Restrictions on online sales may be lawful, says court
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The Munich Appeal Court has ruled that distributors may be prohibited from selling goods that are protected by trademarks or other IP rights on online auction platforms such as eBay (Case U [K] 4842/08, July 2 2009).
A manufacturer of sportswear entered into distribution agreements with retailers under which the latter were prevented from:
- selling the goods on eBay or other online auction platforms; and
- selling the goods to third-party retailers that sell products on online auction platforms.
The purpose of these restrictions was to:
- maintain the prestige of the manufacturer's trademark; and
- ensure that retailers complied with the manufacturer’s quality requirements.
The claimant argued that such prohibition constituted an unlawful restriction of competition under EU antitrust rules, as set out in Article 81 of the EC Treaty and the EU Block Exemption Regulation (2790/1999). In particular, the claimant alleged that the distribution agreements restricted sales in relation to a group of customers and, therefore, contained a "hardcore restriction" under Article 4(b) of the regulation. Consequently, the prohibition was null and void.
The court disagreed, holding that there had been no violation of antitrust laws. It ruled that limiting sales on eBay and other auction platforms did not restrict sales in relation to a particular group of customers, as no group may be defined as 'users of online auction platforms'. Therefore, the prohibition did not apply specifically to a group of customers (internet users), but set out requirements with regard to one particular distribution channel. In other words, distributors were free to sell to this group of customers through other channels that complied with the manufacturer’s quality requirements (eg, via their own websites).
The decision emphasizes that brand owners have numerous options for managing their trademarks on the Internet. In 2003 the German Federal Supreme Court held that a general prohibition on the sales of goods on the Internet does not comply with the antitrust rules (Case KZR 2/02). Nevertheless, the decision of the Munich Appeal Court confirms that brand owners are free to impose certain quality requirements on their distributors.
The European Commission is currently working on a new version of the Block Exemption Regulation and the Guidelines on Vertical Restraints. In the draft version of the guidelines, the commission pointed out that a restriction on online sales "as such" will be considered as a "hardcore restriction". However, the draft also acknowledged that brand owners are free to impose certain quality requirements on their distributors as far as is necessary to maintain the image and prestige of their trademarks. Moreover, a brand owner is entitled to sue a third party that has obtained trademarked goods from an unauthorized distributor. Therefore, a brand owner may claim trademark infringement and prevent the sale of the goods even if it has no contractual relationship with the reseller.
In this regard, the European Court of Justice recently ruled in Copad SA v Christian Dior couture SA (Case C-59/08) that the breach of a contractual provision restricting sales via a particular channel of distribution may constitute trademark infringement if such sales damage the reputation of the mark (for further details please see "Dior decision represents victory for luxury brand owners").
Pascal Böhner, Bardehle Pagenberg Dost Altenburg Geissler, Munich
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