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Nike can restrict sales via online platforms within its selective distribution system

Nike can restrict sales via online platforms within its selective dis

Nike can restrict sales via online platforms within its selective distribution system

01.11.2017 NL law

On 4 October 2017, the District Court of Amsterdam ruled* in favour of sports goods manufacturer Nike in an action against a distributor, Action Sport, which had not complied with Nike's selective distribution policy. The District Court found that Nike's selective distribution system, which included a ban on sales via non-authorised online platforms, was compatible with competition law as it sought to preserve the luxury image of Nike's products.

In 2012, Action Sport and Nike agreed upon a new distribution policy which stipulated that authorised retailers like Action Sport were not allowed to sell Nike products via non-authorised parties. Notwithstanding this policy, Action Sport offered Nike products for sale on Amazon, an non-authorised online platform. Nike subsequently terminated the distribution agreement and sued Action Sport before the District Court of Amsterdam. In its defence, Action Sport argued that Nike's selective distribution system restricted competition and as such was null and void.

Firstly, the District Court held that Nike's distribution system qualified as a 'selective distribution system' and that Nike had applied the selection criteria uniformly and without discrimination. Secondly, the District Court referred to the opinion of AG Wahl in the Coty case: "that, having regard to their characteristics and their nature, luxury goods may require the implementation of a selective distribution system in order to preserve the quality of those goods and to ensure that they are properly used." Following this reasoning, the District Court ruled that Nike was allowed to set up a selective distribution system to preserve the luxury image of its products.

The District Court went on to dismiss Action Sport's argument that the ban on sales via non-authorised platforms was anticompetitive. Again, the District Court referred to AG Wahl, ruling that quality requirements in a selective distribution system may not have the desired effect if the products are offered for sale via non-authorised platforms. As it was undisputed that Amazon was not an authorised retailer, the District Court concluded that Nike had the right to terminate the distribution agreement.

The permitted scope of online sales restrictions in selective distribution systems has been one of the key topics recently discussed in the European Commission's e-commerce sector inquiry and in national case law [see our February 2016, May 2017 and June 2017 Newsletters]. The District Court of Amsterdam has clearly stated through this judgment that an online platform ban is not always considered a hardcore restriction of competition. More clarity will be provided by the judgment of the European Court of Justice in Coty case which is expected to be issued in early 2018.

*For unknown reasons the previously published judgment has been removed from the website on which Dutch court judgments are published.

This article was published in the Competition Law Newsletter of November 2017. Other articles in this newsletter:

  1. General Court annuls UPC/Ziggo merger decision
  2. General Court rules that luxury watchmakers can limit supply of parts to approved repairers
  3. General Court upholds fine for 'gun jumping' EU merger control procedure
  4. European Commission orders the recovery of State aid of around EUR 250 million from Amazon
  5. Dutch Trade and Industry Appeals Tribunal rules on cover pricing
  6. KLM and Amsterdam Schiphol airport offer commitments to reduce competition concerns

Team

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