In order to protect brand image, the quality of pre-sale service, and the pricing structure of their products, manufacturers undertake a variety of measures to sell products to their retailers. Thus, clauses which prohibit retailers from using price comparison engines within selective distributions systems have enjoyed a certain amount of popularity in recent years.
At least for manufacturers in Germany, this way of business is now blocked. On 5 June 2017, the Higher Regional Court Düsseldorf confirmed a decision by the German Federal Cartel Office (FCO), stating a prohibition of the use of price comparison engines by retailers within a distribution system is illegal, as it violates European competition law.
The contracts contested by the FCO included a clause that prohibited the retailers from any use of price comparison engines. Such engines are highly popular tools for consumers, as they allow a transparent overview of products, potential sellers, and most importantly, the best prices. Small and medium-sized companies benefit enormously from the range of comparison software, as it provides such companies with a high level of market visibility for a small price.
The Higher Regional Court Düsseldorf considered the clause in question to stipulate a core restriction and was held to be invalid. The Court stated that the ban of price comparison engines is a restriction of competition by object. Referencing the case law of the European Court of Justice (Pierre Fabre), the appeal court stressed the fact that the ban would hinder the retailers’ advertising and sales possibilities.
Furthermore, the Court significantly restricted the room for manufacturers to justify respective clauses. Referencing products for which consumers typically do not require or need purchase advice, the Court dismissed arguments that the respective prohibitions were necessary to protect the quality of pre-sale service. In addition, the Court considered the internet to be another important and often used source of pre-sale information, deemphasizing the importance of pre-sale services for certain products in general.
The decision of the Higher Regional Court Düsseldorf is of major importance for manufacturers, retailers and consumers alike. In order to avoid heavy fines by the FCO, manufacturers need to make sure that their distribution contracts and systems comply with the decision of the Higher Regional Court Düsseldorf and make the necessary adjustments as soon as possible.
In addition to the ban, the FCO had criticized a clause which prohibited the resellers from selling the manufacturer’s products on online marketplaces. However, as the ban of price comparison engines already constitutes an illegal restriction, the appeal court did not decide on this issue. It will be interesting to see how courts will decide when they get a second chance to decide on the validity of such clauses, thereby clearing up another vividly discussed topic of high economic importance in current German Competition Law.