Price comparison websites restrictions

By Patricia Linan, Candela Sotes

10-2020

The rapid development that the e-commerce sector has undergone in the last decade has meant its definitive implementation as one of the most relevant routes to market. This development has come along with important judgments of the European Court of Justice ("ECJ") on this matter. Cases such as Pierre Fabre or, later, Coty have shed light on the situation of e-commerce within the framework of the Vertical Agreements. 

Some National Competition Authorities, such as the CMA, have carried out market studies on competition law and e-commerce and have specifically addressed the issue of the increasingly popular digital price comparison tools.

The European Commission has not remained on the sidelines of this evolution. In addition to the recent working document on the evaluation of the VBER, in 2017 the Commission published the final report on the e-commerce sector (and the accompanying staff working document) which set out the main findings of this sector inquiry, taking into account the views and comments submitted by stakeholders during a public consultation.

The leading role of price comparison websites

Companies and consumers are increasingly using online platforms, particularly marketplaces and price comparison websites, over traditional distribution networks such as brick-and-mortar retailers. This has led many companies to resort to the use of vertical restrictions to control their distribution networks more intensively.

Price comparison websites allow consumer to search for products and compare the prices of different retailers, as well as to provide links that lead directly (or indirectly) to product offers. The sale does not usually take place on the price comparison website, but on that of the retailer's website. This allows consumer to quickly compare prices of the same product among a large number of retailers, thereby increasing price transparency and allowing them to find the best available purchase option. However, as happens with marketplaces, many of the manufacturers seek to limit the use of price comparison websites for selling their products with the aim of protecting the brand image and the quality standards of their distribution network. 

In particular, manufacturers who oppose to price comparison sites claim that these tools are based only in price, leaving aside other important competitive vectors such as luxury image, quality, features, or style. For this reason, some agreements between manufacturers and retailers include contractual provisions that limit the possibility for retailers to offer of their products through price comparison websites. These restrictions are sometimes justified by certain quality criteria, but occasionally constitute an unjustified prohibition on the use of any kind of price comparison tool.

The European Commission, when analysing these restrictions, considers that there are substantial differences between marketplaces and price comparison websites. Unlike marketplaces, price comparison websites are not a distinct online sales channel, but offer retailers the ability to present and advertise their online offerings to a wider audience. In selective distribution systems, price comparison tools make it easier for customers to find authorized retailers selling the products on Internet. It follows that an absolute prohibition on price comparison website may make more difficult for customers to find the retailer's website and may thus limit the retailer´s ability to effectively generate traffic to its website. Consequently, the Commission concludes that an absolute prohibition that is not linked to quality criteria represents a potential restriction on the effective use of internet as a sales channel and may lead to a hardcore restriction of passive sales under Article 4 of the VBER. Conversely, comparison website bans are acceptable if they are based on objective qualitative criteria, which may give rise to debate on the meaning of this concept.

Another issue discussed in connection with price comparison is that of the well-known MFN (Most-Favoured-Nation) and its effect on competition. According to these MFN clauses, prices displayed on the price comparison sites have to be lowest or at least as favourable as the one offered to any other buyer on other sales channels (i.e. other price comparison websites, marketplace, brick-and-mortar shops or even their own websites). As of today, the Commission has not reached a definitive conclusion on the relationship between MFN clauses and price comparison websites, so this type of clauses should be assessed on a case-by-case basis.

Price comparison website restrictions in Member States. The Asics case.

The ECJ has not yet ruled on the compatibility of contractual clauses prohibiting the use of price comparison sites with competition law. 

However, in 2018 the Germany's Federal Court of Justice ("FCJ") gave its view on this particular matter on the Asics case

Asics prohibited its selective dealers from using price comparison websites. The German Competition Authority ("FCO") considered that such a complete ban of using price comparison website was incompatible with competition law, as it allowed Asics to eliminate a large part of the online offers and hinder the decrease of prices. 

Following the appeal of the FCO decision, the FCJ confirmed the position of the Competition Authority. For the FCJ, this decision followed the same criteria than the ECJ fixed in the Coty case (concerning a ban on the sale through marketplaces), While the ECJ considered that the marketplaces ban imposed by Coty was compatible with competition law, the FCJ considered that the web comparison prohibition imposed by Asics was not because:

Asics goods could not apparently be qualified as luxury goods (as in Coty); 
The prohibition resulted in an absolute prohibition; and not only a limitation based in objective criteria (as in Coty); and
This prohibition would make it very difficult for customers to effectively find dealers online. 

The FCJ concluded that only restrictions based on objective quality requirements could be accepted. 

The German ruling confirms the Commission's position expressed in its e-commerce enquiry. In any event, there is no doubt that many questions are still up for discussion and will surely be the subject of future ECJ rulings. 

For further information concerning the Coty or Asics cases, please refer to our previous article here.

For more information please contact Patricia Liñán and Candela Sotés.

 
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