Online selling inseparable from selective distribution: Bang & Olufsen heavily penalized.

On December 12 2012 the Autorité de la concurrence imposed a €900,000 fine on the Danish company Bang & Olufsen for having prohibited its approved distributors from selling its products online¹. The Authority noted that “such anti-competitive practices are systematically considered, both in European Union and National law, as certainly being a serious breach of conduct.”

Bang & Olufsen is a company producing top of the range Hi-fi systems. In its European contract for selective distribution, unaltered since 1989, the aforementioned company banned the sale of its products by mail order. Based on an internal memo and statements by approved distributors, the Authority discovered that online sales had also been prohibited.

This decision corroborates an earlier ruling in 2008², which fined the Pierre Fabre Dermo-Cosmétique company for a ban imposed on its approved distributors against Internet sales of its products unless on medical prescription. A question of prejudice had been lodged with the Court of Justice of the European Union regarding the validity of such practices. The Court ruled that “[the] general and total ban on Internet sales of contractual products to end users effectively constitutes a characteristic restriction of competition by object (…)”.

Only an objective justification could legitimize such a ban but the company provided no such justification in the case in point. Moreover, according to the Court, the protection of the products’ brand image does not constitute adequate justification.

The authorities therefore concluded that the company had weakened competition amongst its approved distributors – intra-brand competition – and had prevented them having access to other consumers. At the same time, the latter were unable to benefit from more attractive pricing and this practice was a disservice to those living a long way from any point-of-sale.

This is therefore a further warning to distribution networks who must be careful about any restrictions imposed on Internet sales.

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[1] Decision n° 12-D-23 – 12 December 2012.

[2] Decision n° 08-D-25 – 29 October 2008.