Online Sales Restrictions 

1. Introduction

Online sales restrictions are contractual, technological, or commercial measures that restrict a distributor, retailer, dealer, or intermediary from selling products through the internet. They may take many forms, including:

• complete bans on internet sales;
• restrictions on sales through online marketplaces;
• restrictions on the use of price-comparison websites;
• restrictions on search-engine advertising;
• requirements to maintain physical stores;
• territorial restrictions on online customers;
• restrictions on cross-border online sales;
• selective-distribution rules governing online presentation and service quality;
• minimum advertised price or resale-price restrictions; and
• restrictions on selling through particular platforms.

Competition law generally distinguishes between legitimate regulation of online distribution and restrictions that unnecessarily eliminate an important channel of competition.

The central question is whether the restriction protects legitimate distribution objectives or instead forecloses competitors, partitions markets, raises prices, or limits consumer choice.

2. Why Online Sales Matter in Competition Law

The internet has transformed distribution because consumers can:

1. compare prices rapidly;
2. purchase from suppliers in other territories;
3. access numerous competing brands;
4. use online marketplaces;
5. compare product characteristics and reviews;
6. switch suppliers more easily; and
7. obtain products without visiting physical stores.

Consequently, an agreement that prevents or substantially limits online sales can have effects beyond the individual distributor.

Competition authorities therefore examine whether the restriction:

• reduces intra-brand competition;
• reduces inter-brand competition;
• partitions geographic markets;
• facilitates resale-price maintenance;
• prevents entry;
• protects incumbent distributors;
• restricts marketplace competition; or
• reduces consumer access to alternative sellers.

3. Legal Framework

A. EU Competition Law

The principal provisions are:

Article 101 TFEU

Article 101 prohibits agreements between undertakings that have as their object or effect the prevention, restriction, or distortion of competition.

An online sales restriction may therefore be unlawful where it amounts to a particularly serious restriction of competition.

Article 102 TFEU

Where the restriction is imposed by a dominant undertaking, it may constitute an abuse of dominance.

Relevant theories include:

• exclusionary conduct;
• discriminatory access;
• refusal to supply;
• tying;
• foreclosure of online competitors; and
• leveraging of dominance from one market into another.

Vertical Block Exemption Regulation

The EU's vertical rules distinguish between:

• hardcore restrictions;
• permitted vertical restrictions;
• restrictions potentially qualifying for exemption; and
• restrictions requiring individual assessment.

4. Types of Online Sales Restrictions

4.1 Absolute Ban on Internet Sales

The most severe form is a contractual provision effectively preventing a distributor from selling products online.

Example:

"The distributor shall not sell any products through the internet."

Such a restriction may eliminate an entire distribution channel.

The classic authority is Pierre Fabre.

4.2 Marketplace Restrictions

A supplier may permit online sales but prohibit sales through:

• Amazon-type marketplaces;
• eBay-type platforms;
• price-comparison marketplaces; or
• specialist online platforms.

A marketplace restriction is not automatically equivalent to a complete internet-sales prohibition.

Its legality depends on its effects and the applicable vertical-distribution framework.

4.3 Restrictions on Price-Comparison Websites

Suppliers sometimes prohibit distributors from allowing their products to appear on:

• comparison-shopping websites;
• price aggregators; or
• online search-shopping services.

The concern is that consumers may become less able to compare competing offers.

4.4 Search-Advertising Restrictions

A supplier may restrict distributors from:

• bidding on particular keywords;
• purchasing search-engine advertising;
• using the supplier's brand name as an advertising keyword; or
• directing consumers to competing online sellers.

Such restrictions may have territorial or foreclosure effects.

4.5 Territorial Online Restrictions

A distributor may be prevented from accepting orders from consumers located outside its allocated territory.

This becomes particularly important where the restriction prevents passive online sales.

Online sales make territorial market partitioning easier to implement technologically.

4.6 Physical-Store Requirements

A supplier may require an online retailer to maintain:

• a physical shop;
• a minimum number of physical outlets;
• trained personnel; or
• a showroom.

Such requirements can sometimes be justified by legitimate quality or service considerations, but disproportionate requirements may disadvantage online-only competitors.

5. Distinction Between Active and Passive Online Sales

This distinction is fundamental.

Active sales

The distributor deliberately targets customers in another territory.

Examples:

• targeted advertising directed toward another territory;
• unsolicited commercial communications;
• actively approaching customers.

Passive sales

The customer approaches the distributor on its own initiative.

Examples:

• visiting a website;
• submitting an online order;
• responding to a general website;
• purchasing through an online marketplace without being specifically targeted.

