The French Competition Authority (FCA) has recently ruled that although qualitative criteria may be applied to online marketplaces, their use may not be excluded in principle.
Despite their great commercial success, online platforms such as Amazon, Ebay and PriceMinister have all been regarded unfavourably by suppliers, due to their aggressive pricing policies. Many suppliers have thus set up obstacles to prevent their products from being marketed on these platforms. In a recent investigation, the FCA imposed limits on this practice.
The practice of preventing sales on online platforms
In its guidelines on vertical restraints, the European Commission indicated that suppliers may exclude pure players – resellers who are only present online - from their selective distribution network. The suppliers nonetheless saw the risk of certain platforms re-entering the market, acting as marketplaces carrying online offers from authorised distributors. Some suppliers thus sought to prevent their distributors from reselling products through online marketplaces, either through a general prohibition or through qualitative criteria which marketplaces cannot satisfy.
This practice seemed to be in line with the Commission guidelines, which specify that where the distributor’s website is hosted on a third-party platform, the supplier may “require that customers do not visit the distributor’s website through a site carrying the name or logo of the third party platform”. This seemed to confirm the possibility of excluding marketplaces such as Amazon or Ebay which present themselves to internet users under their own “trade name”.
The prohibition of a complete ban of online marketplaces
This practice seems to be called into question by the position recently taken up by the FCA which goes against a general exclusion of online marketplaces. The FCA’s position was made public in a press release announcing that it had closed its investigation against Adidas in November 2015 in return for the manufacturer’s commitment to remove any clause from its distribution agreements prohibiting its distributors from using online marketplaces.
The case went relatively unnoticed given that the commitment by Adidas to amend its contracts was made before any official case opened. Consequently, the case did not lead to the issuance of a formal decision by the FCA. The details of the case are therefore little known but it seems that the Adidas agreements contained a provision prohibiting their distributors from selling their products via online marketplaces.
It should be noted that it was the German Competition Authority (Bundeskartellamt) that drew the attention of the FCA to Adidas’s practice, the German Authority having a year before obtained the same commitment from the manufacturer to remove its clause prohibiting resale via online marketplaces.
Possibility of imposing qualitative criteria on online marketplaces
The FCA has specified that, following the amendments made by Adidas to its agreement, resellers may henceforth use marketplaces provided that they satisfy the qualitative criteria imposed by the manufacturer. Thus, the FCA has validated the possibility for a supplier to select marketplaces according to objective qualitative criteria.
No detail is given however as to which qualitative criteria might be applied to such marketplaces. At the very most, it might be noted that, in accordance with the Commission’s guidelines, these criteria should be “overall equivalent” to those applying to sales in a brick and mortar shop.
Practical consequences for suppliers
Suppliers must henceforth:
- ensure that their distribution agreements do not comprise criteria which make it possible to exclude online marketplaces, such as an obligation to use a URL address comprising the name of the distributor, a prohibition against using a website bearing the name or the logo of a third party or against using a website which presents the offers of several different distributors for the same product;
- adopt criteria which are specific to marketplaces if they wish to ensure that their products will only be sold through marketplaces which guarantee a minimum standard of reliability and quality of presentation.