Online retailers at risk of national divergence on EU product-sales rules, official says

26 November 2018 10:09am

19 November 2018. By Matthew Newman.

Online retailers would face legal uncertainty if national competition authorities were to consider local market conditions in how they enforce EU-wide rules on product sales, a European Commission official said today.

Thomas Kramler, a senior official in the commission’s competition department, said at a conference today in Brussels that such an approach “would go against the purpose” of the EU's Vertical Block Exemption Regulation, which sets out rules on what conditions manufacturers can dictate over how their products are distributed.

“From the logic of the regulation, it doesn’t make sense to say that there are national hardcore restrictions,” he said. “A hardcore restriction needs to be applied uniformly in order for the single market to work properly.”

"I think, personally, one of the merits of the block exemption, and its raison d'être, is that it is applied uniformly across member states and that there's legal certainly about what amounts to a hardcore restriction and what doesn't," he said.

His comments come in the wake of a debate in Germany about the effect of the EU Court of Justice’s landmark Coty judgment last year.

EU judges said that luxury-goods makers are allowed under the regulation to ban the sale of their products on online marketplaces. Since the ruling, there's been a debate whether it applies to other markets than just luxury products.

The German competition authority has said the large percentage of small retailers that rely on online marketplaces such as hosted by means that these distributors should be protected from brand owners’ restrictions. The authority has pursued brands, such as shoemaker Asics, for these restrictions.

In Germany, 62 percent of retailers said they use online platforms, as opposed to 13 percent in Italy and 4 percent in Belgium, according to the commission’s survey of e-commerce last year.

Andreas Mundt, the president of the Bundeskartellamt, has pointed to this figure to justify a different approach in Germany. He has said that small dealers would be harmed were the Coty judgment to apply more broadly to product categories beyond luxury goods.

But Kramler said the authority would have to do an “effects” analysis if it wanted to apply local market conditions and pursue a brand owner for imposing a marketplace ban.

It wouldn’t make sense for one authority to define such a ban as a “hardcore” violation — and thus a restriction “by object,” or one that by its very nature breaks competition rules without the need to consider its effects on the market — when other authorities woudn't consider it as hardcore violation.

Kramler said that if an authority wants to apply local conditions, and thus have a different interpretation of the vertical block exemption rules, it could decide not to apply the benefits of the EU regulation.

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