ASICS Takes Court Action in Dispute Over its Sports Shoes Distribution Policy
11 December 2015
On 13 November 2015, it was reported that sports shoe maker ASICS Germany is taking court action against the German Federal Competition Office which found ASICS’s previous selective distribution system to be illegal.
As announced on 28 August this year, the German Federal Competition Office found that, under its previous selective distribution system ”Distribution Policy SDP 1”, ASICS prohibited dealers from using price comparison engines for the dealers’ online presence and prohibited dealers from using ASICS brand names on the websites of third parties to guide customers to the dealers’ own online retail spaces. The FCO further stated that ASICS Germany prohibited its distributors from using online marketplaces such as eBay or Amazon. This, according to the FCO, affected small and medium-sized distributors especially, since the latter are unable to compensate for the loss of reach caused by such prohibitions (see "Manufacturer of Branded Sports Shoes Found to Have Unlawfully Restricted Online Sales Activities in Germany" for more details).
A selective distribution agreement restricts the number of authorised distributors on the basis of selection criteria that are linked, in the first place, to the nature of the product. This leaves only appointed dealers and final customers as possible buyers. Selective distribution is almost always used so as to distribute branded final products.
As a general rule, a selective distribution system is compliant with EU Competition Law where the following conditions are satisfied:
- Firstly, the nature of the product in question must necessitate a selective distribution system.
- Secondly, resellers must be chosen on the basis of objective criteria which are of a qualitative nature, laid down uniformly, made available to all potential resellers, and not applied in a discriminatory manner. An example of objective criteria of a qualitative nature is special training of sales personnel or certain services provided at the point of sale.
- Thirdly, the criteria laid down must not go beyond what is necessary. Selective distribution systems are exempted from the prohibitions of EU Competition Law, as long as the market share of both supplier and buyer each do not exceed 30% and the distribution systems do not contain hard-core restrictions laid down by EU Competition Law. Hard-core restrictions are, for example, the restriction of the buyer's ability to determine its sales price or the restriction of cross-supplies between distributors within a selective distribution system, including between distributors operating at different levels of trade.
ASICS stated that it had analysed the full report of the German Federal Competition Office before taking the decision to appeal against that decision. ASICS further stated that it is convinced that its previous distribution policy, ”Distribution Policy SDP 1”, complied with EU Competition Law and, in particular, with the vertical guidelines of the European Commission, which set out the principles for the assessment of vertical agreements under EU Competition Law.
The first comprehensive assessment made by a competition authority, of restrictions on sales over third party platforms, was when, in 2014, the German Federal Competition Office considered Adidas’s selective distribution system for Adidas-branded sports and leisure articles in Germany.
Adidas had restricted its authorised resellers from using “open” internet platforms such as eBay and Amazon. The resellers were, however, allowed to use “closed” internet platforms such as Otto.de and were allowed to sell through their own online shops. Adidas also required that the customers of its authorised resellers should not visit its authorised resellers’ online shops through a site carrying a logo of a third party. The proceedings concerning Adidas ended after Adidas revised its online distribution policy.
The FCO took the view that Adidas’s policy amounted to a general ban on the use of third party platforms and that such a general ban restricts competition by limiting authorised resellers in their ability to reach more and different customers over the internet.
In another related development, in June 2014, the Lower Court of Frankfurt found that a general ban on sales by distributors over third party Internet platforms and a prohibition on the use of price-comparison sites constitute a hard-core restriction of competition law. The case concerns a dispute between Deuter, one of the world’s leading sports bag manufacturers, and one of its resellers.
That case is currently pending before the Higher Regional Court of Frankfurt which will issue its judgment on 22 December 2015. Germany’s Federal Competition Office requested the Court to refer the question of the legality of the alleged restriction to sell Deuter’s rucksacks over online platforms to the EU Court of Justice for a preliminary ruling.