As reported in the last issue of VBB on Competition Law (see VBB on Competition Law, Volume 2013, No. 9, available at www.vbb.com), on 19 September 2013 the higher regional court of Berlin handed down a judgment concerning the prohibition of sales over eBay in the context of a selective distribution system operated by Sternjakob.
The selective distribution system concerned high quality school bags sold under the brand name "Scout". Authorised dealers were allowed to sell the schoolbags in their stores and over their own websites, but Sternjakob required authorised dealers not to sell the school bags over eBay or similar platforms. Products belonging to the preceding year's collection sold by authorised dealers ("out-of-collection products"), as well as special products and end-of-stock products, were sold by Sternjakob to a discount chain.
The higher regional court of Berlin held that it can be legitimate to prohibit sales by authorised dealers over eBay in a selective distribution system. According to the court, this is because, in particular, sales over eBay (including eBay shops) may affect the quality image of a product as eBay is often perceived as being similar to a flea market and is also associated with the sale of counterfeit goods. The court held that not all platforms necessarily have this quality-tarnishing image, for example platforms that target quality-conscious consumers, but eBay is not one of these quality platforms.
In order to be legitimate, the court held that the prohibition of sales over eBay must be applied in a non-discriminatory way. In particular, (i) no authorised dealers must be entitled to sell over eBay; and (ii) the supplier must not sell the products sold through its selective distribution system also through distribution channels that do not fulfil quality requirements imposed on authorised dealers, for example, through a discount chain which creates the risk of a loss of quality image.
A prohibition of sales over eBay by authorised dealers may still be seen as non-discriminatory if the products are sold outside of the selective distribution system in the following three situations:
- The sales outside of the selective distribution network are carried out by sellers other than the supplier;
- The sales outside of the selective distribution network are carried out by the supplier but only sporadically; and
- The sales made by the supplier outside of the selective distribution network concern only out-of-collection products, special products or end-of-stock products and, in addition, the supplier communicates clearly to the public that the sales outside of the selective distribution network concern only these limited types of products.
As regards (1), which was not strictly relevant to the facts of the case at hand, the court cited in support two previous rulings of the EU Court of Justice (ECJ) in the Cartier and VAG-Handlerbeirat cases. In the Cartier case, the ECJ held that the legitimacy of the selective distribution system created in the EU by Cartier was not compromised by the fact that Swiss dealers, which - according to Swiss law - could not be obliged to sell only to authorised dealers, sold the products to unauthorised dealers in the EU. In the VAG-Handlerbeirat case, the ECJ upheld the validity of a selective distribution system created by Volkswagen, despite the fact that Volkswagen products were sold outside of the authorised network because the unauthorised sales were made by authorised dealers selling Volkswagen products in breach of their distribution contracts.
As regards (2), the court observed that sporadic sales by the supplier outside the authorised network are in principle not problematic according to the ECJ decision in Copad/Dior. In the case at hand, however, the sales by Sternjakob to the discount chain were not carried out only sporadically as the supplier sold the products continuously through the discount chain during the period 2008-2013. In this way, it tarnished the quality image of the products. The fact that the sales through the discount chain amounted to only a minor proportion of the supplier's revenue was, in the eyes of the court, irrelevant.
As regards (3), the court held that Sternjakob had not complied with the requirement to clearly communicate to the public that the sales outside of the distribution network concerned only the limited types of products listed above. In the case at hand, the court found that, based on the advertising leaflets of the discount chain supplied with products by Sternjakob, consumers could not have concluded that the supply was limited to out-of-collection products, special items and end-of-stock products.
In conclusion, the court held that, in view of the nature and extent of the sales by Sternjakob to the discount chain, the prohibition of sales by authorised dealers over eBay was not legitimate. The court qualified the prohibition as a hardcore restriction of competition and a restriction by object. The restriction at hand was particularly serious as it affected sales over the Internet. More particularly, the court viewed the restriction as a customer restriction as it was intended to restrict sales to a particular customer group, i.e. consumers buying products over the Internet. The court went so far as to indicate that a discriminatory application of a selective distribution system amounts to a hardcore restriction and restriction by object.
Concluding that the prohibition of sales by authorised dealers over eBay was a hardcore restriction and restriction by object, the court held that neither the Vertical Agreements Block Exemption nor the De Minimis Notice could be applied in this case.
As a remedy, the court ordered the supplier to cease requiring the relevant dealer to stop sales over eBay as a condition of obtaining supplies and damages were granted to the relevant dealer.
By way of comment, it should be recalled that paragraph 54 of the Vertical Guidelines suggests that a prohibition on sales by authorised dealers through third party platforms is consistent with the Vertical Agreements Block Exemption. Nonetheless, those Guidelines do not consider the implications of a supplier which imposes such a prohibition itself supplying resellers which do not meet the criteria required for admission to its selective distribution system. Therefore, the ruling of the court in this case is not necessarily inconsistent with the guidance of the European Commission.
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