Online Sales Restrictions Remain a Hot Topic: UK CMA Issues Statement of Objections

By on June 24, 2016

On 9 June 2016, the UK’s Competition and Markets Authority (CMA) issued a statement of objections (SO) to Ping Europe Limited (Ping), a golf equipment manufacturer, alleging that Ping had breached EU and UK competition law by banning the sale of its golf clubs online.

In the event that the CMA ultimately determines that Ping’s online resale ban is not justified, it will no doubt require that Ping cease such conduct and possibly levy a fine. Upon announcement of the issuance of the SO, the CMA stressed that:

[w]here traditional businesses operating through high street shops face intense competition from online sales, suppliers may be tempted to respond by introducing practices, like online sales bans, that can restrict such competition. The internet is an increasingly important distribution channel and retailers’ ability to supply via this channel should not be unduly restricted“.

Furthermore, the CMA emphasised that an online sales ban may pose problems where they are aimed at preventing retailers from reaching a significant proportion of customers.

The concerns voiced by the CMA, are a further indication that issues pertaining to online sales restrictions remain very much on the agenda of antitrust regulators in Europe, including the European Commission whose e-commerce sector inquiry report is expected in the first quarter of 2017.

Indeed, several national competition authorities, including the CMA, have pursued cases involving restrictions in the online sales sphere. For example, in 2012, a manufacturer of speakers and headphones was fined EUR900,000 by the French competition authority for having prohibited “distance selling” by its approved distributors, interpreted to mean Internet sales.

More recently, in December 2015, the Frankfurt Court of Appeal in Germany – in disagreement with the German Competition Authority – decided that a ban on sales via a large online retailer imposed by a backpack manufacturer did not infringe competition law, but was justified by the qualitative selective distribution system in place. The court accepted that sales via the large online retailer would not meet the manufacturer’s criterion of offering proper sales advice on the various products concerned.

Another important development coming hot on the heels of the December 2015 judgment in Germany concerns a preliminary reference to the European Court of Justice (ECJ) by the Frankfurt Court of Appeal on 19 April 2016. In the context of its review of the legality of restrictions imposed by perfume and cosmetic maker Coty, Inc. on an authorized (offline) distributor seeking to sell products via third party platforms on the Internet, the referring court has asked for guidance on the legality of the online platform ban in this case.

The ECJ’s judgment in the Coty case will no doubt have far-reaching consequences on the implementation of selective distribution systems in general and third party platform bans in particular.

The issue of online sales restrictions therefore clearly remains a hot topic in Europe and companies are urged to act with care when considering on whom and how online sales restrictions are to be imposed.





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