On 7 September 2018, the Competition Appeal Tribunal ("CAT") handed down its judgment in Ping upholding the Competition and Market Authority ("CMA")'s decision that Ping's online sales ban ("OSB") constituted a restriction of competition by object under EU and UK competition law. The aim of Ping's OSB was to promote in-store custom fitting for its golf clubs and although the CMA and the CAT both accepted that this was a legitimate commercial strategy, they concluded that alternative and less restrictive measures were available to Ping which would achieve the same outcome. As the restriction was held to be disproportionate it did not benefit from and exemption under Article 101(3) of the Treaty on the Functioning of the European Union ("TFEU").
The ruling confirms the strict approach under EU and UK competition law to restrictions placed on distributors to sell to customers over the internet. However, the CAT reduced the £1.45 million fine imposed by the CMA by £200,000.
The judgment will be of particular interest to UK businesses that seek to restrict online sales in order to promote face-to-face customer relationships for technically complex or bespoke goods. This is the first time that the UK courts have examined prohibitions on online sales under competition law, and the CAT's ruling confirms the approach taken by the European Court of Justice ("CJEU") in Pierre Fabre and Coty. While the CAT did not rule out that OSBs could be permissible if they are objectively justified by reference to certain criteria, the CMA and CAT have shown that they will take a strict approach in assessing whether such a restriction is proportionate to its legitimate aim.
This Briefing sets out the background and judgment of the CAT, and analyses how the judgment and others like it, affect European manufacturers' ability to restrict online sales.
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The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2019