Selective distribution network and misleading advertising

Court of Cassation, Commercial Chamber, 19 October 2022, 21-18.301

In the field of distribution, the control exercised by suppliers over the methods and conditions of marketing their products by distributors is a key issue. This issue is all the more important in selective distribution, where the brand image of the products and their necessary protection require and justify a stricter control.

In this respect, the action for misleading commercial practices, formerly provided for in Article 121-1 of the Consumer Code and now codified in Article L. 121-2 of the same code, may constitute a relevant means of action in that it allows a company to act against a misleading act even if it is not perpetrated by a competing company.

Indeed, there are situations where companies outside a network, and sometimes even outside the market concerned, can cause damage to an image. This was the case in the present case, in which the Court of Cassation was asked to rule on the possibility for the promoter of a selective distribution network to bring an action for misleading advertising against a company that had advertised a website unlawfully marketing its products.

The facts go back to February 2010 : the France Télévisions TV channel had presented a site offering various perfumes for sale during its “Télé matin” and “C’est au programme” programmes. Some of the products sold by this site were part of the selective distribution network of the Coty company, which holds licences for luxury products of the Calvin Klein, Davidoff and Chloé brands.

As Coty had not given any approval to the company holding the site for the purposes of this marketing, it sued it for parasitism, unfair competition and misleading advertising, also invoking the joint and several liability of France Télévisions for the latter.

In a decision on referral after cassation of 9 June 2021, Chamber 5-4 of the Paris Court of Appeal found the company’s network to be lawful and concluded that there had been a breach of the prohibition on resale outside the network (on the basis of the former Article 442-6, I, 6°), as well as the characterisation of an act of unfair competition and parasitism by the company owning the site.

In addition to the liability of the owner company, the Court decided to hold France Télévisions jointly and severally liable for having indirectly participated in the damage caused to the network by promoting the site in question and engaging in misleading commercial practices through false advertising. It thus sanctioned the company for having led people to believe that it was possible to legally acquire products through the website, even though the said products were being resold illegally, regardless of whether the advertising was not commercial in nature and was not disseminated for profit-making purposes.

As a reminder, to qualify as a misleading commercial practice, it is necessary to show that the act in question causes confusion with another good, service or trademark, or that it is based on false or misleading claims, indications or presentations concerning the essential characteristics of a product. In the case of an undertaking other than the seller of the promoted products, this sanction may be applicable provided that it acts in the name of or on behalf of the latter (CJEU, 17 October 2013, Case No. C-391/12).

Consequently, a company engaged in journalistic activity such as France Télévisions could be held liable if it were to infringe a trademark in a proven manner and profit from it or engage in it for the benefit of a related company.

In this case, France Télévisions had no commercial link with the owner of the site and did not benefit directly from the advertising. The Paris Court of Appeal had therefore adopted a broad approach, considering that the site’s broadcasting gave the consumer the false impression that he could lawfully acquire products of the brands in question, and therefore constituted a misleading commercial practice, even in the absence of a profit-making purpose.

Following an appeal lodged by France Télévisions, the Court of Cassation partially annulled this decision for having retained the commercial nature of the message broadcast during the programme without demonstrating how it was promotional rather than informative.

Also, the decision was censured for having concluded that there was a misleading commercial practice without showing how the content of the remarks made by the presenter of the programmes could lead to confusion, presented false information or was likely to mislead on the essential characteristics of the products.

Thus, the Supreme Court confirms the possibility of engaging the liability of the author of an act of advertising relating to a company practising off-network resale. However, this action cannot be authorised solely on the basis of the illegality of the resale of the products in question and remains conditional on the fact that the conditions laid down for misleading advertising are also met with regard to the act of advertising itself.