Cross-border online sale of medicinal products is a recurring issue before the Court of Justice of the European Union. This is no coincidence, as trade in medicines is a strictly regulated area in all Member States, which can easily conflict with the EU principle of freedom to provide services, and in the end, the "price" of excessive national restrictions is borne by the consumers. In our article, we summarize the recent ruling of the Court of Justice of European Union on the limitation of the principle.

1. Background to the case

The current case[1] is between a Dutch pharmacy business and French businesses also involved in the distribution of medicines. The company registered in the Netherlands operates an online pharmacy shop specifically targeting French customers and launched a wide-ranging advertising campaign to promote its website.

According to the French pharmacists, the Dutch company's advertising campaign did not comply with the French legislation on the online advertising and sale of medicinal products, so that the Dutch company gained an undue advantage from the campaign when selling to France. So, the French brought an action against the online pharmacy, seeking compensation for the damages resulting from unfair competition.

2. Summary of the proceedings, arguments of the parties

The French courts examined the following conducts of the Dutch company:

a. Aggressive advertising methods

The campaign included the insertion of advertising leaflets in packages sent by other traders engaged in distance selling (so-called ‘piggyback marketing’) and the sending of advertisements by post.

According to the French applicants, the above method is aggressive marketing contrary to professional ethics and therefore violates the “prohibition of soliciting clients through procedures and methods which are regarded as being contrary to the dignity of the profession” under the French Public Health Code.

b. Sales method promoting abusive consumption of medicinal products

The Dutch company also published, on its website, promotional offers consisting in a discount on the total price of an order of medicinal products once a certain amount was exceeded.

According to the applicants, the above discount also violates the Public Health Code, which provides that “a pharmacist shall not, by any process or means whatsoever, induce patients to engage in abusive consumption of medicinal products”

c. Paid referencing on search engines or price comparison websites

The online pharmacy paid for referencing on search engines or price comparison websites.

The applicants argued that such marketing violates the French decree applicable to websites for the electronic commerce in medicinal products, under which, “paid referencing on search engines or price comparison websites shall be prohibited”.

The Dutch company took the view, contrary to the arguments of the applicants, that those rules do not apply to it since it is duly established in the Netherlands to operate as a dispensing pharmacy and sells its products to French consumers via electronic commerce.

3. Procedure before the French courts

The court of first instance found that the defendant had violated the French legislation relied on by the claimants, thereby obtaining an undue economic advantage.

In its appeal against the judgment, the Dutch company argued that the restrictive national legislation violate the EU principle of freedom to provide services, which is applicable to electronic commerce pursuant to Directive 2000/31/ EC on electronic commerce ("Directive").

Pursuant to the latter, Member States may not, for reasons falling within the coordinated field (eg. trade in medicinal products), restrict the freedom to provide information society services from another Member State.

As a question arose as to the interpretation of the Directive, the second instance court suspended the proceedings and referred its questions for a preliminary ruling before the Court of Justice of the European Union ("CJEU"), which has exclusive jurisdiction to interpret EU law.

4. The procedure and findings of the CJEU

In the course of the proceedings, the CJEU examined whether the application of the French legislation relied on by the Applicants could infringe the provision of the Directive on the freedom to provide services.

The CJEU emphasized that the rule in the Directive prohibiting any restrictions on the freedom to provide services is not absolute, for certain reasons (eg.: protection of public health, public security or the protection of consumers), a Member State may restrict services from another Member State by national legislation.

The legality of the restriction must be examined on a case-by-case basis, based on the following criteria: (I) whether national law restricts the freedom to provide services, (II) whether the measure is suitable and necessary to achieve the objective mentioned in the Directive, and (iii) proportionate to those objectives.

The CJEU found that each of the French legislation relied on by the Plaintiffs had a restrictive effect on the defendant's service, however,

1. the Directive does not preclude the French restriction which prohibits pharmacies from soliciting their clients through certain procedures and methods that can appear to be aggressive, (eg.: through the extensive sending of post and leaflets for advertising purposes). However, it may not result in the provider in question being prevented from carrying out any advertising outside his or her pharmacy, which it is for the national court to ascertain.
2. Nor is the French restriction contrary to the Directive, which prohibits pharmacies from making promotional offers consisting in a discount on the total price of an order of medicinal products once a certain amount is exceeded, provided, however, that such a prohibition is sufficiently circumscribed, which it is for the national court to ascertain.

With regard to the issue of aggressive marketing and discounts, the European Court of Justice has entrusted the French court with carrying out the proportionality test.

However, with regard to the use of search engines, the CJEU stated that the Directive fundamentally precludes the application of a national legislation which prohibits pharmacies selling such medicinal products from using paid referencing on search engines and price comparison websites. Restriction at national level may only be legal if  it is duly established before the referring court that such legislation is appropriate to ensure the attainment of the objective of protecting public health and does not go beyond what is necessary in order to attain that objective.

5. Legal assessment of the decision

The case study shows that, although the freedom to provide services is one of the most important principles of the EU, in some cases such fundamental freedoms may also be restricted by national legislation.

In light of the purposes of each, there is a significant difference between restricting different marketing strategies or discounts and restricting using of search engines and price comparison websites.

While the first two marketing strategies are important for the online pharmacy, as they aim to increase sales volume, price comparisons actually help consumers to find information online so they can choose the right product and service for their needs and make a decision. Ensuring this is one the basic objectives of the Directive.

In view of the above, the CJEU has closely scrutinized national rules prohibiting the use of search engine and price comparison services, as such prohibitions can only be compatible with EU law in exceptional cases, since they in fact restrict the consumer's access to information.

The judgment is therefore well in line with the consistent practice of the Luxembourg Court protecting consumers.

[1] Judgment of the Court (Third Chamber) of 1 October 2020 A v Daniel B and Others Request for a preliminary ruling from the Cour d'appel de Paris Case C-649/18