French cosmetic retailer Pierre Fabre Dermo-Cosmetique can only block Internet sales by some of its product distributors if it can provide a legitimate reason, Europe's highest court said on Thursday.
The ruling by the Luxembourg-based EU Court of Justice (ECJ) went against a 2008 finding by the French competition regulator that PFDC's ban on Internet sales in its distribution agreements was anticompetitive.
French judges had asked the ECJ for a clarification on the issue. A court adviser had said in March a ban on Internet sales restricted competition.
A clause in a selective distribution contract banning the distributors of the company Pierre Fabre Dermo-Cosmétique from selling its products online amounts to a restriction on competition by object, unless that clause is objectively justified, the court said.
Such a ban may not benefit from a block exemption but may, if certain conditions are met, benefit from an individual exemption, it said.
It is now up to French judges to assess whether there are legitimate reasons for PFDC's ban.
PFDC, maker of the Avene, Klorane, Galenic and Ducray brands, requires distributors to sell its products only in shops and with a qualified pharmacist.
Luxury brand owners have long argued that bricks-and-mortar outlets are key to protecting their image and exclusivity, while online retailers and markets such as eBay have challenged such claims.
(Reporting by Foo Yun Chee; editing by Rex Merrifield)