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.