The ECJ has ruled that EU competition law does not allow a supplier
established in a Member State to impose on a distributor in a
territory outside the Community a prohibition on making sales in
any territory other than the contractual territory, including the
territory of the Community, either by direct marketing or by
re-exportation from the contractual territory, if that prohibition
has the effect of preventing, restricting or distorting competition
within the Community and is liable to affect the passing of trade
between Member States.
This question arose in a dispute between Yves St.
Laurent Parfums SA and Javico, whose registered office was in
Germany. Javico had been appointed as distributor of Yves St.
Laurent's products in Russia, Ukraine and Slovenia. Javico agreed
that it would not sell the products outside the specified
territory. Shortly after entering into the contract, Yves St.
Laurent discovered that products which it had supplied to Javico
for sale within the contract territories were being sold in the UK,
Belgium and the Netherlands. It terminated the contracts and sued
for compensation and damages. Javico claimed that the contract was
contrary to EU competition laws.
The Court found that the aim of the restriction was
to be construed as being intended to enable the producer to
penetrate markets outside the EU rather than being intended to
restrict competition. However, it was for the national court to
determine whether such contracts had the effect of appreciably
restricting competition. This might be the case, said the Court,
where the Community market in the products in question is
characterised by an oligopolistic structure or by an appreciable
difference between the prices charged for the contractual product
within the Community and those charged outside the Community. In
assessing whether the prohibition entails a risk that it might have
an appreciable effect on trade between Member States, reference
should be made to the position occupied by the supplier of the
products at issue and the extent of the supplier's production and
sales in the Member States. Therefore, the contract imposing
absolute protection for a territory outside the Community could
escape EU competition law if it affected the market
insignificantly. In this regard, intra-Community trade cannot be
appreciably affected if the products intended for markets outside
the Community account for only a very small percentage of the total
market for those products in the territory of the common
The ECJ further ruled that the type of restrictions
contained in the agreements in question did not escape the
prohibitions contained in EU competition rules on the ground that
the Community supplier of the products concerned distributes those
products within the Community through a selective distribution
network covered by an exemption decision from EU competition rules.
(Case C-306/96 Javico International v Yves St. Laurent Parfums SA,