Last week, the German Federal Cartell Office ("FCO") published the written reasoning of its decision dated 27 August 2015, in which the FCO found the distribution agreements on online-marketing between Asics and its authorized retailers to be partly unlawful under Competition Law Regulations.
Affected by this decision were provisions of the distribution agreements, which prohibited authorized retailers from using price comparison engines for their online presence and from using ASICS brand names on the websites of third parties to guide customers to their own online shops (click here for the full BryanCave Competition Law blog-report). Furthermore, the FCO also found the prohibition of the use of third-party marketplaces to be anti-competitive under Art. 101 TFEU.
In its written decision, the FCO now gives a detailed reasoning on its legal opinion. Although the decision is appealed by ASICS' and therefore not final yet, it provides valuable guidelines concerning remaining options for market players to design distribution agreements in order to protect their economic interests.
Even though the legal approach of the FCO can be seen as relatively strict, the authority also recognises that market restrictions can be justified by the legitimate interests of the manufacturers of brand products. Although the respective conditions were not fulfilled in the case at hand, the FCO gives examples of what can serve as justification for market restricting distribution agreements under the Block Exemption Regulation for Vertical Agreements.
- Trademark law aspects are generally fit to justify restrictions on the distribution of branded products. These restrictions, however, have to meet the requirements of necessity and proportionality. Therefore, a brand manufacturer for example is within his rights when setting out in the distribution agreement how the respective brand name can be used on third-party websites. A total prohibition of such use of the brand name on the other hand is deemed to be disproportionate by the FCO.
- Distribution restrictions can be justified if they are necessary to protect the brand image. This in general allows brand manufacturers to set out specific rules regulating the distribution of the brand products by the authorized retailers. Nonetheless, in the opinion of the FCO this legitimate interest does not cover provisions which prohibit the usage of the brand name and the support of price comparing engines totally. Therefore, distribution agreements should ensure a minimum protection of the retailers' interests in order to be in accordance with the requirements of competition law.
It remains to be seen whether the Courts will follow the legal opinion of the FCO or if they will come to a different conclusion. For the time being, market players should pay close attention to the criteria established by the FCO, in order to use the scope provided by the decision and to ensure their respective distribution agreements comply with (European) Competition Law.