With the Ker-Optika judgment that I wrote about before in relation to internet sales of medical devices and online sale of eHealth services the European Court (ECJ) set boundaries for national legislation in the EU regulating the internet sales of medical devices. To sum it up, the fact that an expert consult is necessary initially does not justify a prohibition on internet sales of a medical device.
It is a common principle in EU internal market law that what member states are not allowed to prohibit via national law companies are not allowed to prevent by means of agreements. It is therefore no great surprise that the ECJ, when faced with the question if internet sales for prestigeous cosmetic products could be prohibited in a selective distribution agreement on grounds of ‘cosmetovigilance’, ruled in the recent Pierre Fabre Dermo-Cosmétique case that it
“has not accepted arguments relating to the need to provide individual advice to the customer and to ensure his protection against the incorrect use of products, in the context of non-prescription medicines and contact lenses, to justify a ban on internet sales” (point 44)
The ECJ referred explicitly to the Ker-Optika case in this respect as well as to the DocMorris case in which it also dissociated the internet delivery of a regulated product (medicinal product) and the need to protect consumers against incorrect use of the product. Consequently, the ECJ held that
“in the context of a selective distribution system, a contractual clause requiring sales of cosmetics and personal care products to be made in a physical space where a qualified pharmacist must be present, resulting in a ban on the use of the internet for those sales, amounts to a restriction by object within the meaning of that provision where, following an individual and specific examination of the content and objective of that contractual clause and the legal and economic context of which it forms a part, it is apparent that, having regard to the properties of the products at issue, that clause is not objectively justified.” (point 47)
The manufacturer of the cosmetic products had further submitted that the prohibition was allowed because it was equivalent to a prohibition on operating out of an unauthorised establishment, which was exempted under Regulation 2790/1999, the old vertical restraints block exemption. That argument did not convince the ECJ either because it held that
“prohibiting de facto the internet as a method of marketing cannot be regarded as a clause prohibiting members of the selective distribution system concerned from operating out of an unauthorised place of establishment within the meaning of Article 4(c) of Regulation No 2790/1999″ (point 55)
This will play out in the same way under the new vertical restraints block exemption, Regulation 330/2010, which has exact hardcore restriction that removes an agreement from the safe harbour in articel 4 (c). That does not mean that a manufacturer has no instruments at all to protect consumers even if it cannot prevent internet sales as such, since the Commission has stated in its FAQ about the new block exemption:
“However, certain vertical restraints on online sales can be justified because they eventually benefit consumers. For instance a supplier may impose a requirement, as for off-line sales, that, in a selective distribution system, a distributor must not sell online through a website that does not meet the agreed quality standards, or to unauthorised distributors.”
In the end however the judgment of the ECJ does not mean that internet sales cannot be prohibited in a selective distribution system under any circumstances. The manufacturer needs an objective justification derived from the properties of the product at issue. So, while it may not be objectively justifiable to prohibit internet sales for low-risk over-the-counter medical devices, it may well be that higher risk devices sales on the internet can be prohibited as I have written in my post about the Ker-Optika case, when discussing ‘burden of justification’ in detail.
Eric: I am learning a lot from your blog posts – thanks for sharing all this great information. Do you know if the MDD covers software offered as a service?
Hi Donna-Bea, you’re very welcome. The MDD most definitely also covers software offered as service (SaaS). Watch for the standalone software guidance of the European Commission that is scheduled to come out in December, which (in its current draft) states that software provided via the internet is also regulated if it has an intended purpose that is regulated by the MDD. When that document comes out for the public I will post it on this blog and discuss it in detail. Also, it is expected that the Review of the MDD of which the draft will come out end Q2 2012 will contain language with respect to off-shore SaaS services, such as in vitro diagnostic testing performed outside the EU. If you would like to know more I would be happy to discuss.