It is not news that it has become increasingly difficult for brand owners – many of them luxury brands – to keep their selective distribution systems intact without making the costly switch to a vertically integrated, wholly owned distribution chain. While re-imports from outside the EU (actually, the slightly larger European Economic Area, comprising of EU member states plus Norway, Iceland, and Liechtenstein) can be controlled easily, an entire industry of intermediate traders has sprung up and dedicates itself to undermining existing selective distribution systems by buying up seemingly exhausted brand items from authorized distributors and passing them on to high street chains and supermarkets.
But is it an unfair business practice if the high street chain buys from the intermediary despite knowing that the goods originated from a breach of contract? Is it relevant if the goods themselves carry information to that effect?
No, says the Austrian Supreme Court, dismissing a claim against a retailer who had removed a label saying ‘not destined for sale over the Internet in Austria’ (4 Ob 84/15d). Unfair competition requires a conscious or active assisting in the breach, the court explained by reference to a German case from 2008.
The Austrian ruling comes on the heels of another recent decision by the same court, which made it slightly easier for businesses to poach their competitor’s staff: Offering to pay the contractual penalty incurred by the employee’s early termination no longer constitutes an unfair business practice under all circumstances, the Supreme Court had ruled in late 2014, apparently diverting from its earlier practice (4 Ob 125/14g).
Read together, both rulings cast doubt on the viability of an unfair business practices approach except in the worst circumstances. The decisions underline the importance of having a product tracking/ID system in place, so a brand owner can identify which of the authorised distributors do not honour their obligations. Luckily, the courts have not shown any restraint in upholding the integrity of such systems so far.