Online platform restrictions in vertical agreements (suppliers precluding their distributors from selling via online platforms or via one or more specific platforms) has been and continues to be an ongoing source of tension in the EU between suppliers, their distributors and online platforms. When advising clients regarding the implementation of distribution structures and compliance with competition law rules, the following should be taken into account.
The Vertical Block Exemption Regulation[1] and its accompanying Guidelines[2] (VBER) exempts certain agreements and practices from the EU’s competition law rules.
Imposing an absolute prohibition on distributors to sell contract goods online is considered a hardcore restriction[3] and in general cannot benefit from the exemption under the VBER[4]. The situation is different if a ban on using the internet as a method to sell the contract goods online is not absolute but applies only to internet sales via third party online platforms which operate in a discernible manner towards consumers.
In its final report on the E-commerce Sector Inquiry[5] of May 2017, the European Commission stated that, without prejudice to the at the time pending preliminary reference in the Coty case[6], the findings of the inquiry indicated that (absolute) marketplace bans should not be considered as hardcore restrictions within the meaning of Article 4(b) and Article 4(c) of the VBER.
The long awaited judgment of the European Court of Justice in the Coty case of 6 December 2017 provided further clarity and legal certainty to market participants.
A short summary:
Online platform restrictions firstly may fall outside the scope of EU competition law rules entirely where selective distribution systems are concerned (which comply with the criteria set by the European Court of Justice in the Metro-case[7]) if such bans are appropriate and do not go beyond what is necessary to preserve the luxury (or the high-technology/quality) image of the goods involved.
If online platform bans do not escape the EU competition law rules (for example in cases of selective distribution system which do not meet the criteria referred to above), the question is whether or not such online platform bans qualify as hardcore restrictions which cannot benefit from the exemption under the VBER.
In the Coty judgment, the European Court of Justice considers and concludes in general terms that online platform bans do not constitute hardcore restrictions. This confirms the European Commission’s view.
Online platform bans are therefore block-exempted under the VBER. If the market shares of the parties are above the 30% threshold of the VBER[8], it must be established whether such a ban restricts competition under Article 101 of the Treaty on the Functioning of the European Union (TFEU).
Given the general character of the considerations of the European Court of Justice in the Coty judgment, they apply to all kind of products and distribution systems.
For further information on the VBER please contact Jaap van Till[9], Partner at Loyal
[1] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32010R0330&from=EN
[2] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52010XC0519(04)&from=EN
[3] Restrictions which cannot benefit from the VBER
[4] https://curia.europa.eu/juris/liste.jsf?language=en&num=C-439/09
[5] https://ec.europa.eu/competition/antitrust/sector_inquiry_final_report_en.pdf
[7] https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61984CJ0075
[8] Under Article 3 VBER the block exemption applies, save for hardcore restrictions, where the market share of the parties to the agreement does not exceed 30%
