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The retail landscape has undergone tectonic shifts over the last decade. Emerging new distribution formats have started challenging traditional brick-and-mortar chains long ago, but the industry has undergone radical change more recently, as manufacturers are increasingly engaging in dual distribution (i.e., selling both through retailers and their own stores, primarily online), price comparison websites are starting to offer direct-purchase options, traditional online players are opening brick-and-mortar stores, and more online retailers are offering sales opportunities for other retailers via online market places. These new distribution formats have challenged suppliers to think about how to design their go-to-market strategy, and "steering measures," such as online sales restrictions, have been scrutinized by a number of competition authorities for some time; and several of those, such as third-party platform and price comparison website bans, have been hotly debated.
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This debate will inevitably feed into the latest reform discussions, in particular with regard to the soon-to-expire Vertical Block Exemption Regulation (V-BER). The currently ongoing public consultation process regarding the V-BER's potential renewal now provides for a good opportunity for all stakeholders to alert the Commission to the need for and consequences of changes to this regulation, in particular with regard to limitations imposed on distributors regarding selling or advertising online.
Third, the ECJ provided guidance on how third-party platform bans are to be treated under the V-BER, which comes into play when the Metro criteria are not met and Article 101(1) TFEU is applicable. The V-BER provides for a safe harbor for vertical restrictions if the contractual parties' market shares do not exceed 30 percent, but is not applicable if the agreement contains a "hardcore restriction" of competition. In Coty, the ECJ held that a third-party platform ban does not constitute such a hardcore restriction for two reasons. First, it does not (on its face) exclude online sales entirely, given that distributors could still sell through their own web shops or non-discernible third-party platforms. Second, third-party platform customers are not a definable customer group in the meaning of Article 4(b) V-BER, so that the ban did not exclude sales to a certain category of customers as a whole, which would have been illegal.
Another question that Coty did not answer is how to treat other forms of online sales restrictions in the context of selective distribution systems, such as (i) the prohibition to use price comparison tools (such as billiger. de) and (ii) restrictions on keyword bidding in search term ad auctions (such as Google AdWords). Neither type of restriction has been subject to any Commission decisions or ECJ judgments yet.
In a decision in 2015, the FCO qualified the prohibition of using price comparison sites within a selective distribution system as a hardcore restriction of competition within the meaning of Article 4(c) V-BER. It seems doubtful that this view is compatible with the subsequent Coty judgment, given that a price comparison site ban still allows for several other methods to sell online, thereby falling short of a de facto prohibition of online sales. Strictly speaking, a price comparison site ban does not even amount to any form of sales restriction, but is rather a restriction on how to advertise (traditionally, price comparison websites are only a "window" showing search results, not a sales channel such as third-party platforms, given that the actual sale is typically performed via the distributor's website). In addition, a price comparison site ban does not restrict sales (or advertisement) to a definable customer group in the meaning of Article 4(b) V-BER.
Finally, the Coty judgment does not contain a clear statement regarding how to deal with cases where several forms of restrictions apply in parallel, and thereby significantly limit the distributors' ability to sell the contract goods online. In fact, the ECJ also based its reasoning on the argument that Coty did not prevent distributors from promoting their own websites via online advertising and online search engines, which both enabled users to find the website. While this line of argument implies that restrictions resulting in a de facto ban from selling online probably constitute a restriction of competition by object, it remains unclear how to treat cases that fall just short of a de facto complete prohibition.
Less than a week after the ECJ had rendered its Coty judgment, the German Federal Court of Justice (FCJ) held that shoe manufacturer Asics prohibiting its authorized distributors from using price comparison tools constituted a hardcore restriction of competition within the meaning of Article 4(c) V-BER. The FCJ saw no need to go along with the ECJ approach in Coty, given that it did not view athletic shoes as luxury goods. The FCJ further argued that the accumulation of several types of restrictions contained in Asics's selective distribution agreements "substantially" limited (but did not fully exclude) the distributors' ability to sell the contract goods online. Thus, even absent a de facto ban of online sales, the FCJ found the prohibition from using price comparison sites to be a hardcore restriction.
