According to the Information from European Union Institutions – European Commission Guidelines on Vertical Restraint (19 May, 2010) 2010/C 130/01, i explain as below. 

 

 

First of all it is necessary to take into consideration the provisions of The Treaty on the Functioning of the European Union (hereafter the TFEU). Moreover article 4(a) of the Block Exemption Regulation concerns resale price maintenance (RPM), that is, agreements or concerted practices having as their direct or indirect object the establishment of a fixed or minimum resale price or a fixed or minimum price level to be observed by the buyer. In the case of contractual provisions or concerted practices that directly establish the resale price, the restriction is clear cut. 

 

As we know, the internet is a powerful tool to reach a greater number and variety of customers than by more traditional sales methods, which explains why certain restrictions on the use of the internet are dealt with as (re)sales restrictions. In principle, every distributor must be allowed to use the internet to sell products. In general, where a distributor uses a website to sell products that is considered a form of passive selling, since it is a reasonable way to allow customers to reach the distributor. 

 

In addition, a contractual clause requiring sales of products to be made in a physical space, resulting in a ban on the use of the internet for those sales, amounts to a restriction by object within the meaning of that provision where, following an individual and specific examination of the content and objective of that contractual clause and the legal and economic context of which it forms a part, it is apparent that, having regard to the properties of the products at issue, that clause is not objectively justified(1)* .

 

The Commission thus regards the following as examples of hardcore restrictions of passive selling given the capability of these restrictions to limit the distributor’s access to a greater number and variety of customers, that is inter alia:

 

 

 

2) However, under the Block Exemption the supplier may require quality standards for the use of the internet site to resell its goods, just as the supplier may require quality standards for a shop or for selling by catalogue or for advertising and promotion in general. This may be relevant in particular for selective distribution. Under the Block Exemption, the supplier may, for example, require that its distributors have one or more brick and mortar shops or showrooms as a condition for becoming a member of its distribution system. Subsequent changes to such a condition are also possible under the Block Exemption, except where those changes have as their object to directly or indirectly limit the online sales by the distributors. Similarly, a supplier may require that its distributors use third party platforms to distribute the contract products only in accordance with the standards and conditions agreed between the supplier and its distributors for the distributors’ use of the internet. For instance, where the distributor’s website is hosted by a third party platform, the supplier may require that customers do not visit the distributor’s website through a site carrying the name or logo of the third party platform.

 

This does not mean that the criteria imposed for online sales must be identical to those imposed for offline sales , but rather that they should pursue the same objectives and achieve comparable results and that the difference between the criteria must be justified by the different nature of these two distribution modes. For example, in order to prevent sales to unauthorised dealers, a supplier can restrict its selected dealers from selling more than a given quantity of contract products to an individual end user. Such a requirement may have to be stricter for online sales if it is easier for an unauthorised dealer to obtain those products by using the internet. Similarly, it may have to be stricter for offline sales if it is easier to obtain them from a brick and mortar shop. 

 

 

What is important to know, that for example when a manufacturer established in a particular national market enters another national market and introduces its products with the help of an exclusive distributor and where this distributor needs to invest in launching and establishing the brand on this new market. Where substantial investments by the distributor to start up and/or develop the new market are necessary, restrictions of passive sales by other distributors into such a territory or to such a customer group which are necessary for the distributor to recoup those investments generally fall outsider the scope of Article 101(1) TFEU during the first two years that the distributor is selling the contract goods or services in that territory or to that customer group, even though such hardcore restrictions are in general presumed to fall within the scope of Article 101(1) TFEU

 

Within a selective distribución system the dealers should be free to sell, both actively and passively, to all end users, also with the help of the internet. Therefore, the Commission considers any obligations which dissuade appointed dealers from using the internet to reach a greater number and variety of customers by imposing criteria for online sales which are not overall equivalent to the criteria imposed for the sales from the brick and mortar shop as a hardcore restriction.

 

What is important, according to the last judgment of the court(2)* (First chamber), a selective distribution system for luxury goods designed, primarily, to preserve the luxury image of those goods complies with that provision to the extent that resellers are chosen on the basis of objective criteria of a qualitative nature that are laid down uniformly for all potential resellers and applied in a non-discriminatory fashion and that the criteria laid down do not go beyond what is necessary. Moreover the article 101 (1) TFEU must be interpreted as not precluding a contractual clause, such as that at issue in the main proceedings, which prohibits authorised distributors in a selective distribution system for luxury goods designed, primarily, to preserve the luxury image of those goods from using, in a discernible manner, third-party platforms for the internet sale of the contract goods, on condition that that clause has the objective of preserving the luxury image of those goods, that it is laid down uniformly and not applied in a discriminatory fashion, and that it is proportionate in the light of the objective pursued, these being matters to be determined by the referring court. The prohibition imposed on the members of a selective distribution system for luxury goods, which operate as distributors at the retail level of trade, of making use, in a discernible manner, of third-party undertakings for internet sales does not constitute a restriction of customers.

 

The problem is what the luxury goods mean?

 

 

Dior and the French Government submit that the sale of goods bearing the Christian Dior mark to a discount store outsider the exclusive distribución network constitutes damage to the reputation of the mark that justifies the application of Article 7(2) of the Directive 89/104.

 

On those grounds, the Court ruled, that Proprietor of a trade mark can invoke the rights conferred by that trade mark against a licensee who contravenes a provision in a licence agreement prohibiting, on grounds of the trade mark’s prestige, sales to discount stores, provided it has been established that that contravention, by reason of the situation in the main proceedings, damages the allure and prestigious image which bestows on them an aura of luxury.

 

 

SUMMARY 

 

The rule is that every distributor must be allowed to use the internet to sell products. As the case – law determines there is no possible to create contractual clause requiring sales of products only in physical stores, excluding internet. However this situation does not preclude sales including online and offline at the same time.

 

There is no possibility to conclude an agreement that the distributor shall pay a higher price for products intended to be resold by the distributor online than for products intended to be resold offline. 

 

It is necessary to say that this does not exclude the supplier agreement a fixed fee, at the same time in online and offline sales. 

 

There is no doubt that a supplier may have to require that its distributors use third party platforms to distribute the contract products only in accordance with the standards and conditions agreed between the supplier and its distributors for the distributors. 

 

In the case of restriction, it is important to note that all criteria for online sales must be equivalent with these imposed for the offline sale.

 

 

(1)* Judgment of the court (Third Chamber), 13 October 2011, In Case C-439/09, Pierre Fabre Dermo-Cosmétique SAS.

(2)* In Case C-230/16 Coty Germany GmbH vs. Parfümerie Akzente GmbH.

(3)* JUDGMENT OF THE COURT (First Chamber), 23 April 2009, In Case C-59/08, Copad SA vs. Christian Dior coutures SA.