Restrictions on online sales: Franchisor De Neuville sanctioned by the French Competition Authority

Avocats, Conseils en réseaux

The French Competition Authority (Autorité de la Concurrence) has recently handed down significant penalties for practices restricting online sales. The latest decision concerns De Neuville, a franchisor in the field of chocolates based products.

In a decision dated February 6, 2024[1], the Autorité imposed a fine of € 4,068,000 on De Neuville, France’s 3rd-largest chocolate retailer, for practices aimed at restricting online sales of De Neuville brand chocolates by its franchisees, as well as their sales to professional customers.

This decision follows on a series of decisions by the Autorité relating to restrictions on online sales. More specifically, in two decisions[2] handed down in December 2023, the Autorité condemned Mariage Frères and Rolex for having prevented their distributors from selling their brand’s products online, thus arousing keen interest in its firm stance on these practices.

The Franchise model not spared by the French Competition Authority

The De Neuville brand specializes in the sale of chocolate products, with 90% of its stores operated by franchisees. With 154 points of sale, the network belongs to the international food group Savencia, present worldwide with well-known cheese brands (St-Môret, Saint Albray, Caprice des Dieux, etc.).

De Neuville also operates an online sales website, enabling it to sell products directly to end consumers. As with any franchise network, the contracts binding the De Neuville franchisor to its chocolate distributors were accompanied by an operating manual.

After investigation, the Autorité noted that between 2006 and 2019, the franchise contracts and their appendices included clauses prohibiting franchisees from selling online, leading de facto to a ban on internet sales.

Proof, if needed, that the franchise model does not derogate from the prohibition on online sales to franchisees. It should be also noted that this decision was handed down following an ex officio referral by the Autorité and not following a complaint from franchisees.

Restrictions stipulated in the franchise contract and operating manual

The Authority found that the stipulations in question had been present in 17 versions of the franchise contract since 2006, where it was expressly stated that the franchisor had exclusive rights to sell its products and services via mail order or the Internet. This exclusivity was also reiterated in the operating manual.

Although exemptions were provided for franchisees wishing to sell products over the Internet, they were nevertheless required to obtain the franchisor’s express agreement to market their products on their own websites, this authorization being limited to their exclusive territorial zone.

The franchisor subsequently changed these contractual clauses in 2014, in light of the “Pierre Fabre” case law[3] concerning prohibitions on internet sales. However, the prohibition remained in the appendices and operating manual, which still referred to the franchisor’s exclusivity with regard to online sales.

It was only in 2019 that De Neuville removed all references to these prohibitions to give these franchisees the possibility of selling online, even though the Autorité pointed out that some franchisees still thought this possibility was not reserved for them.

Restrictive effects on franchisees and consumers

The Autorité noted that the franchisor, relying on its dual role as supplier and competitor of franchisees on the retail market, was able to control their commercial outlets through its centralized online sales system, while maintaining a competitive advantage over them.

Franchisees were thus prevented from actively and passively selling the brand’s products on the Internet to customers via a website.

These disputed contractual stipulations were deemed to reduce intra-brand competition, which is likely to have deprived the franchisees of indirect benefits. The decision also noted that these prohibitions not only partitioned the market, but also deprived consumers of a distribution channel.

In short, the franchisor was accused of taking the lion’s share of online sales of De Neuville brand products.

The justifications put forward by the franchisor, such as the structuring of the franchise network, the network’s brand image, or the strong inter-brand competition on the market concerned, were not enough to convince the Autorité, which stressed that such restrictive practices of competition by object could not be exempted.

Expert advice:

The Autorité maintains its firm stance against any form of restriction on online sales, particularly in the case of contractual relations between franchisors and franchisees. This decision is a reminder of the need for networks to carefully consider the provisions of their contractual corpus relating to online sales, as well as the stipulations contained in their operating manuals.

While absolute prohibition is not possible, contractual adjustments can be made to ensure – as far as possible – that the online sales strategy is harmonized across the network.

[1] Décision 24-D-02 du 06 février 2024 relative à des pratiques mises en œuvre dans le secteur de la distribution de chocolats

[2] Décisions n° 23-D-12 du 11 décembre 2023 relative à des pratiques mises en œuvre dans le secteur des thés de luxe n° 23-D-13 du 19 décembre 2023 relative à des pratiques mises en œuvre dans le secteur de la distribution de montres de luxe

[3] CJUE 13 oct. 2011, aff. C-439/09, Pierre Fabre Dermo-Cosmétique (Sté) c/ Président de l’Autorité de la concurrence

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