An "online marketplace" is an e-commerce site that offers multiple products from various sellers and connects merchants with potential customers for the purpose of enabling direct purchases. Over the past decade, online marketplaces (such as Amazon and eBay) have become an important sales channel for both suppliers and retailers selling their products online.
Despite the significant benefits derived from online marketplaces in facilitating retailers' ability to sell their products online and the associated consumer advantages, suppliers of certain products may choose to restrict a retailer's freedom to use this particular online sales channel – by banning the marketplace – for a variety of reasons. Examples include protecting brand image, positioning a brand, ensuring sufficient customer support services, or maintaining a direct relationship with customers.
A ban on an online marketplace should be distinguished from an outright ban on a distributor selling the contract goods online. The latter is considered a restriction by object under Article 101(1) TFEU if it is not objectively justified.
Article 4(b) of the current VBER, which will expire on 31 May 2022, prohibits agreements or concerted practices that have as their object the restriction of sales by a buyer party to the contract or its customers, insofar as those restrictions relate to the territory in which or the customers to whom the buyer or its customers may sell the contract goods or services.
As for online sales, paragraph 54 of the current vertical guidelines provides that a supplier "may require its distributors to use third-party platforms to distribute the contract goods in accordance with the standards and conditions agreed between the supplier and its distributors for the distributors’ use of the Internet. For example, if the distributor's website is hosted by a third-party platform, the supplier may require that customers not visit the distributor's website through a site bearing the name or logo of the third-party platform". With this somewhat opaque language, the Commission indicated that it would exempt a requirement by the supplier to its buyers to use their own electronic storefront rather than selling the supplier's products through online marketplaces.
This was confirmed by the European Court of Justice in the Coty case (Case C-230/16). In that case, the Court first confirmed that the qualification of a selective distribution system as purely qualitative – thereby escaping the prohibition of Article 101(1) TFEU – is not lost when a supplier imposes a marketplace ban on its authorised distributors, at least to the extent that the products in question are luxury goods and the ban meets Metro’s criteria, which means, among other things, that it must be proportionate to preserve the luxury image of those goods. Moreover, regardless of the nature of the selective distribution system (purely qualitative or quantitative – see DLC Countdown No. 19 on this), the Court confirmed that a marketplace ban does not amount to a customer or territorial restriction within the meaning of Article 4(b) of the current VBER.
The new VBER and vertical guidelines, which take effect on 1 June 2022, clarify and consolidate existing practice and case law. It is useful to note that the list of hardcore restrictions (Article 4(e) of the new VBER) now includes the "obstacle to the effective use of the Internet" as a separate hardcore restriction that may be relevant to any distribution system (selective, exclusive or open distribution).
Regarding luxury goods that are part of a purely qualitative selective distribution system, paragraph 150 of the new vertical guidelines adopts Coty and states that a ban on the use of online marketplaces may be proportionate and consistent with Metro’s criteria, provided it does not indirectly prevent the effective use of the Internet for sales to certain territories or customers. This is not the case when authorised distributors remain free to operate their own online store and advertise online to create awareness of their online activities. In such circumstances, a ban on online marketplaces will be proportionate and outside the scope of Article 101(1) TFEU, so no further analysis is required under the new VBER.
Under the regime of the VBER, paragraph 208 of the new vertical guidelines abandons the previously somewhat opaque language and provides that "a direct or indirect ban on the use of online marketplaces" may benefit from the block exemption, provided it does not conflict with the requirement of Article 4(e) of the new VBER on the effective use of the Internet by buyers for the purpose of selling goods or services online. Again, the guidelines state that this will generally not be the case where the buyer remains free to operate its own online store and advertise online.
The application of the new VBER remains subject to a dual market share limit of 30%. Between paragraphs 338–342, the new vertical guidelines provide guidance for assessing restrictions on the use of online marketplaces in individual cases where one or both parties exceed that market share limit.
The consolidation and clarification of existing practice and case law in the new vertical guidelines bring clarity regarding the permissibility of online marketplace bans and will certainly lead to a more uniform assessment of such restrictions across the EU.
The clarifications in the new vertical guidelines on the proper evaluation to be conducted for online marketplace bans, both within and outside the VBER, are to be welcomed. Outside the VBER, the new vertical guidelines now include guidance regarding online marketplace bans in the context of purely qualitative selective distribution (i.e. outside Article 101(1) TFEU) and also in situations where the supplier or buyer or both exceed the 30% market share threshold.
In anticipation of 1 June 2022, we aim to provide you with regular updates and the necessary legal knowledge to fully prepare your business for the future. Be sure to check out the Distribution Law Center platform and our LinkedIn page for even more information on the laws regulating vertical agreements, both competition and commercial law. Twenty-seven specialised teams from across the EEA are working hard to make the platform your preferred source of guidance and information.
A translation of this Countdown newsletter is available in the following languages: Portuguese.
Read the available DLC Countdown newsletters on the expected changes here.