Many manufacturers of branded goods, who have expressed concerns about the image of their products and worry that these are sold on the cheap, have sought to restrict the use of the Internet by their distributors. In particular, distribution agreements oftentimes include provisions that ban sales via online marketplaces such as eBay and Amazon Marketplace. The legality of such sales bans has repeatedly been questioned by the German competition authority (Bundeskartellamt) and before the German courts. The manufacturer adidas AG, for instance, recently changed its distribution agreements following pressure from the German competition authority to allow the members of its distribution system the sale of adidas sports gear via online platforms.
The judgment of the Higher Regional Court of Schleswig of June 5, 2014 (Case no.: 16 U Kart 154/13), which dismissed an appeal brought by the camera manufacturer Casio Europe against an injunction of the Regional Court of Kiel, is going down the same road. The case concerned the following provision in Casio Europe's distribution agreements: "Sales via so-called 'Internet auction platforms' (e.g., eBay), Internet marketplaces (e.g., Amazon Marketplace) or independent third parties are not allowed."
The Higher Regional Court confirmed the view of the court of first instance that a ban on sales via third-party platforms is a restriction of competition both by object and by effect and, therefore, an infringement of competition law. This is the case, in particular, because the ban limits the choices for consumers and reduces the competitive pressure on prices since many consumers use large online platforms, which they trust and which are characterized by intensive price competition. The arguments brought by the defendant for a justification of the ban were dismissed in their entirety by the court. With regard to advice to customers, the court said that this is not relevant as the defendant had not shown that the products required any particular explanations and that the operating manual should suffice; that customers buying online do normally not seek advice; and, that the products in question are also offered at large electronic retailers for which Casio did not specify any criteria of a qualitative nature. Further, in the court's view, it is usually a matter of chance whether the consumer would find someone in the brick and mortar store who is really familiar with the product and could advise accordingly. Finally, as the court considered that the ban of Internet platforms was a so-called "hard-core" restriction, it also dismissed the possibility that the ban could be exempted from the prohibition on anti-competitive agreements.
As the court has allowed that its judgment may be appealed before the German Supreme Court, it is likely that soon the highest German court and, possibly even the Court of Justice of the European Union, will rule on the legality of online marketplace bans under competition law.
Note: A version of this article, by Till Steinvorth, first appeared in the July 30 edition of Orrick's Emerging Companies-Germany Newsletter.
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