According to a recent decision of the German Federal Court of Justice, prohibiting authorised dealers from using price comparison websites may be a “hard-core” breach of competition law.
Within its selective distribution system, market leader ASICS had prohibited dealers from using price comparison websites. In addition, dealers were not allowed to permit third parties to use ASICS’ brand names on their websites in order to guide customers to the dealers’ own online shops. Finally, dealers were prohibited from selling their products via third party websites that displayed the third party’s name or brand.
The German competition authority (FCO), however, had based its original prohibition decision only on the complete ban of price comparison website finding the ban to be incompatible with competition law. Thus, also the German Federal Court of Justice (FCJ) is essentially limited to this restriction.
Ban of price comparison website qualifies as hard-core restriction
In considering ASICS’s appeal against this decision, the FCJ found that a complete ban – i.e. not based on qualitative criteria – of price comparison websites constituted a “hard-core” restriction under the European Commission’s block exemption for vertical agreements (the Vertical Block Exemption). According to the FCJ, the access to price comparison websites is of key importance for online competition, as they allow customers to select the best offer amongst a broad range of dealers (including small and medium-sized dealers). The FCO’s original decision had stressed that the ban of price comparison websites enabled ASICS to eliminate a large part of online offers and to inhibit price decrease.
Furthermore, ASICS’s ban of price comparison websites was found to be particularly harmful to competition, as it was framed by other clauses which impaired dealers’ ability to market ASICS’s products online.
However, the FCJ did point out that its ruling only applied to a complete ban of price comparison websites. It stated that restrictions that prevented access to such websites might possibly be in accordance with competition law if these restrictions were linked to specific quality requirements.
Is this ruling in line with CJEU’s Coty judgement?
The ASICS ruling was published only shortly after the Coty decision of the Court of Justice of the European Union (CJEU). In Coty, the CJEU found that, within a selective distribution system a supplier of luxury goods may under certain conditions prohibit authorised dealers from selling the supplier’s products on third-party online platforms. The CJEU concluded that the contractual clause in question did not go beyond what was necessary to preserve the prestigious image of the respective luxury goods. The court was careful to point out that it did not consider a marketplace ban to be a hard-core restriction, as Coty’s distributors remained free to advertise via the internet on third-party platforms and to use online search engines, allowing customers other means to find the distributors online.
While the freedom granted by the Coty decision seems at odd with the ASICS case, the FCJ considers its decision to be consistent with the Coty judgement on the grounds that:
- ASICS’s products apparently do not qualify as “luxury goods” (suggesting that Coty has no relevance for branded goods that are not considered “luxury” goods);
- ASICS imposed a complete ban opposed to a restriction based on qualitative criteria (as in Coty); and
- the combination of the restriction and additional barriers for online sales eliminated the possibility that customers could find the dealers effectively online (unlike in Coty, where the dealers’ possibility to be found via price comparison website was a key aspect to justify the compatibility of Coty’s third party platform restriction with competition law)
The FCO will see the FCJ’s decision as confirmation of the FCO’s critical stance on online restrictions and of its restrictive reading of the Coty judgment. The FCO has been clear that it considers Coty only to apply to luxury goods in the narrow sense and not generally to all kinds of branded goods.
However, many commentators read the Coty judgement as applying to all brands, luxury or not. The ASICS judgement does not make clear whether this distinction has been applied in Germany, or whether the FCO will require any restriction on online platforms to be linked to the protection of a luxury brand. Thus, we can expect – and hope – that case law in Germany will continue to develop clearer legal boundaries for online sales restrictions, offering greater certainty to business.
What is clear is that all companies, whether operating selective distribution or not, will continue to face significant scrutiny in Germany when imposing requirements for online sales. To minimise competition law risk, ASICS therefore suggests that companies operating a selective distribution system in Germany:
- may restrict the sale of luxury goods via third party platforms if that is necessary to protect the luxury image; but
- may not impose outright bans of price comparison websites for (merely) branded goods.
While this may potentially be at odds to policy in other Member States, following these principles may, for now, be prudent at least within Germany.