February 18, 2020

February 18, 2020

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February 17, 2020

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German Bundeskartellamt’s Decision against Online Sales Restrictions by ASICS Ultimately Confirmed

In its decision of 12 December 2017, the German Federal Supreme Court (Bundesgerichtshof – BGH) dismissed ASICS’ application to appeal the 2017 judgment of the Düsseldorf Higher Regional Court (OLG) on alleged online sales restrictions.  The BGH confirmed that prohibiting the use of price comparison websites by retailers constitutes a hardcore restriction under EU competition law.

In 2015, the Federal Cartel Office (Bundeskartellamt – BKartA) found that ASICS’ selective ‘retail system 1.0’ (the system was launched as “Vertriebssystem 1.0”) contained hardcore restrictions  under Article 4(c) of the Vertical Block Exemption Regulation (VBER).  By introducing retail system 1.0, ASICS had allegedly requested approximately 2,000 retailers to refrain from advertising ASICS’ products via price comparison websites and prohibited the use of its brand names on third party websites redirecting customers to retailers’ online shops.

On appeal, the OLG upheld the BKartA’s decision, finding that a general prohibition on the use of price comparison websites restricts competition, as it deprives distributors of an opportunity to advertise and sell online effectively.  The OLG also found that the prohibition was not justified by either branding considerations or the need for staff to provide advice to customers.  The OLG refused to permit further appeal to the Federal Supreme Court as no fundamental questions of law were raised. Further, it found that there were no reasons to refer the matter to the CJEU for preliminary ruling.

The BGH confirmed the OLG’s view.  It agreed that a ban on price comparison websites prevented consumers from finding retailers’ offers easily, and was capable of substantially restricting retailers’ online sales.  In view of the large amount and variety of products offered online, and the considerable number of retailers, price comparison websites are important for both consumers and retailers.  They enable consumers to identify which retailers offer the product they selected, and on which conditions.  Accordingly, a retailer can substantially enhance its chances of sales by connecting with price comparison websites.

The BGH further clarified that the judgments of the Court of Justice of the EU (CJEU) in Pierre Fabre (C-439/09) and in Coty (C-230/16) are not applicable.  First, the restriction on the use of price comparison websites did not amount to a total ban on Internet sales as in Pierre Fabre, but only limited the use of one online sales channel.  Second, the general restriction on price comparison engines is different from the situation considered in Coty.  In its Coty judgmentthe CJEU found that a supplier of luxury goods may prevent its authorised retailers from using third-party platforms in a discernible manner to sell its products, in order to preserve the products’ luxury image.  The BGH held that the Coty judgment was not applicable because the affected ASICS products (running shoes) could not be considered to be luxury goods.  It did not provide further guidance on the issue of when a product might be considered to be a luxury product or not.  In particular, it did not address the point raised by the BKartA in its 2015 decision that the mere fact that a product is of high quality and is sold under a registered trademark does not automatically give this product an “aura of luxury”.

According to the BGH, irrespective of the fact that the ‘retail system 1.0’ did not concern luxury goods,  it consisted of a combination of contractual clauses which – unlike the clauses in Coty (which did not preclude retailer use of price comparison websites)  – did not guarantee that consumers would have substantial access to online retailers’ offers.

Although there was no precedent on the issue, the BGH agreed with the OLG that this case did not raise a fundamental question of law because there was no doubt that a general prohibition of advertising via price comparison websites was a hardcore restriction.  For the same reason, it found that a preliminary reference to the CJEU would be redundant.  Finally, the BGH confirmed that the OLG was right to limit its findings to the general prohibition on price comparison websites without addressing the legality of other clauses in ‘retail system 1.0’.  It is sufficient for one clause to qualify as a hardcore restriction for the entire ‘retail system 1.0’ to be unlawful.

Following the publication of BGH’s ruling, Andreas Mundt, President of the BKartA, confirmed his view of the importance of price comparison websites and Internet marketplaces for small and medium-sized retailers.  He noted that manufacturers often operate their own online shops and cooperate with large marketplaces.  As a result, “[i]f these manufacturers simultaneously impose online restrictions on their predominantly small and medium-sized dealers, the online business will ultimately be concentrated in the hands of the manufacturers themselves, a few large retailers and even fewer leading marketplaces.  So we have to keep the markets open for small retailers for the benefit of consumers and small dealers.

The BGH’s (and OLG’s) view appears to be mirrored in the European Commission’s e-commerce sector inquiry finding that “absolute price comparison tool bans which are not linked to quality criteria, potentially restrict the effective use of the internet as a sales channel and may amount to a hardcore restriction of passive sales under Article 4 b) and 4 c) of the VBER” (seeStaff Working Document).

© 2020 Covington & Burling LLP

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About this Author

Jennifer Boudet, Covington Burling, technology and communications attorney
Associate

Jennifer Boudet is an associate in the Antitrust and Competition team advising clients in a variety of sectors, including in particular technology and communications, and life sciences.

Ms. Boudet advises clients across a broad range of EU and national competition law matters, with specific experience in multi-jurisdictional merger control filings, Articles 101 and 102 cases, as well as regulatory issues.

32.2.545.7503
Kim-Simone Janutta, Covington, Regulatory attorney
Associate

Kim-Simone Janutta advises clients in all areas of European and German Competition law, including cartel investigations, self-assessment of undertakings, compliance, state aid and regulatory issues.

Her practice focuses on the transport sector, in particular blue water carriage and civil aviation. In addition, Ms. Janutta has a broad experience in compliance in the defence sector.

322-545-7517