Case law: Brand owner breached competition law by banning retailers from using its online brand names in search advertising
Businesses selling branded products through retailers should beware of stopping those retailers from using the brand names in online search advertising, or risk being fined for breaching competition law.
This update was published in Legal Alert - February 2019
Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.
A company owning various well-known brands operated a selective distribution network of retailers selling its products. It restricted what those retailers could do in five ways:
- It banned them from using its brand names in their online search advertising.
- It made them ask for specific authorisation before they could make online sales – and the company’s discretion whether to authorise online sales was absolute, rather than based on specified quality criteria.
- It banned them from making sales to consumers outside the territories they had been allocated.
- It limited cross-selling between authorised wholesalers and retailers of its products.
- It restricted the prices retailers could charge for its products.
The European Commission ruled that the effect was to stop the retailers from advertising and selling the company’s branded products across borders within the EU, which created artificially high retail prices for the products in some EU member states. This breached EU competition law because it prevented, restricted or distorted competition within the EU’s Single Market.
This is the first time trade mark advertising bans have been ruled unlawful (apart from in the German courts). The ruling has yet to be published so it remains to be seen whether the fact that the retailers were part of a network, and there were four other infringements of competition law, were contributing factors.
- Businesses selling branded products through retailers should beware of stopping those retailers from using the brand names in online search advertising, otherwise they risk being fined for competition law breaches.
Case ref: Case COMP/AT.40428 Guess Commission Decision of 17 December 2018
Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.
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