On June 9, 2022 the Paris Court of Appeals partially reversed an FCA prohibition decision following an appeal by wine importer Distillerie Dillon SAS (“Distillerie Dillon”) and its parent companies Bardinet SAS and Compagnie Financière Européenne de Prises de Participation SA (together, the “Appellants”). The FCA decision, issued on October 29, 2020, sanctioned the Appellants as well as several wine producers and importers, including Champagne Nicolas Feuillatte (“CNF”), for participating in an exclusive importation system for champagne in several overseas French territories.[1] The Court of Appeals largely upheld the FCA’s reasoning and finding of infringement but reduced the amount of the fine imposed on the Appellant on the grounds that the harm caused to the economy was very limited.

Background

In 2010, the Appellants and CNF entered into a contract for the importation of champagne wine in Martinique. The contract contained two exclusivity clauses, whereby Distillerie Dillon committed to distribute champagne in Martinique sourcing its needs exclusively from CNF, and CNF granted Distillerie Dillon the exclusive right to distribute its champagne on the territory.

In March 2013, a law was enacted prohibiting agreements and concerted practices that have the object or effect of granting exclusive importation rights in French overseas territories, including Martinique (the “Lurel Law”). Yet the Appellants and CNF continued to implement their contract well after the entry into force of the Lurel Law. Consequently, the FCA found that the parties had infringed the Lurel Law between Mars 22, 2013 and June 28, 2016, and imposed a total fine of 421,000 euros on the Appellants.[2]

The Court of Appeals’ ruling

Following an appeal by Distillerie Dillon and its parent companies, the Paris Court of Appeals issued its decision on June 9, 2022. It largely upheld the appealed decision but disagreed with the FCA regarding the assessment of the harm caused to the economy, leading to a fine reduction.

The FCA had concluded that the damage to the economy was “certain but limited”. It found that retailers needed to be sufficiently large to be able to sell champagne in overseas territories without relying on an import and distribution agreement, and possibilities to circumvent exclusive import agreements are limited. Therefore, the practices restrained the ability of competing importer- wholesalers to develop their activities and prevented retailers from benefiting from the competition between wholesalers.

However, despite acknowledging the absence of intra-brand competition, the Court stressed that inter-brand competition is very strong in Martinique as regards the sale of champagne to consumers, and that retailers frequently make promotional offers, making champagne a loss leader product. Therefore, the Court refuted the FCA’s conclusion that there were no competitive constraints in the champagne market in Martinique and held that, although certain, the damage to the economy was not merely limited but “very limited”. Accordingly, the Court partially overturned the FCA’s decision and reduced the Appellants’ fine from 421,000 euros to 300,000 euros.

[1]      FCA decision 20-D-16 of October 29, 2020, regarding practices implemented in the sector for the sale of champagne in the French Antilles and Guiana.

[2]      CNF was fined 216,000 euros.