Competition law has traditionally been much more protective of passive sales, because prohibiting them can divide the internal market into territorial compartments.

6. Important Case Laws

1. Pierre Fabre Dermo-Cosmétique SAS v Autorité de la concurrence

Court: Court of Justice of the European Union
Year: 2011

Facts

Pierre Fabre's selective-distribution agreements required cosmetics to be sold in the physical presence of a qualified pharmacist. In practice, this prevented authorised distributors from selling the products through the internet.

Issue

Whether the restriction preventing distributors from effectively selling online constituted a restriction of competition by object.

Decision

The CJEU held that a contractual clause effectively prohibiting internet sales could constitute a restriction of competition by object, subject to the relevant legal assessment.

Importance

The case established a fundamental principle:

A supplier cannot ordinarily eliminate internet sales merely by requiring a physical presence if the practical effect is to prohibit online selling.

It is one of the most important authorities concerning online distribution restrictions.

7. Coty Germany GmbH v Parfümerie Akzente GmbH

Court: CJEU
Year: 2017

Facts

Coty operated a selective distribution system for luxury cosmetics. Its agreement prohibited authorised distributors from selling the products through third-party online marketplaces in a manner visible to consumers.

Issue

Whether the marketplace restriction violated EU competition law.

Decision

The CJEU held that a prohibition on discernible third-party marketplace sales could, under the circumstances, be compatible with Article 101 TFEU where it was directed toward preserving the luxury image of the products and satisfied the applicable proportionality requirements.

Importance

Coty is particularly important because it distinguishes a marketplace restriction from an absolute internet-sales prohibition.

The case demonstrates that:

• online sales are not immune from quality requirements;
• selective distribution can legitimately protect certain brand characteristics;
• marketplace restrictions are not automatically hardcore restrictions; and
• proportionality remains important.

8. Guess?

Case: Guess — European Commission
Year: 2018

Facts

The European Commission investigated distribution arrangements involving Guess products.

The Commission identified restrictions concerning:

• authorised distributors' ability to sell online;
• the use of particular online advertising mechanisms;
• cross-border sales; and
• restrictions affecting consumer access to authorised distributors.

Decision

The Commission imposed a substantial fine on Guess for restrictive distribution practices.

Importance

The case illustrates how online restrictions can operate together with:

• territorial restrictions;
• selective distribution;
• advertising restrictions; and
• restrictions on unauthorised online sales.

It demonstrates that competition authorities may examine the combined effect of several contractual restrictions rather than looking at each clause in isolation.

9. ASICS

Case: European Commission / German competition authorities
Subject: Online distribution restrictions

ASICS' distribution arrangements included restrictions affecting the ability of authorised retailers to use certain internet sales and comparison mechanisms.

The authorities considered restrictions involving:

• price-comparison websites;
• online marketplace visibility;
• brand-related online advertising; and
• internet distribution.

Importance

The ASICS matter is significant because it shows that an undertaking does not necessarily escape competition-law scrutiny merely because it permits some internet sales.

A supplier can still restrict competition if its contractual conditions make online competition substantially less effective.

10. Adidas

Case: Adidas — German Bundeskartellamt
Subject: Online distribution

Adidas historically imposed restrictions concerning online sales, including limitations affecting the use of online marketplaces.

The German competition authority examined whether the restrictions materially limited retailers' ability to market Adidas products online.

Importance

The Adidas matter illustrates the importance of distinguishing between:

• legitimate selective-distribution requirements;
• quality-control measures; and
• restrictions that unnecessarily prevent retailers from reaching consumers through important online channels.

It also demonstrates the importance of marketplace access in modern competition law.

11. B2C Europe v Commission / Online Intermediary Context

European competition jurisprudence has increasingly considered the role of online intermediaries and platforms in vertical distribution.

The broader principle emerging from EU competition law is that restrictions affecting digital distribution must be analysed in light of:

• the role of platforms;
• consumer reach;
• market structure;
• alternative distribution channels;
• the importance of the restricted platform; and
• potential foreclosure.

This is particularly relevant to marketplace bans and platform restrictions.

12. MEO — Serviços de Comunicações e Multimédia

Case: MEO v Autoridade da Concorrência
Court: CJEU
Year: 2018

Although not a pure online-sales case, MEO is relevant to the assessment of discriminatory contractual practices in digital and platform-related markets.

Importance

The CJEU emphasised the importance of analysing actual or potential competitive effects, particularly where discriminatory treatment is alleged.

This reasoning is useful when an online platform or supplier gives different online distribution conditions to competing distributors.