{"id":2300,"date":"2017-02-28T16:31:38","date_gmt":"2017-02-28T15:31:38","guid":{"rendered":"https:\/\/www.legalmondo.com\/?p=2300\/"},"modified":"2020-01-05T21:22:37","modified_gmt":"2020-01-05T20:22:37","slug":"ecommerce-restrictions-distributors-germany","status":"publish","type":"post","link":"https:\/\/www.legalmondo.com\/de\/2017\/02\/ecommerce-restrictions-distributors-germany\/","title":{"rendered":"eCommerce: restrictions on distributors in Germany"},"content":{"rendered":"<p>In distribution contracts, manufacturers and suppliers <strong>tend to restrict distributors in selling the goods online<\/strong> (I.). Though this practice is quite common, there is <strong>no clearly established rule<\/strong> if and which restrictions are allowed by antitrust law (II.), <strong>especially<\/strong> in case of <strong>luxury goods<\/strong> within selective distribution networks (III.).<\/p>\n<p>Now, it is up to the <strong>Court of Justice of the European Union<\/strong> (<a href=\"https:\/\/europa.eu\/european-union\/about-eu\/institutions-bodies\/court-justice_en\" target=\"_blank\" rel=\"noopener\">CJEU<\/a>) to give a preliminary ruling on the internet sales restrictions (IV.). In the meantime, the question is: how to deal with resale restrictions now (V.).<\/p>\n<h2>Resale Restrictions in E-Commerce<\/h2>\n<p><strong>E-Commerce keeps growing<\/strong> &#8211; worldwide and also in Germany, where it accounts for about 10% of total retail turnover (according to the 2016 figures from \u201c<a href=\"http:\/\/www.einzelhandel.de\/index.php\/presse\/zahlenfaktengrafiken\/item\/110185-e-commerce-umsaetze\" target=\"_blank\" rel=\"noopener\">Handelsverband Deutschland<\/a>\u201d [Trade Association of Germany]). Also manufacturers of renowned brands try to take advantage of the market opportunities of e-commerce, and at the same time try to preserve their brand\u2019s image. Consequently, manufacturers have imposed <strong>several kinds of restrictions on their distributors<\/strong>, in particular:<\/p>\n<ul>\n<li>total ban of internet sales,<\/li>\n<li>prohibition of sales via third parties\u2019 online platforms (especially \u201cmarketplaces\u201d),<\/li>\n<li>operation of a brick and mortar shops as a prerequisite for internet sales,<\/li>\n<li>dual pricing, or<\/li>\n<li>quality criteria for internet sales.<\/li>\n<\/ul>\n<h2>Antitrust limits to online resale restrictions<strong>\u00a0<\/strong><\/h2>\n<p><strong>Antitrust authorities<\/strong>, however, however, have lately put such restrictions under scrutiny and enforce antitrust rules in e-commerce as well. Accordingly, there have been quite a few court judgments and antitrust authorities\u2019 decisions, both in favour of and against such restrictions, e.g. on:<\/p>\n<ul>\n<li>bags (\u201cScout\u201d re third party platforms),<\/li>\n<li>sportswear (\u201cAsics\u201dre price comparisons, logo clause, \u201cAdidas\u201d re third party platforms),<\/li>\n<li>electronics (\u201cSennheiser\u201d and \u201cCasio\u201dboth re third party platforms),<\/li>\n<li>luxury cosmetics \/ perfumes (\u201cCoty\u201d re price comparisons, third platforms), or<\/li>\n<li>software (\u201cGoogle\u201d requiring manufacturers of to pre-install apps, cf. <a href=\"http:\/\/europa.eu\/rapid\/press-release_IP-16-1492_de.htm\" target=\"_blank\" rel=\"noopener\">European Commission\u2019s press release<\/a> of 20\u00a0April\u00a02016).<\/li>\n<\/ul>\n<p>Now, the luxury cosmetics case of Coty Germany has reached the <strong>European level<\/strong>.