UK: The Bikeurope Case: Final Sprint On Online Sales Restrictions?

Last Updated: 26 July 2019
Article by Yves Botteman and Camille Keres

On July 1st, 2019, the French Competition Authority (FCA) imposed a €250,000 fine on Bikeurope B.V. (hereafter, Bikeurope) and its parent company Trek Bicycle Corporation for implementing a de facto ban on online sales to its distributors in France.

This decision, which is the last episode to date in the online restrictions saga, paints a particularly contrasted picture concerning online sales restrictions. While the FCA showed no mercy against certain forms of online restrictions, others apparently got a free pass – at least for now. As such, the Bikeurope case is an important, although perhaps incomplete, roadmap for brand owners willing to impose online restraints on their distributors in France and, more broadly, across the European Union.

Background

Bikeurope assembles, distributes and sells high-end bicycles via a selective distribution network. It operates in France through it French establishment, Trek France. With regard to online sales, Bikeurope imposed a series of restrictions from 2008 to 2014. These restrictions evolved over time but essentially included (1) a requirement to resell (or deliver, depending on the years) the products only from an authorized physical place of sale. Other restrictions included (2) a ban on sales on auction websites and (3) restrictions concerning online advertising, which was notably subject to Bikeurope pre-approval between 2008 and 2014.

The FCA's tough stance on Bikeurope's de facto online sales ban

The FCA focused its analysis on the provisions under (1) and found that they amounted to a ban on online sales. In this regard, the FCA noted that the requirement to resell from an authorized place of sale necessarily implied a ban on online sales. The same applied to the requirement to deliver from an authorized place of sale, as this would force customers to pick up the products bought online in the physical store of the distributor. Furthermore, the existence of a ban on online sales was confirmed by emails sent by Bikeurope to its distributors and by the fact that, as of April 2014, no Bikeurope distributor sold their products online.

In its defence, Bikeurope put forward two key arguments:

  • The need to ensure the safety and technicity of the Bikeurope products. Bikeurope relied on a French decree of 1995, which was applicable during the infringement period and which set out an obligation to only deliver fully set up bicycles to consumers. The goal of this regulatory obligation was to ensure consumer safety and to indirectly preserve the technicity of the products. On that basis, Bikeurope argued that its in-store delivery requirement was purported to ensure compliance with the 1995 decree. The FCA rejected the argument, noting in particular that the in-store delivery requirement went beyond the provisions of the decree, which did not prohibit online sales. The FCA also noted that online sales developed for bicycles developed during the infringement period, going from 4,5% in 2012 to 7,5% in 2015.
  • The need to preserve "a strong added value business model". Bikeurope also argued that the requirement for in-store delivery aimed at preserving the added-value of the business model, e.g. via an in-person service at the store. In line with a consistent line of recent case law in Europe, the FCA rejected the argument, noting that Bikeurope could have achieved this objective through less onerous means, for instance by imposing an obligation on online distributors to provide advice via a hotline or a live chat.

Finally, the FCA found that Bikeurope's de facto ban on online sales had an anticompetitive object. In this regard, the FCA highlighted that the in-store delivery requirement amounted to re-establishing catchment areas: even though customers would be able to compare prices when making an online purchase, they would ultimately be constrained to buy products sold by nearby outlets. The FCA therefore imposed a €250,000 fine – a relatively small amount, due to the fact that the law on online sales ban was unclear until 2011 (when the Pierre Fabre judgment confirmed that online sales bans are anticompetitive).

Radio silence on platform bans and online advertising restrictions – No news, good news?

As noted above, Bikeurope imposed other online restrictions to its distributors, namely, a ban on sales on auction websites and restrictions concerning online advertising, which were notably subject to Bikeurope's pre-approval between 2008 and 2014. The FCA's decision largely ignores these two restrictions.

As for the ban on sales on auction websites, this – admittedly tacit – validation of the mechanism is consistent with the prior decisional practice of the FCA and with the case law of a number of European national courts, including the Caudalie judgment of the Court of Appeal of Paris (adopted on July 13, 2018).

The situation is less clear concerning the restriction on online advertising that Bikeurope imposed on its distributors, in particular insofar as it limited online advertisement to the distributor's own website or to websites approved in advance by Bikeurope. One the one hand, such restraint may well be seen as participating in the overall intent of Bikeurope to prohibit online sales. On the other hand, the FCA did not treat this restraint as part of its objections and did not carry out an analysis on its possible anticompetitive effect. Further, with a view to protecting their brand image, suppliers should be able to exercise some control over how distributors and retailers advertise their products on third party websites.

One may nevertheless wonder whether this assessment may vary depending on the extent to which the advertising restrictions significantly impair the online visibility of the distributors. While the FCA does not shed light on this point, the German competition authority and the German courts touched upon it in the Asics case in Germany, which concerned comparable restrictions (prohibition to use price comparison engines and to use the Asics trademark for advertising purposes). In Asics, the restrictions were deemed anticompetitive precisely because they limited the searchability of the distributors on the Internet – an issue possibly worth considering when assessing restrictions to online advertising.

Where does it leave us?

The Bikeurope decision comes less than a year after the Stihl decision, where the FCA imposed a €7 million fine on a chainsaw manufacturer for imposing an obligation to its distributors to hand-deliver the products to their customers. The FCA also imposed several injunctions on Stihl to change its behaviour. In this case and similar to Bikeurope, Stihl argued that this restriction was necessary to ensure the safe use of its products, by allowing the distributor to demonstrate, in person, how to safely use the chainsaw. The FCA found that such a restriction was disproportionate relative to its objective of ensuring the safety of its products. Other similarity with Bikeurope: Stihl had also imposed a platform ban, which the FCA cleared (this time, explicitly).

Following these two cases, two clear take-away emerge:

  • The FCA will not tolerate any kind of de facto ban on online sales – however serious or legitimate the justifications for these bans may be. One may argue that the FCA is being too rigid, if not dogmatic, on this issue: both Bikeurope and Stihl put forward arguably convincing stories to justify their practices, based on credible safety concerns. In this regard, we note with interest that the Paris Court of Appeal has already ordered the suspension of the injunctions imposed by the FCA against Stihl. In doing so, the Court of Appeal flagged, inter alia, "the legal risk resulting from Stihl's civil liability as well as the reputational risk induced by the lower quality of the service", which suggests that the Stihl's safety concerns might well prevail when the Court of Appeal rules on the merits of the case in the coming months.
  • The FCA is clearly validating online platform bans. In this regard, the fact that the FCA did not even examine the ban that Bikeurope imposed on auction websites is particularly telling.

But this may not be the end of the road yet. Adding to the upcoming judgment of the Court of Appeal in the Stihl case, one may wonder what the status of restrictions to online advertising is after the Bikeurope case. The silence of the FCA on this issue might be indicative that at least some degree of restrictions to online advertising, aimed at protecting the brand image, would be admissible. This would be even more so where the supplier can show that such limits do not materially impede the visibility and searcheability of the retailer in the online space, i.e. consumers can easily find the website of the retailer through a few clicks. This being said, the topic has proven to be sensitive in other jurisdictions and further guidance on this topic would be welcome.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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