insofar as distributors in France would not be subject to the hand-delivery requirement, unlike distributors located in other member States.
The Paris Court of Appeal will have to rule on the merits of the case in June 2019.
[1] ECJ October 13, 2011, case C-439/09, Pierre Fabre Dermo-Cosmétique (Sté) v. President of the FCA.
[2] ECJ December 6, 2017, case C-230/16, Coty Germany GmbH v. Parfümerie Akzente GmbH.