The Competition and Markets Authority (CMA), the UK’s primary competition and consumer authority, has fined Ping Europe Limited (Ping) £1.45m for preventing two UK retailers from selling Ping’s golf clubs online.
Although Ping had a commercial objective, imposing the restriction to promote in-store customer fitting, the CMA concluded that Ping could have achieved this through less restrictive means. The CMA stated that restrictions on internet trading can be a problem if they seek to prevent retailers reaching a significant proportion of customers. The CMA’s decision, which is due to be published, will provide further reasoning behind the decision to impose the fine. However, the CMA’s press release states that the level of the fine imposed on Ping reflected the fact that the breach of competition law had occurred in the context of a “genuine commercial aim” (of promoting in-store fitting).
Competition laws prohibit certain activities which prevent, restrict or distort competition. The CMA has, in common with competition authorities across the EU (and the European Commission itself), recently carried out a number of investigations into restrictions on online sales. The competition law rules generally take a harsh line against such restrictions, particularly since they are usually regarded as being “passive” sales, where the consumer finds the retailer, and so cannot be prevented altogether in the name of protecting particular distributors or channels in the same way as “active” sales.
There is, however, an ongoing debate as to how far brands can go in restricting internet sales, in particular whether measures such as bans on the use of marketplaces are justified in the name of protecting brand image, especially for so-called “luxury” goods. An opinion issued by the Advocate General to the European Court of Justice last month in the Coty case indicated that there may be some circumstances in which such restrictions can be imposed without infringing competition law (see ‘EU General Court opinion delivers boost to brands selling online’). The ECJ’s final decision is awaited with interest.
In the meantime, those selling online will need to continue to think carefully about, and take appropriate counsel on, the interaction between their commercial practices and the competition law rules.
Alex Haffner, Partner, Fladgate LLP (firstname.lastname@example.org)
Muhammed Bhaimohmed, Associate, Fladgate LLP (email@example.com)