A court ruling to restrict the sale of e-cigarettes in France this week could set a European, if not global precedent and knock the nascent e-cigarette industry off course.
A commercial court in Toulouse ruled on Monday that e-cigarettes (that do not contain tobacco) qualify as tobacco products and should only be sold by registered tobacconists.
French news agency AFP said the court ordered an e-cigarette retailer to stop selling and advertising the products. It argued it was violating the "state monopoly on the sale of tobacco" which states that tobacco products can only be sold at registered outlets in France, where their advertising is also banned.
Erik Bloomquist, senior global tobacco analyst at Berenberg said it was now important to look at how the EU would treat e-cigarettes when it published revisions to its Tobacco Products Directive (TPD) in 2014.
"This (French ruling) could lead to greater regulation of the e-cigarette industry, and yes, in terms of manufacturing and distribution it could put a squeeze on the nascent e-cigarette industry," he said.
He expected the TPD could put more pressure on smaller players than on the big suppliers like BAT or Imperial Tobacco, however.
"It could in fact be more favorable for the majors [large tobacco companies] because the French ruling suggests that the EU or some major countries are not concerned with damaging the nascent e-cig industry," he said. If upheld, the French ruling would mean producers could only distribute their products through regulated tobacconists, meaning business as usual for the larger firms.
(Read more: NYC may douse e-cigarettes in public spaces)
Last month, European Union (EU) proposals reported in the British media appeared to show growing concerns among EU officials over the as yet loosely regulated e-cigarette industry with officials even proposing to ban and remove all e-cigarettes from shop shelves.
According to details of a confidential European document reported by the U.K.'s Telegraph newspaper, officials in Brussels saw a "risk that electronic cigarettes can develop into a gateway to normal cigarettes."
Concerns have been steadily growing over the boom in the e-cigarette industry since the products have gained in popularity over the last five years.
Although it is still far smaller than the real tobacco industry, industry analysis firm Euromonitor International estimates that the e-cigarette industry is worth in excess of $2 billion globally (the same size as the global small cigars market).