In the same vein, in a recent case in October 2018, the French Autorité de la concurrence found that a third-party platform ban regarding non-luxury goods could be justified under the Coty case law, provided that it was necessary and proportionate. Nevertheless, it ultimately fined power equipment manufacturer STIHL because its distribution contracts contained provisions that, according to the Autorité, amounted to a de facto prohibition of online sales (such as an obligation either to pick up the order personally at the distributor's premises or to have the distributor personally deliver the order to the customer).
As regards content, most of the restrictions included in the Guess distribution agreements, such as resale price maintenance clauses, prohibiting cross-selling to other authorized distributors, or using the online sales authorization process arbitrarily with the explicit goal of limiting the number of online distributors, constitute clear-cut violations. The Commission's assessment and conclusions in this regard are, therefore, not surprising. With a view to Coty, the Commission followed the ECJ insofar as it emphasized that a specific contractual clause within a selective distribution agreement is lawful if the Metro criteria are met.
Yet, the decision contains several notable points. Most importantly, the Commission found that an absolute ban on using trademarks and brand names for online sales advertising, which prevents authorized distributors from bidding on these keywords at online advertised auctions (and therefore presently reserving this privilege to Guess only) was a restriction of competition by object. Surprisingly, the Commission did not link this finding to the other, additional restrictions imposed on the distributors, let alone on a de facto prohibition of online sales, but considered the keyword bidding ban to be a hardcore restriction in itself.
It is not clear at first sight why the Commission saw no need to take the Coty case law into account when assessing an exemption under the V-BER. Given that (i) the keyword bidding ban did not (on its face) exclude online sales entirely, and (ii) (in the same vein as "marketplace users") customers using search engines do not seem to be a definable customer group within the meaning of Article 4(b) V-BER, one would have expected a detailed assessment of Article 4(b) and/ or (c) V-BER in light of Coty. However, instead of rejecting an exemption under the V-BER, the Commission simply argued that the keyword bidding ban had the (ultimate) objective to "partition the market since they limited the ability of the authorized retailers to sell the contract products actively or passively (depending on the targeted audience or territory)."
Two potential explanations of why the Commission considered the keyword bidding ban a "by object" restriction come to mind. The first is that, without explicitly stating so, it took into account the other restrictions that Guess imposed on its resellers, and ultimately found (without saying so) a complete online sales ban. However, such a conclusion does not seem to be in line with the Commission's own findings in the context of the Metro assessment, according to which the keyword bidding ban restricted (but did not exclude) the "findability" of online retailers. While the Commission concluded that retailers were "deprived of the ability to effectively generate traffic to their own websites," this statement leaves open whether the ban de facto only im-peded or excluded online sales. It does sound a little more like the FCO's and FCJ's "substantial limitation" standard.
A second explanation is that the Commission took into account that the keyword bidding ban had a horizontal dimension insofar as Guess was directly competing with its distributors when bidding for keywords and selling its products online. This horizontal element distinguishes the case from Coty. However, the V-BER expressly also applies to cases of dual distribution (see Article 2(4)(a)), so, a priori, the fact that Guess was also selling through its own website as such should not have prevented the Commission from assessing the restriction under the V-BER.
The above shows that Guess does not constitute a clear-cut case that can easily serve as a template for other cases. Nevertheless, it must be noted that the Commission appears to be determined to treat a keyword bidding ban as a "by object" restriction. This might even be the case when the manufacturer has a "better story" that the restriction serves to protect a legitimate interest than Guess. Given that, other than the FCJ, the ECJ has at no point held that a "substantial limitation" to be found online and to generate online traffic suffices as a hardcore restriction, it remains doubtful whether the Commission approach is in line with the Coty case law. 041b061a72