On 2 June 2014 the German Federal Cartel Office (Bundeskartellamt) reported that it has closed its proceedings against Adidas AG after the company has agreed to amend its conditions for online sales in such a way that they comply with competition law. Adidas AG is one of the largest sports brands in the world with turnover of approximately €14.5 billion ($19.3 billion) in 2013.
Adidas AG operates a selective distribution system, which only allows authorized retailers to sell adidas products to consumers. In 2012, Adidas AG introduced new conditions for online sales that included a prohibition for retailers to sell via large online market places such as eBay and amazon. The German Bundeskartellamt had initiated proceedings after it had received numerous complaints by sports retailers following the introduction of the new sales policy.
In its publication the Bundeskartellamt stated that the trading possibilities offered by the Internet create new challenges for both manufacturers and retailers. In this dynamic market environment, it is the Bundeskartellamt’s task to keep markets and opportunities open for the benefit of retailers and consumers. Whilst manufacturers can still select their distributors according to certain quality requirements, the manufacturers are under both European and German competition law prohibited from largely eliminating a principal distribution channel like the internet. The Bundeskartellamt’s proceedings against Adidas and also against ASICS (which have not yet been concluded) serve as test case taking into account that number of brand manufacturers are contemplating similar measures currently. The Bundeskartellamt takes the view that opening the distribution channels is particularly important for small and medium-sized sports retailers who want to expand their customer base. Consumers will also directly benefit from the amended conditions of sale.
Adidas AG’s decision to reconsider its distribution rules and to finally lift the restrictions imposed on its distributors 2012 followed extensive investigations of the Bundeskartellamt and an informal notification that its ban on sales via online market places gave rise to serious competition concerns. Adidas AG submitted an amended version of its conditions of sale for e-commerce, in which it has completely abandoned its ban on sales via online market places. At the same time it clarified that all authorized retailers are free to use Adidas brand related terms as search words for search engine advertising.
The Bundeskartellamt is currently also holding discussions with ASICS Deutschland GmbH, to which a statement of objections has been issued on account of similar conditions of sale on how the company could amend its selective distribution system in order to bring it in line with competition law. However, and crucially, the Bundeskartellamt’s position in both the ASICS and Adidas cases appears to limit the ability of parties to ban certain types of online sales. This appears at odds with the EU Commission’s interpretation in the Vertical Agreement Block Exemption Regulation. The Vertical Agreements Block Exemption Regulation itself and the accompanying guidelines do not explicitly state that sales must be allowed through third party platforms and auction websites. Paragraph 54 of the Guidelines in fact allows (somewhat ambiguously) distributors to ban sales through third party websites if they do not comply with the supplier’s quality and brand requirements or if reaching these sales portals would mean using websites with third party names and logos. Many businesses both inside and outside Germany do indeed ban sales through Ebay and Amazon. This apparent conflict of interpretation between EU and national competition law will need to be resolved as the resulting uncertainty is bad for business.