Prohibition of online sales not permissible

May a manufacturer of branded goods prohibit the retailers supplied by it from selling the goods via the Internet within the framework of a selective distribution system? The Regional Court (LG) Frankfurt/Main had to address this question.

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The subject matter of the dispute between the online retailer and the manufacturer of functional rucksacks was the manufacturer's demand within the framework of a distribution agreement that the contract products must not be distributed via certain Internet and auction platforms. Furthermore, the provision of price information on price comparison websites was to require the prior consent of the manufacturer. Further supplies to the retailer were made conditional upon the signing of this agreement. After the retailer accepted it only in modified form, it was no longer supplied.

The court's decision

Following the corresponding action by the retailer, the Regional Court (LG) Frankfurt/Main ruled by judgment of 18.06.2014 (Az. 2-03 O 158/13) that the disputed prohibition on online sales is unlawful from several points of view. According to the court's reasoning, on the one hand, there is a competition-restricting agreement, since a selective distribution system is only permissible if the selection of resellers is subject to objective criteria of a qualitative nature. Although it is disputed whether the prohibition to distribute the goods via certain platforms is a permissible criterion, the deciding court nevertheless does not see in it a justified quality requirement that would permit a block exemption. An individual exemption would likewise not be available due to the lack of efficiency benefits put forward. Finally, there are also no product-related circumstances apparent that would make such a prohibition necessary.

For these reasons, both the platform prohibition and the consent requirement for price search engines are unlawful under competition law. Furthermore, in the court's view, there is also an unreasonable obstruction of the purchaser.

Conclusion

The introduction of a selective distribution system is difficult due to inconsistent case law. In some cases, a platform prohibition is held to be permissible at least when applied without discrimination. Other courts, by contrast, fundamentally reject its permissibility. The establishment of a distribution system therefore requires careful planning in order to avoid competition law violations.