Online marketplaces are Internet platforms that are not  operated by a dealer itself, but merely provide the hosting  performance for dealers. Germany’s Federal Cartel Office  (FCO) has for some time been expressing concerns  about the competition law compliance of restrictions of  sales via online marketplaces. The concerns primarily  relate to distribution agreements of manufacturers of  brand products, which often contain clauses that restrict  or prohibit the sale of the manufacturer’s products via  online marketplaces. Well-known manufacturers of  sportswear are among the manufacturers that insist on  such distribution agreements.

Brand manufacturers typically operate selective  distribution systems to sell their products. These  systems require that the contract goods are sold only  to distributors that were previously selected based  on defined characteristics, e.g. quality requirements.  The distribution agreements applied by a well-known  German sportswear manufacturer, in the view of the  FCO, encompassed a ban on the sale of products via  online marketplaces. Following extensive investigations  in 2013, including a web survey of about 3,000 retailers,  the FCO stated its objections as regards the legality of  these restrictions. According to the view of the FCO,  preventing sales via platforms would de facto restrict  the possibility − especially for smaller distributors −  of selling online. Because the undertaking in question then changed its Internet sales conditions following the  statement of objection by the FCO, the case was recently  closed (see press release of the FCO from 02/07/2014,  available here). 

The case against a Japanese sportswear producer, which  was also reprimanded by the FCO because of limitations  on online trading, is still in process. Notably, despite the  settlement reached in the proceedings illustrated above,  in practice a huge number of distribution agreements  in the EEA still contain similar restrictions. Thus, the  question of the consequences of the FCO’s view is of  significance to the general public.

It is common ground that the general prohibition  or restriction of online sales contradicts German as  well as European competition law (ECJ, judgment of  13 October 2011, C-439/09 – Pierre Fabre). However,  under European law (see Guidelines to Regulation (EU)  No. 330/2010, Vertical Block Exemption Regulation or  VBER, para. 54), a supplier may expressly require that  its distributors use third-party platforms to distribute  the contract products only in accordance with the  standards and conditions agreed between the supplier  and its distributors. For instance, where the distributor’s  website is hosted by a third-party platform, the supplier may require that customers do not visit the distributor’s  website through a site carrying the name or logo of the  third-party platform.

In view of the fact that selling via online marketplaces  is necessarily associated with the presentation of the  name or logo of these platforms, one may conclude  that the EU Commission considers the prohibition of  sales via online marketplaces in the context of selective  distribution systems to be legal. Since the VBER is also  applicable under German law, prohibition of sales via  online marketplaces was permissible under German  law according to the previous understanding. This  interpretation was in line with previous case law: in recent decisions; the ban on selling goods via a third-party platform was not considered illegal as such, provided that the distribution system was applied in a  non-discriminatory way. In this context, the Appellate  Court of Berlin found that the distribution conditions  of a manufacturer of high-end school satchels, which  prohibited sales via online marketplaces based on the  reasoning that this would harm the exclusive brand image,  were discriminatory, because the manufacturer itself  distributed its products via discount stores at the same  time (KG Berlin, judgment of 19.09.2013 – 2 U 8/09). 

However, in contrast to the explicit wording of the  Guidelines on Vertical Restraints as well as former  German case law, the FCO now holds the view that the  per-se prohibition of online marketplaces constitutes  an infringement of Art. 4 lit. c) VBER, as this would  lead to a restriction of passive sales to end users if not  objectively and individually justified. This interpretation,  following the FCO’s approach, was recently confirmed  by the Higher Regional Court of Schleswig-Holstein  (OLG Schleswig-Holstein, 05.06.2014 – 16 U 154/13  (Kart) and the District Court of Frankfurt (LG Frankfurt  a.M., 18.06.2014 – 2-03 O 158/13).

In addition, the FCO claims to have aligned its approach  with other national authorities and the EU Commission.  Thus, at least with regard to distribution contracts  having effects in Germany, a careful approach may lead  to a reassessment of existing distribution agreements.  In view of para. 54 of the Vertical Guidelines, a number  of distribution agreements in the EEA were drafted  excluding platform sales. Restrictions of online sales may  only be permissible under German practice under strict  requirements of proving objectively that noncompliance  of a specific marketplace with the quality standards set  up by the manufacturer. Thus, an individual case-by-case  assessment is necessary. A per-se prohibition of platform  sales may, following the clear message sent by the  FCO, endanger undertakings for antitrust proceedings,  including possibly fines, in Germany.