The German Federal Cartel Office (“Bundeskartellamt”, BKartA) and the Schleswig Court of Appeals (“Oberlandesgericht” or “OLG Schleswig”) have held that the highly-renowned brands adidas, ASICS and Casio must allow their approved resellers to use internet auction sites and online marketplaces to resell their goods.
These cases suggest that a supplier may not prohibit, but merely regulate, such online resale by way of a selective distribution system in which requirements and restrictions on online sales may not exceed similar obligations imposed on resellers for other, namely offline, distribution channels.
- On Wednesday, July 2, the BKartA announced that it had closed its investigation into sports articles supplier adidas after adidas agreed to remove a restriction that prevented its approved resellers from selling products via internet auction sites and online marketplaces. adidas has also dropped a restriction preventing its resellers from using terms related to adidas brands as search words for advertising on search engines such as Google AdWords.
Adidas distributes its products by way of a selective distribution system. Its terms for online sales prohibited the use of online platforms and third party market places completely, banning well-known international platforms such as eBay and Amazon as well as domestic German platforms such as Rakuten.de and Hitmeister.de. The BKartA initiated proceedings after receiving complaints from resellers and found that the restrictions “gave cause for serious competition concerns”. adidas has now agreed to remove the ban on use of online platforms completely.
- In another BKartA procedure (see Press Release of April 28, 2014), the BKartA warned ASICS that its selective distribution system for running shoes, which banned any use of online market places, support for price comparison engines and use of the ASICS brand names on third party websites, was in violation of German and EU competition law.
The BKartA has also criticised ASICS for the way that it organises its selective distribution system, finding that it divides its distributors into 20 different categories, allows them only a limited range of products and makes cross-supplies between authorised distributors overly difficult. ASICS was granted leave to comment by June 10. According to the BKartA, it remains in “good talks” with ASICS, with whom it is negotiating on changes to the distribution system in order to make it compliant with competition law, or at least with the point of view of the BKartA.
- The OLG Schleswig, in its judgment of June 5, 2014 (Case 16 U Kart 154/13) confirmed that digital camera manufacturer Casio may not prevent dealers from selling its cameras via internet auction platforms or internet marketplaces. Casio’s distribution system, according to the Court, does not qualify for selective distribution. The Court found that the prohibition relieved Casio and its dealers from pressure on prices and restricted access for dealers to a large group of customers. The OLG has allowed Casio to file an appeal in law (“Revision”) to the Federal Court of Justice (“Bundesgerichtshof”, BGH).
These cases, as well as the ruling of the Berlin Court of Appeal (“Kammergericht”, KG) of September 19, 2013, on Scout satchels (Case 2 U 8/09 Kart) (see our earlier ebriefing here) , suggest that a supplier may only restrict the use of internet platforms and market places in a selective distribution system in which the criteria imposed on online sales are at least overall equivalent to criteria imposed for other sales channels, e. g. sale in physical shops, as explained in the Guidelines of the European Commission on vertical restraints (see Rec. 56). While the KG and the OLG Schleswig cases may result in rulings by the BGH or the European Court of Justice (“ECJ”), it is uncertain whether the BGH or the ECJ will let suppliers completely ban the use of online market places. Future BKartA and court cases may provide guidance upon circumstances in which the obligations on resellers for online sales and use of other sales channels are equivalent.
The adidas case is one of a number of investigations opened by the BKartA, and we expect to see it decide, or close following concessions by the suppliers, a number of similar cases in the near future. In a statement on its website relating to the adidas case, BKartA stated that“that the trading possibilities offered by the Internet create new challenges for both manufacturers and retailers” and that it is its “task to keep markets and opportunities open for the benefit of retailers and consumers”. The statement continues, “It goes without saying that manufacturers can select their distributors according to certain quality requirements. However, both under European and German competition law they are prohibited from largely eliminating a principal distribution channel such as the web.”
Casio, in the case decided by the OLG Schleswig, was sued by an association for the promotion of commercial interests. Such associations usually file cease-and-desist claims for unlawful general terms and conditions or for unfair competition. Thus, in addition to threat of receiving complaints or facing litigation from their resellers and the risk of BKartA scrutiny, suppliers may also face action by such independent bodies too. In light of this, compliance with the BKartA and court case law has become indispensable.