Germany: German Court Rules Against Casio Europe’s Prohibition Of Online Sales Via Internet Platforms

By a recently published judgment of 5 June 2014, the Higher Regional Court of Schleswig-Holstein (the "Court") upheld on appeal a judgment of a lower instance court condemning restrictions on the use of Internet platforms imposed by Casio Europe ("Casio"). The Court confirmed that a ban on sales via Internet platforms such as eBay and Amazon Marketplace imposed by Casio on its authorised retailers violates Article 101 TFEU and the equivalent provision under German law, Section 1 of the Act against Restraints of Competition ("GWB").

Casio operates a multi-channel distribution system for its digital cameras, under which it sells its cameras to: (i) wholesalers; (ii) large retailers (such as Karstadt and Saturn); and (iii) consumers through its own online shop.

Casio requires that wholesalers sell Casio's cameras to retailers who fulfil certain obligations, including requirements related to the display, stocking and advertising of the products. The retailers are entitled to sell through catalogues, newspapers and their own online shops. However, they are prohibited from selling through Internet platforms such as eBay and Amazon Marketplace, as well as from selling to unauthorised third party resellers.

The Court held that Casio's prohibition to sell via Internet platforms such as eBay and Amazon Marketplace has both the object and effect of restricting competition in violation of Article 101(1) and Section 1 GWB. Furthermore, the Court found no objective reasons that would justify this restriction under Article 101 (3) or Section 2 GWB.

Violation of Article 101 (1) TFEU and Section 1 GWB

The Court found that the ban restricts competition by object because it: (i) decreases the price pressure on Casio and its authorised retailers as it prevents price competition from Internet platforms such as eBay and Amazon Marketplace; (ii) diverts the sales that would otherwise be made through the Internet platforms to Casio's own online shop; and (iii) allows Casio to increase its presence in the growing e-commerce sector.

According to the Court, the reason why the ban also restricts competition by effect is because it limits the access of both retailers and end-customers to e-commerce.

The Court rejected the possibility that quality-based factors would prevent the ban from infringing Article 101 TFEU/Section 1 GWB.  In reaching this conclusion, the Court took the view that: (i) photographic cameras of the type produced by Casio are not so technically complex that expert customer service is required; (ii) Internet platforms such as eBay and Amazon Marketplace are in any event increasingly professional, no longer resemble flea markets and ensure a high level of customer satisfaction because the online transactions are safe; and (iii) the Internet-related standards which Casio requires its retailers to meet are very low and easily met by Internet platforms such as eBay and Amazon Marketplace.

Justification under Article 101 (3) TFEU / Section 2 GWB

The Court proceeded to consider whether the ban in question could be justified on an individual assessment under Article 101 (3) TFEU/Section 2 GWB or under the Vertical Agreement Block Exemption Regulation ("VABER").

First, the Court took the view that the ban could not be justified on an individual assessment under Article 101 (3) TFEU/Section 2 GWB as it does not further technical or economic progress.

Second, the Court concluded that the ban could not be block-exempted under the VABER because it constituted a hard-core customer restriction within the meaning of Article 4 (b) VABER. While acknowledging that the ban did not target any particular group of customers, the Court took the view that the scope of application of Article 4 (b) VABER was not limited to restrictions on sales to specific groups of customers. In this respect, the Court referred to the English language version of Article 4 (b) VABER, which specifies as problematic restrictions on the "customers" to which the buyer may resell the contract goods, whereas the German language version of Article 4 (b) VABER instead uses the term "Kundengruppe" (customer group) instead of "customers". The Court held that it was preferable to interpret Article 4 (b) VABER on the basis of the English language version, which was also supported by the French and Spanish language versions.

This case is a further example of the increasingly expansive, but at times inconsistent and therefore somewhat confusing, German case law concerning restrictions on the use of third party platforms. It is understood that appeals are pending in some of these cases and guidance from the European Court of Justice would be welcome to ensure that a coherent approach to this important issue is applied across the European Union by both national courts and competition authorities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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