<\/p>\n<h2>The current Coty Case<strong>\u00a0<\/strong><\/h2>\n<p><strong>Facts of the case<\/strong> are as follows: The supplier (Coty Germany GmbH) has set up a selective distribution network. Distributors may sell via internet, under the following <strong>restrictions<\/strong>. They shall<\/p>\n<ul>\n<li>use their internet store as \u201celectronic store window\u201d of their brick and mortar store(s), thereby maintaining the products\u2019 character as luxury goods, and<\/li>\n<li>abstain insofar from engaging third parties as such cooperation is externally visible.<\/li>\n<\/ul>\n<p><strong>The parties\u2019 intentions: <\/strong>The supplier wants to enforce especially the last restriction, stopping a distributor (Parf\u00fcmerie Akzente GmbH) from selling supplier\u2019s products via Amazon\u2019s marketplace. The distributor, obviously, intends to be free from such restrictions.<\/p>\n<p>The <strong>court of<\/strong> <strong>first instance<\/strong>, the district court of Frankfurt, decided that the ban of sales via third party platforms is an unlawful restriction of competition under article\u00a0101 Treaty on the Functioning of the European Union (\u201c<a href=\"http:\/\/eur-lex.europa.eu\/resource.html?uri=cellar:2bf140bf-a3f8-4ab2-b506-fd71826e6da6.0023.02\/DOC_2&amp;format=PDF\" target=\"_blank\" rel=\"noopener\">TFEU<\/a>\u201d), namely a hardcore restriction under article\u00a04 lit.\u00a0c Regulation (EU) No.\u00a0330\/2010 (Vertical Block Exemptions Regulation or \u201c<a href=\"http:\/\/eur-lex.europa.eu\/LexUriServ\/LexUriServ.do?uri=OJ:L:2010:102:0001:0007:EN:PDF\" target=\"_blank\" rel=\"noopener\">VBER<\/a>\u201d). The <strong>court of second instance<\/strong>, the Higher Regional Court of Frankfurt, however, does obviously not see the answer that clear. Therefore, the court has requested the <strong>Court of Justice of the European Union<\/strong> (<a href=\"https:\/\/europa.eu\/european-union\/about-eu\/institutions-bodies\/court-justice_en\" target=\"_blank\" rel=\"noopener\">CJEU<\/a>) to give a preliminary ruling on how European antitrust rules have to be interpreted, namely article\u00a0101 <a href=\"http:\/\/eur-lex.europa.eu\/resource.html?uri=cellar:2bf140bf-a3f8-4ab2-b506-fd71826e6da6.0023.02\/DOC_2&amp;format=PDF\" target=\"_blank\" rel=\"noopener\">TFEU<\/a> and article\u00a04 lit. b and c VBER (decision of 19.04.2016, ref. no.\u00a011 U 96\/14 [Kart]).<\/p>\n<h2>Questions referred to the CJEU<\/h2>\n<p>The CJEU has <strong>filed the case as<\/strong> \u201cCoty Germany\u201d (<a href=\"http:\/\/eur-lex.europa.eu\/legal-content\/EN\/ALL\/?uri=CELEX%3A62016CN0230\" target=\"_blank\" rel=\"noopener\">reference no.\u00a0C-230\/16<\/a>). These are the four questions on which the CJEU is requested to answer:<\/p>\n<ol>\n<li>Do <strong>selective distribution systems<\/strong> that have as their aim the <strong>distribution of luxury goods<\/strong> and primarily serve to <strong>ensure a \u2018luxury image\u2019<\/strong> for the goods constitute an aspect of competition that is compatible with Article 101(1) <a href=\"http:\/\/eur-lex.europa.eu\/resource.html?uri=cellar:2bf140bf-a3f8-4ab2-b506-fd71826e6da6.0023.02\/DOC_2&amp;format=PDF\" target=\"_blank\" rel=\"noopener\">TFEU<\/a>?