In a decision published in January 2018, the Federal Court of Justice, Germany's last-instance court, held that absolute prohibitions to participate in online price comparison tools imposed on distributors in selective distribution systems amount to a hardcore restriction under Article 4c of the EU Block Exemption Regulation on Vertical Restraints (330/2010).(1)
A closer look at the German decision reveals some doubts as to its compatibility with the European Court of Justice (ECJ) decisions in Pierre Fabre(2) and Coty.(3) In any event, it appears surprising that the national court did not find it necessary to refer the question to the ECJ.
In 2015 the Federal Cartel Office decided(4) that sports shoe manufacturer asics infringed Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Section 1 of the Act against Restraints of Competition when it imposed in its selective distribution contracts, among other things:
- an absolute prohibition to participate in price comparison tools (first restriction);
- an absolute prohibition to sell via third-party online platforms (second restriction); and
- a de facto absolute prohibition to advertise on third-party websites using asics brands (third restriction).
The court held that at least the first and third restrictions amounted to hardcore restrictions under Article 4c of the Block Exemption Regulation.
On appeal, the Dusseldorf Higher Regional Court upheld the decision.(5) Finding that the first restriction was a hardcore restriction, the court did not decide on the other restrictions. More importantly, the court found that the absolute price comparison tool ban was so evidently a hardcore restriction that it refused asics leave for appeal to Germany's Federal Court of Justice.
asics appealed against this refusal (ie, not yet against the decision on the merits). The German top court rejected the appeal, concluding that it was beyond any doubt that absolute price comparison tool bans amount to hardcore restrictions under Article 4c of the Block Exemption Regulation.
The court set out that under German law an appeal against a refusal to leave for appeal is founded only if:
- a substantive question of law is disputed and therefore requires clarification; or
- the court is obliged under Article 267 of the TFEU to refer the question to the ECJ for a preliminary ruling.
Accordingly, as a first step, the court briefly assessed whether it was disputed, in jurisprudence or among scholars, that an absolute price comparison tool ban amounts to a hardcore restriction. It found that this question was not disputed and required no clarification, as:
- both the Federal Cartel Office and the Dusseldorf Higher Regional Court agreed in the decisions subject to appeal that such bans amounted to hardcore restrictions under Article 4c of the Block Exemption Regulation;
- the European Commission, in Paragraph 552 of the staff working document accompanying the final report of the e-commerce sector inquiry, did not state that such bans do not amount to hardcore restrictions; and
- the applicant provided no other case law to the contrary, nor any legal commentaries endorsing a different view.
As a second step, the court explained why cases of price comparison tool bans are so clear-cut that the court is not obliged under Article 267 of the TFEU to refer the question to the ECJ for a preliminary ruling. This analysis had three elements.
The court first established why it did not believe that Pierre Fabre and Coty could serve as precedents:
- Pierre Fabre concerned a de facto prohibition of online sales in selective distribution systems. According to the Federal Court of Justice, the clause at issue in the present case did not amount to a de facto prohibition on using the Internet as a means of marketing. Rather, it restricted only certain forms of using the Internet as a sales channel. Hence, the cases were not comparable.
- Coty concerned an absolute ban on the usage of third-party platforms in selective distribution systems for luxury goods. According to the Federal Court of Justice, the present case differed from Coty in that the latter:
- concerned a ban on the use of third-party platforms instead of price comparison tools; and
- related to the distribution of luxury goods instead of sports shoes.
The court then looked at the potential effects of the price comparison tool ban. It found that the prohibition led to a "substantial restriction" of retailers in online trading. The court argued that price comparison tools allowed internet users who already know which product they wish to buy to search specifically for prices and conditions. In the court's view, a retailer therefore could noticeably increase the visibility of its offer by participating in price comparison tools. Accordingly, there is no doubt that absolute price comparison tool bans amount to a hardcore restriction.
Finally, the court returned to Coty and explained in more detail why Coty did not cast doubt on its finding. It considered that Coty was different to the case in two aspects:
- Coty concerned luxury goods – the court left open how this aspect specifically affected its assessment.
- In Coty, under certain conditions, authorised dealers could advertise via the Internet on third-party platforms and use online search engines, with the result that customers could access the online offer of those dealers. In the present case, in addition to the absolute ban on the use of price comparison tools, the selective distribution contract prohibited dealers from:
- using the asics brands on third-party websites in order to divert customers from that third-party website to that of the dealer; and
- using third-party platforms.
- According to the Federal Court of Justice, because of this "combination of restrictions" in the distribution contract in question, customers were no longer guaranteed access to the respective dealers' online offers.
Considering the facts of the case, the Federal Court of Justice may ultimately have been correct in denying asics a full appeal. Arguably, the combination of the restrictive clauses in asics's selective distribution contract made online sales so difficult for authorised distributors that these clauses together amounted to a de facto prohibition of online sales – and hence amounted to a hardcore restriction.
However, this is not what the court ruled. Instead, it found that the price comparison tool ban on its own amounted to a hardcore restriction under Article 4c of the Block Exemption Regulation.
Is this convincing?
First, is it really convincing to argue that a legal question is "not disputed" if the only views known are those which are expressed in the decisions which are submitted to the court for review?
Second, is it really convincing to argue that a price comparison tool ban, which in the court's view does not amount to a prohibition of online sales, but in combination with other restrictions makes it difficult for customers to access the online offer, amounts – on its own – to a hardcore restriction?
Third, is the finding that an absolute price comparison tool ban on its own amounts to a hardcore restriction under Article 4c of the Block Exemption Regulation in line with ECJ case law – in particular, with Pierre Fabre and Coty? Would it not be a reasonable reading of Coty that a restriction which merely makes online sales more difficult but does not (de facto) prohibit them does not have the object of restricting passive sales and hence is not a hardcore restriction?
In particular, the reply to latter question is not obvious. Thus, the Federal Court of Justice should arguably have referred that question to the ECJ for a preliminary ruling. As it did not do so, hopes that Coty would pave the way towards a more harmonised approach to vertical restraints in the European Union may be short lived.
For further information on this topic please contact Kai Neuhaus at CMS Hasche Sigle by telephone (+32 2 6500 420) or email (email@example.com). The CMS Hasche Sigle website can be accessed at www.cms-hs.com.
(4) For further details, please see "Running astray? Detailed reasons of the highly debated ASICS online marketing decision of the Federal Cartel Office published".
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.