Changes needed in selective distribution agreements

Towards the end of last week the German competition authority (“the Bundeskartellamt“) announced the conclusion of its long running investigation in respect of certain provisions of the selective distribution system of sports footwear brand ASICS.

The Bundeskartellamt found that the provisions of the selective distribution system implemented by ASICS’ German subsidiary which prohibited distributors from using:

  1. price comparison engines for their online presence; and
  2. the ASICS brand names on websites of third parties to guide customers to their own online shops, 

are anti-competitive.

The competition authority concluded that such provisions are concerned primarily with controlling online and offline price competition.

Its findings were made on the basis that such provisions restrict the:

  • online sales activities of small and medium sized authorised dealers; and
  • as such, their ability to sell the products over the internet.

As such, there is a risk that such sales restrictions will “prevent consumers from enjoying the benefits of the availability of both online and offline sales“ and the consequent price reductions.

The Bundeskartellamt also criticised the provision of the ASICS selective distribution system which prohibited distributors from using online marketplaces such as Amazon and eBay.

The decision in respect of ASICS follows a similar investigation by the Bundeskartellamt in 2014 of the conditions set by Adidas for the online sale of its products, in particular Adidas‘ restriction on sales via online marketplaces. The Bundeskartellamt decided that such restriction gave rise to serious competition concerns. The investigation in respect of Adidas was concluded in June 2014 after Adidas amended its sales conditions taking out all reference to its restriction on sales via online market places.

ASICS has now followed suit by amending the clauses in its selective distribution system which were the subject of competition law objections.

UK brands operating selective distribution systems which contain similar restrictions risk attack by competition authorities within the EU. It is open to both the European Commission and the national authorities of EU member states to follow the lead of the Bundeskartellamt. Indeed national competition authorities may feel the need to do so where the complainant is a retailer incorporated in the particular member state!

It is also open to retailers which have been refused admittance to a brand’s selective distribution system (for example, because of their use of, say, price comparison engines) to challenge the refusal.

In the interim the UK Competition and Markets Authority (the “CMA“) is undertaking an economic research project concerning vertical agreements (being agreements between companies at different levels of the supply chain) and the internet. In undertaking such project, the CMA has been gathering information from lawyers, economic consultants and business representative groups as to how suppliers of branded goods restrict online sales. Earlier this year the CMA was not planning to produce formal guidance or changes in the law as a result of its project. However, the Bundeskartellamt’s decision may change its mind.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.