In the latest ruling relating to selective distribution, the higher regional court of Düsseldorf supported an earlier decision by the German anti-trust authority that Asics should not be allowed to demand that its retail partners refrain from using online price comparison engines to sell their products.
The German competition authority, the Bundeskartellamt (BKA), studied the distribution policy adopted by Asics in 2011. It found in 2015 that clauses relating to price comparison engines inadmissibly restricted competition to the detriment of consumers.
But instead of overturning this decision, the court in Düsseldorf supported it earlier this month. Judges apparently didn't accept the argument that the prohibition to use price comparison engines was justified by the brand's strategy to protect its reputation, or to provide adequate advice to the buyer. Asics' distribution contracts were adjusted two years ago to allow for these price comparison engines.
As part of its decision around Asics, the BKA also found that German and European competition law did not allow suppliers to prevent retail partners from using online marketplaces such as Ebay and Amazon. The BKA acknowledged that brands should have the right to define qualitative criteria relating to the presentation of their products, but this should not amount to an outright general prohibition for retail partners to use marketplaces.
In an update on this second point, a retailer who filed a lawsuit against Deuter apparently withdrawn the case shortly before a hearing scheduled later this month at the Bundesgerichtshof (BGH), the German Supreme Court.
In this Deuter case, the competition chamber of the higher regional court of Frankfurt had decided in December 2015 that it was not unlawful under German and European antitrust laws for selective retail distribution contracts of brand owners to generally prohibit sales of the retailers' products through marketplaces (referring in particular to Amazon). Then again, the court found it generally unacceptable from a competition standpoint to prohibit promotion of the products through price comparison engines.
Deuter did not take the point on the price comparison engines any further, but the retailer brought the case to the BGH, and it was joined in this instance by Amazon.
The Deuter distribution contract was drafted by Jochen Schäfer, legal counsel of the World Federation of the Sporting Goods Industry (WFSGI) and the Federation of the European Sporting Goods Industry (Fesi) as well as a lawyer in private practice. He says that the withdrawal means that the relatively favorable verdict of the Frankfurt court is final, however it fails to provide absolute clarity as yet about the status of marketplace prohibitions in Europe, and particularly at the German level.
Johannes Laitenberger, the director general of the competition department of the European Commission, apparently shares the opinion that suppliers may impose bans on online marketplaces such as Ebay and Amazon without violating the European Union's antitrust rules. In a brief from the Ashurst law firm, Laitenberger is quoted as saying that the Commission's submission to the European Court of Justice (ECJ) in a landmark court case “confirmed the commission's position that mere marketplace bans aren't hardcore restrictions.”
The case relates to a dispute between Coty Germany, a perfume and cosmetics company, and one of its distributors, Parfümerie Akzente. The German Supreme Court referred several questions about the case to the ECJ, asking the judges to clarify the application of antitrust rules to online practices that have raised legal questions in several countries. It should be pointed out that this case relates to products that may be regarded as luxury items, which may therefore not be subject to exactly the same criteria and regulations as sporting goods in terms of selective distribution.
The latest EU guidelines relating to selective distribution date back to 2010, providing further explanations about the “block exemption regulation vertical” issued the same year. These vertical guidelines are up for revision in 2020, meaning that the Commission may have started working on them, or will start shortly. This makes Laitenberger's remarks all the more interesting, although Schäfer adds that the written opinion of the ECJ's attorney general, and a subsequent court verdict in the Coty case, could provide an even stronger signal.
Meanwhile, selective distribution also comes into consideration as part of the sector inquiry started by the European Commission's Competition DG into online retailing in 2015. Suppliers who received the survey gave their answers early last year and the Commission issued a preliminary report in September.
This report states that restrictions on the usage of marketplaces are mostly found in selective distribution agreements and typically concern branded goods. They are most widespread in the sports and outdoor sector, applying for 14 percent of retailers active in this category, ahead of clothing and footwear at 12 percent, and consumer electronics at 11 percent. The restrictions mostly relate to the protection of a brand's positioning, the fight against counterfeit sales, efforts to provide proper service, the protection of existing distribution channels and concerns about the market position of certain marketplaces.
In the light of the preliminary findings, the report continues, the Commission does not consider (absolute) marketplace bans to constitute “hardcore restrictions,” as they do not have the purpose of segmenting markets based on territory or customers. As the report indicates, the restrictions concern the issue of how the distributor can sell the products over the internet.
However, it adds, this does not mean that absolute marketplace bans are generally compatible with European competition law. The Commission or national competition authorities may decide to scrutinize marketplace bans in certain cases detailed in the report, which can be downloaded on the web pages relating to this sectorial investigation.
