Online sales restrictions come under the CMA’s microscope

The Competition and Markets Authority (“CMA” - UK competition authority) is gathering information on the means used by branded clothing and luxury goods manufacturers to restrict internet platforms (eBay, Amazon, price comparison websites) from selling products online. This information gathering exercise began with CMA questionnaires to industry associations, lawyers and economists and it is possible that it could lead to a CMA study being initiated in due course. The CMA will conduct a meeting this Friday in London (16 January 2015) to discuss online sales restrictions in general and whether online trading is working as a whole. 

A top priority for the new European Commission is the reduction of barriers in the digital market. The CMA information gathering exercise should also be seen in the context of investigations currently underway by other national competition authorities (in particular, France and Germany) who have been active in relation to online sales restrictions. Germany has investigated the sale of household appliances, garden equipment, cosmetics and hotel rooms and is currently examining whether Japanese sports shoe manufacturer, Asics, may be infringing competition law by forbidding sales of its products by online marketplaces and preventing the use of price comparison websites. The ECJ upheld a decision by the French competition authority which found that cosmetic manufacturer, Pierre Fabre, had infringed the competition rules by banning its distributors from selling products online. Amazon’s “price parity policy” has also come under scrutiny by the UK competition authorities insofar as it restricted sellers from offering lower prices on other online sales channels. This investigation was closed when Amazon dropped the policy.

This information gathering process begins five years after the Commission Guidelines on Vertical Restraints were adopted. These Guidelines considered that in principle, every distributor must be allowed to use the internet to sell products and that using a website to sell products should be considered as “passive” selling, on the basis that it is a reasonable way to allow customers to reach the distributor. The result is to allow customers who visit a distributor’s website and conclude a sale to be considered “passive” selling - and that this cannot be prevented, even if it is outside the distributor’s allocated territory. The underlying principle is to ensure that sales across EU Member States are not inhibited through online sales restrictions (such as cancelling transactions if credit card data reveals an address that is not within an exclusive distributor’s territory or automatically re-routing customers to the manufacturer’s or other exclusive distributors’ websites). 

Technological innovation can often outpace law (even soft law, such as those found in the Commission’s five year old Guidelines) and the information gathering process being carried out by the CMA is aimed at finding out more about the use of online sales restrictions, how they may affect the workings of the online markets and whether they deserve further study.  

This CMA exercise is at the early stages of seeing whether there are new issues to be dealt with regarding online sales restrictions (it may or may not provoke a study which could in turn result in a more detailed CMA market investigation -  both of which require publication and allow observations to be made).  While this information gathering process is at a very early stage, every  effort should be made to engage with and influence the process.  If you would like to discuss how we can assist with this engagement please contact Jonathan Branton or Bróna Heenan.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Jonathan Branton

Partner - Head of EU/Competition

I lead the firm in EU/Competition issues, specialising in behavioural antitrust, merger control, public procurement and State aid, and all related issues of public funding, including the UK’s Regional Growth Fund, ERDF and ESIF. I also head up the firm’s Brussels office and the firm’s cross-discipline Public Sector group.