07 October 2020

European Court of Justice Applies Free Movement Rules of E-Commerce Directive to Advertising by Mail-Order Pharmacy

In its judgment from October 1, the European Court of Justice (ECJ) ruled that an EU Member State cannot restrict a mail-order pharmacy, established in another Member State, from using paid referencing on search engines and price-comparison websites to promote its service, unless the Member State clearly establishes that the restriction is appropriate, and does not go beyond what is necessary, to protect public health. The ECJ further found that several other advertising restrictions imposed by France restricted the freedom to provide services under the e-commerce rules, but added that those restrictions may be justified provided that certain conditions are fulfilled, which is for the national referring court to verify.

Key facts

The case involved Shop-Apotheke, a mail-order pharmacy established in the Netherlands, that was promoting its online sales service and the parapharmaceutical and non-prescription medicinal products it sells to French consumers by using different online and physical advertising practices. The claimants, which included several operators of dispensing pharmacies and associations representing the professional interests of French pharmacists, sued Shop-Apotheke before the Commercial Court in Paris. They sought compensation for the damage allegedly suffered as a result of the unfair competition Shop-Apotheke engaged in and that allowed it to unduly obtain an advantage from failing to comply with several French rules applicable to advertising by a pharmacist and to the online sale of medicinal products.

The Paris Court of Appeal referred a question on appeal to the ECJ, asking whether the rules on the free movement of goods in the Treaty on the Functioning of the European Union (TFEU), the Community Code (Directive 2001/83/EC), and the e-Commerce Directive (Directive 2000/31/EC) authorize a Member State to impose on pharmacists established in another EU Member State specific rules prohibiting the solicitation of customers through means regarded as contrary to the dignity of the profession, prohibiting the inciting of patients to engage in abusive consumption of medicinal products and the obligation to observe certain good practices and technical rules in the distribution of medicinal products online.

Assessment under the e-Commerce Directive

In its preliminary remarks, the ECJ confirmed that an online sales service, such as that provided by Shop-Apotheke, constitutes an information society service within the meaning of the e-Commerce Directive and of Directive (EU) 2015/1535.

Notification obligation

The ECJ also confirmed the existence of the procedural notification obligation foreseen in Article 3(4)(b) of the e-Commerce Directive. The directive requires that a Member State wishing to impose certain restrictions on an information society service provider established in another Member State has to first inform the Member State of origin and the European Commission. The ECJ did not go further, considering that it was up to the national referring court to assess whether France had fulfilled the notification obligation.

Restriction of the freedom to provide an information society service

On substance, the ECJ considered that advertising practices, such as those carried out by Shop-Apotheke, should be assessed solely under the e-Commerce Directive, irrespective of whether they are carried out by physical or electronic means. Such advertising constitutes an element that is ancillary to, and inseparable from, the online sales service. This finding differs from Advocate General Saugmandsgaard Øe’s opinion from February 27, 2020, which considered that only the online advertising practices were covered by the e-Commerce Directive, whereas the advertising by physical means (e.g., through leaflets) should be assessed under the free movement of goods rules set out in Articles 34 and 36 of the TFEU.

The ECJ further stated that in accordance with Article 3(4)(a) of the e-Commerce Directive, the Member State of destination of an online sales service cannot, in principle, restrict the free movement of information society services from another Member State, except where such a restriction is justified by certain public interest objectives. The ECJ noted that each of the French measures amounted to such a restriction.

Justification by a public interest objective

The ECJ then assessed whether each of the measures was necessary and proportionate to achieve the public interest objective pursued. It noted that the intensive use of advertising or the choice of aggressive advertising messages may harm public health and the dignity of the health profession (in this case the pharmacist profession), and a prohibition of such advertising may therefore be adequate. However, a restriction that amounts to imposing a general and absolute prohibition of any advertising by health professionals to promote their activities goes beyond what is necessary to protect such objectives. It is for the national referring court to determine whether the prohibition at issue prevented Shop-Apotheke from carrying out any advertising outside its pharmacy, regardless of the medium used or the scale of the advertising.

In regard to the prohibition to advertise promotional offers consisting of a discount on the total price of an order once a certain amount is exceeded, the ECJ noted that the e-Commerce Directive does not, in principle, preclude the application of such a prohibition by the Member State of destination where such a prohibition is intended to prevent the excessive consumption or inappropriate use of medicinal products. The ECJ clarified, however, that such a prohibition must be sufficiently circumscribed and targeted solely at medicinal products and not at parapharmaceutical products. The latter is for the national referring court to assess.

Regarding the obligation to complete a health questionnaire before a consumer places the first order on the pharmacy’s website, the ECJ found that such a measure can have a deterrent effect on consumers wishing to purchase medicinal products online. The ECJ nevertheless considered that such a questionnaire is adequate to protect the health of the patient, and that having numerous interactive online features, which the customer must use before purchasing a medicinal product, is acceptable and less restrictive of the free movement of goods than an absolute prohibition of the online sale of medicinal products. The French requirement therefore does not appear to go beyond what is necessary to achieve the objective pursued.

As regards the prohibition of using paid referencing on search engines and price comparison websites, the ECJ considered that that prohibition restricts the possibilities for a mail-order pharmacy to make itself known to potential customers in another Member State and to promote its online sales service. The French government had claimed that the prohibition was justified to ensure a balanced distribution of pharmacies throughout the national territory. The ECJ found that France had not provided any evidence that this was indeed the case and that it therefore did not fulfill its responsibility to provide evidence that the restriction on the freedom to provide information society services was appropriate to achieve that objective. The ECJ concluded that the Member State of destination cannot prohibit mail-order pharmacies established in other Member States from using paid referencing on search engines and price comparison websites to promote their service and the products they sell. Such a prohibition would be permissible only if it were established before the referring court that that it was appropriate to ensure the attainment of the objective of protecting public health and does not go beyond what is necessary to achieve that objective.

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