<\/li>\n<\/ol>\n<p>If the first question is answered in the affirmative:<\/p>\n<ol start=\"2\">\n<li>Does it constitute an aspect of competition that is <strong>compatible with Article 101(1) <\/strong><a href=\"http:\/\/eur-lex.europa.eu\/resource.html?uri=cellar:2bf140bf-a3f8-4ab2-b506-fd71826e6da6.0023.02\/DOC_2&amp;format=PDF\" target=\"_blank\" rel=\"noopener\"><strong>TFEU<\/strong><\/a><strong> if<\/strong> the members of a selective distribution system operating at the retail level of trade are <strong>prohibited generally<\/strong> from <strong>engaging third-<\/strong><strong>party<\/strong><strong> undertakings<\/strong> discernible to the public to handle internet sales, irrespective of whether the manufacturer\u2019s legitimate quality standards are contravened in the specific case?<\/li>\n<\/ol>\n<ol start=\"3\">\n<li>Is Article 4(b) of <a href=\"http:\/\/eur-lex.europa.eu\/LexUriServ\/LexUriServ.do?uri=OJ:L:2010:102:0001:0007:EN:PDF\" target=\"_blank\" rel=\"noopener\">Regulation (EU) No 330\/2010<\/a> to be interpreted as meaning that a <strong>prohibition of engaging thirdparty<\/strong> undertakings discernible to the public to handle internet sales that is imposed on the members of a selective distribution system operating at the retail level of trade constitutes a <strong>restriction of the retailer\u2019s customer group \u2018by object\u2019<\/strong>?<\/li>\n<\/ol>\n<ol start=\"4\">\n<li>Is Article 4(c) of <a href=\"http:\/\/eur-lex.europa.eu\/LexUriServ\/LexUriServ.do?uri=OJ:L:2010:102:0001:0007:EN:PDF\" target=\"_blank\" rel=\"noopener\">Regulation (EU) No 330\/2010<\/a> to be interpreted as meaning that a <strong>prohibition of engaging third-party undertakings<\/strong> discernible to the public to handle internet sales that is imposed on the members of a selective distribution system operating at the retail level of trade constitutes a <strong>restriction of passive sales to end users \u2018by object\u2019<\/strong>?<\/li>\n<\/ol>\n<h2>How to deal with Restrictions now<\/h2>\n<p>There is <strong>quite some case law<\/strong> in Germany about the ban on online sales, some decisions in favour, some against. Online sales restrictions have lately also been under <strong>scrutiny of the German Bundeskartellamt<\/strong> (federal antitrust authority), which in general rather takes a critical position against such restrictions, including restrictions on selling via third-party platforms.<\/p>\n<p>A decision of the highest German court is, however, <strong>still missing<\/strong>. Still missing is therefore also a <strong>clear answer to the question<\/strong> which restrictions suppliers and distributors can validly agree upon, especially in case of luxury goods. The CJEU\u2019s preliminary ruling should provide such clarity.<\/p>\n<p>Until the CJEU\u2019s preliminary ruling, the <strong>current legal situation<\/strong> should be as follows \u2013 based especially on the <a href=\"http:\/\/eur-lex.europa.eu\/LexUriServ\/LexUriServ.do?uri=OJ:C:2010:130:0001:0046:en:PDF\" target=\"_blank\" rel=\"noopener\">Guidelines on Vertical Restraints\u00a02010<\/a> (which do not have the quality of a law and do not bind the courts, but set out the principles which guide the European Commission\u2019s assessment of vertical agreements and thus in principle bind the European Commission itself):<\/p>\n<ol>\n<li>A <strong>total ban of online sales is hardly valid<\/strong> because online sales are considered as passive sales (cf. <a href=\"http:\/\/eur-lex.europa.eu\/LexUriServ\/LexUriServ.do?uri=OJ:C:2010:130:0001:0046:en:PDF\" target=\"_blank\" rel=\"noopener\">Guidelines on Vertical Restraints\u00a02010<\/a>, para.\u00a052). Hardly an option either is restricting the <strong>webstore\u2019s language options<\/strong> because it does not change the passive character of such selling (cf. <a href=\"http:\/\/eur-lex.europa.eu\/LexUriServ\/LexUriServ.do?uri=OJ:C:2010:130:0001:0046:en:PDF\" target=\"_blank\" rel=\"noopener\">Guidelines on Vertical Restraints\u00a02010<\/a>, para.