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Creating a successful online retail strategy has never been more difficult. Shoddy presentation trashes the brand. Website algorithm price scraping and matching creates a pricing death spiral. Some brands believe that only in-store “look and feel” can do justice to the product’s premium positioning. But if etail swamps retail, no bricks & mortar outlet will devote shelf space or staff time to the brand. But that’s just commercial choice right? There’s no legal compliance issue here.

Not so… at least if the restrictions affect Europe

Pierre Fabre Dermo-Cosmetique’s high end reputation relies on selling cosmetics and personal care products through pharmacy outlets meeting its high quality criteria for staff, training and facilities. To maintain the brand, a qualified pharmacist must be present at every sale.  So is it a legitimate business choice or illegal antitrust restriction?  Europe’s highest court held the obligation to be illegal.  Requiring a person to be present at a point of sale de facto prohibited online sales to retail customers.  EU law requires every reseller to be permitted to sell online.  This was their right, and there was no excuse for prohibiting it, whether directly or via an indirect personal-presence obligation.  All contrary arguments were brushed aside – consumers benefitting from qualified advice, preserving the brand’s hard won quality reputation.  None of these outweighed the reseller e-commerce imperative.  Pierre Fabre was fined and forced to allow retail sales.

A slew of similar EU cases have imposed fines and/or prohibition orders for:

  • Restricting internet trade via third party auction or marketplace sites without proper quality-related justifications.
  • Requiring pre-approval of resellers’ online advertised pricing.
  • Requiring that the resellers only state on their websites that they are authorised resellers.
  • Banning use of the supplier’s trade mark, logo or key search terms on the reseller’s website.
  • Preventing resellers’ prices being listed on price comparison website.

Over 2,000 suppliers and retailers have been asked to provide the EU with their e-commerce strategy related documents as part of a wide ranging e-commerce sector inquiry which started in March 2015. So before rolling out your retail online strategy – remember the rules of the road.

Remember! Don’t gamble with compliance.  

Suppliers and resellers across Europe have been caught up in onerous and expensive e-commerce investigations. So don’t “add to you basket” as EU antitrust fine.

Golden Rules  

Reseller e-commerce has a near sacred place in Europe’s antitrust rules.  From Dublin to Dubrovnik, e-commerce is seen as the great leveller.  It allows retailers across the 28 state trading bloc to reach all 500m EU consumers.  So act with great caution when trying to control resellers’ e-commerce opportunities.

Know the Risks. You May Not: 

  • Ban online resale either explicitly or by means of de facto bans, eg
    • requiring a human point of presence for each sale
    • requiring rerouting of consumers to the supplier’s e-commerce platform.
  • Penalise or restrict online sales, eg:
    • a higher price (or withheld bonus or discount) for products supplied for online resale compared to products
    • supplied for in-store sales.
    • restricting the reseller’s online sales to a limited percentage of total product sales.
  • Require geofiltering of territories to which physical products may be sold (eg via IP address, consumer details or credit card address) or rerouting to the local reseller’s website.

Know How Far You Can Go – You Can: 

  • Prevent a reseller from being ‘internet only’ (by requiring a physical shop or a certain amount of offline sales).
  • Require the reseller’s internet site to meet the supplier’s quality standards provided the supplier requires comparable standards of physical outlets.
  • Pay a dealer a lump sum to support the distributor’s offline sales efforts (eg to subsidise in-store promotions, demo products, staff training or shelf space).

Get Legal Involved: Your EU Reseller e-Commerce Strategy is a Compliance Minefield:

  • Involve legal early in devising your go-to-market e-commerce retail strategy.
  • Pay particular attention to restrictions on resellers using third party auction or e-commerce market places.  The rules here are very technical and legal must be involved.
  • Any territory related restriction must be drafted by legal.  There are strict limits to what’s permissible and specific legal language must be used.
Author

Bill Batchelor is a member of Baker McKenzie’s European & Competition Law Practice in Brussels. He has been described as “…a sensible lawyer who gives sound and to-the-point advice” by Chambers Europe 2009. Prior to joining the Firm, Mr. Batchelor worked for the DG for Competition of the European Commission, and spent six months with the UK Office of Fair Trading as part of the team that established the 1998 UK Competition Act. He has worked in the Firm’s Washington DC, London and Brussels offices. Mr. Batchelor has contributed to Butterworths Competition Law, Cartels Chapter, and Sweet & Maxwell’s IT Encyclopaedia, Competition Law Chapter.

Author

Roxane Busey is a partner in Baker & McKenzie's Chicago Office. She has more than 30 years of experience advising companies on a broad range of antitrust issues. She has been recognized as a leading antitrust authority by notable legal directories and publications including Chambers USA, Global Competition Review, America’s Leading Business Lawyers, The Best Lawyers in America, Who’s Who in the World and Illinois Top 10 Women Lawyers. Ms. Busey also served as chair of the ABA Antitrust Section from 2001-2002.

Author

Georgina Foster is a partner in Baker McKenzie's Sydney office and leads the Firm’s Australian competition practice.

Author

Carolina Pardo is a lawyer and specialist in International Contract Law graduated from Universidad de los Andes. She obtained a LL.M. with specialization in International Private Law and Competition Law from the London School of Economics and Political Science. Over 20 years, she has advised major national and international clients on matters related to compliance with data protection, competition and consumer law rules. She has also successfully coordinated and prepared proposals for submission to national authorities on behalf of major industrial groups in Colombia. She has been recognized by Chambers Latin America as leader in the Competition ranking in Colombia, and the practice group headed by her has been ranked first for two consecutive years. She joined Baker McKenzie in 1994, and currently serves as international partner and heads the Competition, IT and Consumer Law practice group. Additionally, she is an active member of the steering committee of the Latin American Competition, Compliance and IT practice groups of Baker McKenzie.

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