The results of the European Commission’s evaluation of the Vertical Block Exemption Regulation (VBER) call for more clarity and convergence in the interpretation of certain (online) vertical restrictions. However, the Dutch competition authority (the ACM) and the Dutch courts cannot wait for the European Commission’s revised VBER rules to deal with such sales restrictions.
The ACM recently conducted dawn raids on suspicion of resale price maintenance in the home-decor sector, while the Amsterdam Court of Appeal has confirmed that Nike may restrict sales via online third party platforms within its selective distribution system, irrespective of whether Nike’s products qualify as luxury goods.
It now remains to be seen if the Commission’s revised rules, a draft of which should be published next year, necessitate a shift in this assessment.
Resale price maintenance
The ACM still seems right on track in its battle against (online) vertical restraints (see our March 2019 newsletter). It recently conducted dawn raids in the home decor sector to investigate vertical price-fixing suspicions, as well as possible illegal agreements among home-decor suppliers about the prices they charge their retailers. Its investigation into resale price maintenance (RPM) by manufacturers of certain consumer goods is still ongoing (see our January 2019 newsletter).
It remains to be seen whether the ACM will take note of the findings in the European Commission’s evaluation of the VBER in its investigations. According to these findings, more guidance is needed, for instance on how to assess when recommended resale prices result in RPM, as well as other atypical price restrictions that may qualify as RPM (such as price ranges defined by the supplier and ‘hub & spoke’ scenarios).
Third party platform ban
The Amsterdam Court of Appeal recently ruled on the compatibility of a third party platform ban imposed by Nike in its selective distribution system. Italian retailer Action Sport has in two instances raised questions about the validity of these specific restrictions in respect of otherwise widely available goods.
Nike initiated proceedings at the Amsterdam District Court against Italian retailer Action Sport in 2017. Nike had previously terminated its contract with Action Sport due to violations of the distribution policy agreed between Nike and Action Sport, which included a ban on sales via non-authorised online platforms. Nike subsequently requested the court to confirm that its selective distribution policy was compatible with competition law. We have previously discussed Nike’s win in first instance.
Action Sport appealed the ruling to the Amsterdam Court of Appeal, claiming, inter alia, that the VBER does not cover the selective distribution system. Action Sport first argued that Nike goods are not luxury goods and, as such, the selective distribution system is invalid on the basis of the Coty judgment of the European Court of Justice (see also our December 2017 newsletter). Secondly, according to Action Sport, the restriction of online sales is a hardcore restriction, as the purpose of the restriction is to benefit direct online sales by Nike itself. Hardcore restrictions fall outside of the scope of the VBER.
The Amsterdam Court of Appeal dismissed these claims on 8 September 2020. According to the court, it does not follow from the VBER or from the Coty judgment that the exemption of selective distribution systems by the VBER is limited to luxury goods. Secondly, Nike did not fully restrict online sales by Action Sport, but only limited it to sales through authorised online platforms (including Action Sport’s own platform). Therefore, consumers did actually have access to the products through multiple online vendors.
The Evaluation of the VBER
The judgment of the Amsterdam Court of Appeal was published on the same day as the European Commission published the results of its evaluation of the VBER. The Commission notes that many respondents raised issues in relation to the impact of market developments such as the growth of online platforms on the assessment of selective distribution agreements. The Commission also considers that much uncertainty remains about the extent to which the permissibility of marketplace bans is limited to specific types of products, and has concluded that these issues should be taken into account in any next steps following the evaluation. The judgment by the Amsterdam Court of Appeal appears to answer some of these questions, and we now wait for the Commission (or the European Court of Justice) to provide further clarity when it publishes its revised rules, to come into effect on 31 May 2022.
This article was published in the Competition Newsletter of October 2020. Other articles in this newsletter: