The double-page colour advertisement in Liberation was shot by Benetton's creative director, Oliviero Toscani, and featured the genitalia alongside the slogan 'United Colours of Benetton'. Some of the photographs were of children.
Acting on a tip-off, British police advised retailers and distributors that handle imported copies of Liberation, which sells 200,000 copies in France, that it would be 'unwise' for them to deal in the issue because they would risk infringing indecency legislation.
The paper's British sales fell by 1,000 copies as a result. But the issue was a mid-afternoon sell-out in France, where the ad prompted only 10 calls of complaint. One, however, was from the country's advertising trade body, which told other publishers it would not tolerate further publication of the ad.
Benetton, whose advertising campaigns have provoked increasing controversy, said the charge of sexual exploitation of minors was ridiculous as the children photographed were those of Mr Toscani himself. 'They are his own children and so it is not sexual exploitation,' said a spokesman for Benetton in Italy.
The response from Benetton's London headquarters suggested a distinct distancing from the latest advertising stunt: 'It was not a new campaign, it was not really an advert at all - you shouldn't know about it anyway, it's been banned here.'
The ad was devised after the organisers of the Venice Biennale arts festival invited Mr Toscani to show his work in its avant-garde section.
Pascal Somarriba, Benetton's head of international advertising, said Mr Toscani had to show new advertising work, so the photograph was placed in Liberation with the Benetton logo in order to be accepted for the Biennale.
'It is a study of sexuality and races,' he said. 'It is also about what is tolerated in one arena but not in another. Lots of things like nudity have been tolerated in art down the centuries but are not tolerated in advertising.'
Benetton's previous campaigns have featured a range of unconnected and often political images. Earlier this year an image of the Queen was regenerated by computer as a black person. Another showed a blood-smeared baby still attached to its umbilical cord. Two years ago a Benetton campaign used a photo of Albanians crowded on a ship trying to get to Italy.
'Did we ask permission of everyone on that boat to use the image in the advertisement? No,' Mr Pascal said.
'The purpose was not to show individual Albanians but to talk about immigration. This advert does not exploit children but talks about sexuality.'
He sounded more sure than he had earlier last week when he spoke to the British chapter of the International Advertising Association: 'We are not definitely sure we are doing the right thing,' he had said.