1. Restrictions by object and effect in the digital economy
Giorgio Monti

2. Outline Context On-line shopping Sector Inquiry
Object/effect distinction
On-line shopping
Coty Germany v Akzente
Case law
Block exemption
Back in the national court

3. E-commerce Sector Inquiry COM (2017) 229 final
The percentage of people aged between 16 and 74 that have ordered goods or services over the internet has grown year-on-year from 30 % in 2007 to 55 % in [3]
Manufacturers use selective distribution as a reaction to the growth of e-commerce as it allows them to better control their distribution networks, in particular in terms of the quality of distribution but also price. [15]

4. Selective Distribution

5. Coty: selective distribution with prohibition of online sales through 3rd party platforms
AKZENTE

6. Economic approach Inter-brand v. intra-brand competition
Theories of harm
Eliminates some retail outlets
E.g. some retailers exit the market because they cannot survive without selling the goods on marketplaces
Eliminates ‘marketplaces’ as a distribution site
Problematic if marketplaces yield lower prices
Direct consumer harm
Prices are higher
NB: a single contract cannot yield these effects

7. Is the agreement between Coty and Akzente
Clearly restrictive of competition?
We need more evidence to decide?

8. Selective distribution Law 1: Art 101(1) in Coty
‘such agreements necessarily affect competition.’ [23]
How? Positively? Negatively?
 not prohibited if[24]:
The choice of resellers is based on obective criteria of a qualitaive nature
Product characteristics necessitate such a network (e.g. to preserve quality or use of the product)
Criteria laid down do not go beyond what is necessary
Follows Metro 1 (1977)
Burden on supplier to justify choice of selectve distribution
Product looks like an essential facility

9. Coty – product characteristics
‘luxury goods may require the implementation of a selective distribution system in order to preserve the quality of those goods.’ [28] Nike shoes? (NL) Deuter bags? (Germany)

10. Types of product matter?
Luxury products (Coty); body hygene goods [32].
The need to preserve the prestigiouls image of cosmetic and hygene goods was not a legitimate requirement for the purposes of justufying a comprehensive prohibition of the internet sale of those goods. [34]

11. Legality = product characteristics + contract terms?
Example
Luxury watch: supplier can limit sales on third party platforms
High quality watch: supplier cannot limit sales on on-line platforms
Ordinary watch: supplier cannot even use a system of selective distribution

12. Proportionality Adequate to safeguard image No more than necessary
Helps suppler control the online presence to ensure that it meets the quality requirements it sets for sellers
Lack of contract nexus with third party platforms makes monitoring of uality requirements more difficult
Suppliers may sell online through [52-53]:
Own websites
Third party platform where the identity of the latform is not visible.
Not through:
Third party pltforms that are recognisable by consumers

13. Can you legitimately block sales through third-party platforms?
Coty guides national court:
Is the restriction appropriate to preserve luxury?
Guarantees website is associated with its brand
Coty can check compliance with conditions on authorized websites
Coty cannot require compliance by third party platforms, absent contract
Is the restriction proportionate?
Not an absolute prohibition on on-line sales
Inability to control 3rd party platforms relevant

14. Selective Distribution Law 2 Regulation 330/2010
Elements to secure block exemption:
Parties have a vertical relationship (Art 2)
Seller and buyer both have market share below 30% (Art 3)
Absence of ‘hardcore restrictions’(Art 4)
Not applicable to certain terms (Art 5)
COM may withdraw benefit of BER ex post if effects are anti-competitive (Art 6); NCA may withdraw benefit of BER from its jurisdiction (Art 29 Reg 1/2003)

15. Article 4’s Black list & selective distribution
Art 4(b)(iii): restricting the territory in which or the customers to whom distributor may sell… except sales by selected distributor to non-authorized dealers
Art 4(c): restricting active or passive sales to end users by members of a selective distribution system (but may restrict sales from unauthorized premises)

16. Article 4 and e-commerce
Total ban on internet sales
Restricts at the very least passive sales to those wishing to buy on-line (Art 4c, Pierre Fabre)
Ban on 3rd party websites
Does not restrict customers or territories (Art 4b) as goods may be found on-line
Does not restrict passive sales to end users
Requirement of a brick and mortar store? (i.e. exclusion of pure on-line distributors?)

17. Relationship between Metro case law and Block Exemption
Block Exemption is more generous:
Applies irrespective of goods
Market power threshold; assume that absent market power anticompetitive effects are remote (cf US antitrust: Leegin v PSKS, 2007)
Metro case law might apply:
Above the 30% threshold
For e-commerce the approach is the same under both

18. Coty back in the national court
Application of Coty’s guidance raises doubts
Is the restriction proportionate given that other third party platforms sell Coty goods? Why exclude amazon if it can comply with the quality requirements?
In Germany (E-Commerce inquiry) third party platforms are more used than in other MS: keeping channel open is important
Court applies Block Exemption instead!
Market shares below 30%
No restrictions of customers and no restriction of passive sales (Art 4)

19. Conclusions US antitrust would not even consider a case like Coty:
No market power
Lively inter-brand competition for perfumes
Amazon is a large player downstream
EU antitrust:
Coty pushes courts to look at the economics…
… but retains a form-based approach
Block Exemption Regulation as a parallel pathway