On 19 January 2018, the German Federal Court of Justice (FCJ) published its judgment concerning an appeal brought by shoe manufacturer ASICS against a fining decision. The FCJ ruled that ASICS had infringed competition law by prohibiting its retailers from participating in price comparison websites. The judgment confirms the strict approach of German courts relating to vertical online sales restrictions.
In August 2015, the German competition authority fined ASICS for restricting internet sales by authorised distributors in its selective distribution system [see our February 2016 Newsletter]. Among other things, the authority objected to a clause which prohibited authorised distributors from participating in price-comparison websites. After ASICS had unsuccessfully appealed the fining decision before the District Court of Düsseldorf, the case was brought before the FCJ.
The FCJ first sets out that price-comparison websites are an important tool for consumers to help them make a choice given the large variety of products, suppliers and prices found on the internet. At the same time, price comparison websites are often used by small retailers to attract customers via low-priced offers. Against this background, the FCJ ruled that ASICS's absolute ban on participating in price-comparison websites (e.g. irrespective of the quality of the price comparison tool) constituted a restriction of competition which could not be exempted under the Vertical Block Exemption Regulation.
Interestingly enough, the FCJ spent some time distinguishing the facts in ASICS from the facts in the European Court of Justice's Coty-judgment. In the Coty-judgment, the Court of Justice ruled that suppliers of luxury goods may prohibit their authorised distributors from selling on third party internet platforms such as eBay [see our December 2017 Newsletter]. The FCJ, however, ruled that this reasoning could not be applied to ASICS's selective distribution system as ASICS' shoes are not luxury goods and ASICS, unlike Coty, used a combination of contractual clauses to restrict the online sales of its distributors (e.g. that distributors are not allowed to use ASICS's brand name in online advertisements). Accordingly, the FCJ dismisses ASICS's appeal.
The FCJ's judgment shows that restrictions on the use of price comparison tools are not necessarily treated equally to online platform bans under EU competition rules. This is in line with the European Commission's view, which stated in its e-commerce sector inquiry report that: '[M]arketplaces and price comparison tools differ in a number of respects' and that in a selective distribution system 'absolute price comparison tool bans which are not linked to quality criteria, potentially restrict the effective use of the internet as a sales channel and may amount to a hardcore restriction'.
This article was published in the Competition Law Newsletter of January 2018. Other articles in this newsletter:
On 13 January 2016, the German Competition Authority ("Bundeskartellamt") published the non-confidential version of the infringement decision relating to ASICS, a manufacturer of sports clothing and running shoes. ASICS was fined for restricting Internet sales of authorised distributors in its selective distribution system between 2012 and 2015. The decision shows the continued strict approach of the Bundeskartellamt in the field of e-commerce.
In 2012, ASICS introduced a new selective distribution system in which it prohibited its distributors from using ASICS's brand name in online advertisements and banned them from partaking in price-comparison websites. Moreover, distributors were not allowed to sell ASICS goods on Internet platforms such as Amazon, Bol.com or eBay.
The Bundeskartellamt entered into negotiations with several sporting goods manufacturers over their distribution policies in 2013. During these discussions, an amicable solution was reached with Adidas but no compromise could be made with ASICS. Consequently, the Bundeskartellamt adopted an infringement decision on 26 August 2015 and subsequently a non-confidential version was published on 13 January 2016.
In its decision, the Bundeskartellamt made clear that constraints on the online use of the ASICS brand name and the ban on the use of price comparison websites were prone to restrict intra-brand competition of ASICS goods. In this regard, specific attention was paid to the effects on small and medium sized distributors, who cannot compete effectively without access to price comparison websites and advertising services such as Google AdWords. The Bundeskartellamt ultimately did not find an infringement relating to the ban on the use of Internet platforms but suggested that such restriction was not allowed.
The strict approach of the Bundeskartellamt stands in stark contrast with the attitude of certain other national competition authorities ("NCAs") in this field. For example, the president of the Dutch Authority for Consumers and Markets stated that regulatory authorities need to exercise restraint in qualifying vertical agreements, which restrict Internet sales, as hardcore violations of competition law. Although the European Commission recently commenced a sector enquiry into e-commerce, the diverging approaches of NCAs to restrictions of Internet sales are unlikely to disappear soon. As such, companies may want to tailor their distribution policies to the national competition laws.