\u00a052). The same goes for <strong>restrictions on the turnover<\/strong> made by sales via the internet.<\/li>\n<\/ol>\n<ol start=\"2\">\n<li><strong>Allowed<\/strong> should, however, especially be<\/li>\n<\/ol>\n<ul>\n<li><strong>qualitative requirements<\/strong> for the <strong>design of e-commerce platform<\/strong> (without resulting in a total ban and without restricting the use of languages),<\/li>\n<li>the <strong>restriction of active sales<\/strong> into the exclusive territory or to an exclusive customer group reserved to the supplier or allocated by the supplier to another buyer (article\u00a04 lit.\u00a0b (i) <a href=\"http:\/\/eur-lex.europa.eu\/LexUriServ\/LexUriServ.do?uri=OJ:L:2010:102:0001:0007:EN:PDF\" target=\"_blank\" rel=\"noopener\">VBER<\/a><u>)<\/u>, e.g. territory-based banners on third party websites, cf. <a href=\"http:\/\/eur-lex.europa.eu\/LexUriServ\/LexUriServ.do?uri=OJ:C:2010:130:0001:0046:en:PDF\" target=\"_blank\" rel=\"noopener\">Guidelines on Vertical Restraints\u00a02010<\/a>, para.\u00a053),<\/li>\n<li>general <strong>qualitative restrictions for becoming a member of the supplier\u2019s selective distribution system<\/strong>, e.g. requiring that distributors have one or more brick and mortar shops or showrooms (<a href=\"http:\/\/eur-lex.europa.eu\/LexUriServ\/LexUriServ.do?uri=OJ:C:2010:130:0001:0046:en:PDF\" target=\"_blank\" rel=\"noopener\">Guidelines on Vertical Restraints\u00a02010<\/a>, para.\u00a054, 176).<\/li>\n<\/ul>\n<p>The CJEU\u2019s decision will bring more clarity \u2013 Legalmondo will keep you updated on the Coty Case and possible implications on online distribution.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In distribution contracts, manufacturers and suppliers tend to restrict distributors in selling the goods online (I.). Though this practice is quite common, there is no clearly established rule if and which restrictions are allowed by antitrust law (II.), especially in case of luxury goods within selective distribution networks (III.). Now, it is up to the [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":5989,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[202,245],"tags":[220],"class_list":["post-2300","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-distribution-agreements","category-ecommerce","tag-germany"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.legalmondo.com\/de\/wp-json\/wp\/v2\/posts\/2300","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legalmondo.com\/de\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.legalmondo.com\/de\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.legalmondo.com\/de\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.legalmondo.com\/de\/wp-json\/wp\/v2\/comments?post=2300"}],"version-history":[{"count":5,"href":"https:\/\/www.legalmondo.com\/de\/wp-json\/wp\/v2\/posts\/2300\/revisions"}],"predecessor-version":[{"id":2341,"href":"https:\/\/www.legalmondo.com\/de\/wp-json\/wp\/v2\/posts\/2300\/revisions\/2341"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.legalmondo.com\/de\/wp-json\/wp\/v2\/media\/5989"}],"wp:attachment":[{"href":"https:\/\/www.legalmondo.com\/de\/wp-json\/wp\/v2\/media?parent=2300"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.legalmondo.com\/de\/wp-json\/wp\/v2\/categories?post=2300"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.legalmondo.com\/de\/wp-json\/wp\/v2\/tags?post=2300"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}