In a press release of 28 April 2014, German competition authority the Bundeskartellamt (BKA) announced its view that manufacturers may not prohibit their distributors from selling their products via online marketplaces like eBay and Amazon, because this kind of prohibition restricts competition.
The preliminary opinion from the BKA
The BKA is investigating the German selective distribution system of sport shoe manufacturer ASICS. ASICS prohibits its distributors from selling ASICS products on online marketplaces like eBay and Amazon. ASICS also prohibits its distributors from supporting price comparison engines. ASICS’s brand names may also not be used on third-party websites, not even to refer customers to the online stores of official ASICS distributors.
After an initial investigation the BKA reached the preliminary opinion that the three prohibitions that ASICS imposes on its distributors constitute restrictions on competition. The BKA views each of these prohibitions individually as a hardcore restriction. In the BKA’s view, ASICS’s distribution system is aimed primarily at controlling price competition both online and in physical shops. Together the three prohibitions constitute a de facto ban on internet sales, according to the BKA. This not only restricts competition between ASICS distributors, but also the competition on the market for sport shoes in general. After all, ASICS has a large market share and other sport shoe manufacturers are restricting internet trade in a similar fashion.
It is also interesting that BKA is particularly critical about the detailed differentiation of ASICS’s distribution system. ASICS has no fewer than 20 different categories of distributor. Some distributors are assigned different product ranges. Moreover, many distributors can only sell a limited product range to final customers.
ASICS has until 10 June 2014 to respond to the BKA’s preliminary opinion. The proceedings against ASICS are not taking place in isolation. The BKA is also investigating other sport shoe manufacturers, such as Adidas.
Online sale
Sale via an online store is considered passive sale. Passive sale involves customers who approach the distributor on their own initiative. It follows from the European Block exemption on vertical cooperation that a ban on passive sale is a so-called hardcore restriction. That is why a ban on online sale is also a hardcore restriction. This does not mean that a manufacturer may not impose any requirements at all for the use of websites by distributors. The Guidelines for vertical restraints corresponding to the block exemption explain that a manufacturer can, in the context of the block exemption, impose quality standards for the use of a website for the re-selling of its products, as it can also do for a shop, catalogue sale or advertising and promotion in general.
The preliminary opinion from the BKA shows that parties must be careful when stipulating requirements for online sale. Requirements that discourage approved distributors from using the internet to reach a larger number and greater variety of customers by imposing criteria for online sale that are not equivalent to the criteria for sale in physical shops are regarded as hardcore restrictions. This does not mean that the criteria for online sale must be identical to the criteria for offline sale, but they must have the same objectives and similar results and the difference between the criteria must be justified by the differing nature of the two distribution methods.
By: Eric Janssen