Last week the French Competition Authority ADLC– l’Autorité de la Concurrence (ADLC)– announced fines totalling €250,000 against Bikeurope B.V. for reducing competition by banning online sales of its bikes between 2007 and 2014. This decision builds on the principles developed in the CJEU’s Coty judgment, and provides a further warning to brands who might seek to influence retail pricing or otherwise restrict competition between retailers.
As part of the Trek Bicycle Corporation, Bikeurope manufactures, distributes and sells high-end bikes in Europe through a selective network of authorised distributors. The ADLC’s investigation into Bikeurope first started after it received evidence of potential wrongdoing from the Directorate General for Competition, Consumer Affairs and Repression of Fraud. The ADLC swiftly followed up with dawn raids at the firms’ premises, subsequently progressing to a full investigation.
During the relevant period investigated by the ADLC, Bikeurope was found to have added provisions to its terms of sale stating that for all online sales, its bikes must first be delivered directly to the retailer’s store, effectively precluding online sales to customers. The ADLC’s investigation subsequently found that Bikeurope’s infringing activities had moved into second gear, as they went on to explicitly forbid online sales of any kind.
Bikeurope also monitored its distributors’ sales, and its French arm – Trek France – sent warning emails to retailers who didn’t stick to their rules. The ADLC found that in one email, sent in 2012, Trek France stated explicitly “we do not allow distance selling of our bikes (including online)”. Trek France’s justification for doing so was threefold; they allegedly sought to:
- ensure that the customer benefitted from the retailer’s expertise;
- ensure that their bikes were wholly and competently assembled by the retailer; and
- avoid a price war.
For retailers who didn’t comply with their demands, Trek France wrote to them further, threatening to terminate their contracts. Now, however, the ADLC has forced Bikeurope to pump the breaks on its anti-competitive activities, finding that although Bikeurope are entitled to safeguard the high-end image of their products, the imposition of the restrictions on online selling were disproportionate to that aim.
This ruling, which mirrors the ADLC’s previous decision to fine chainsaw manufacturer Stihl for its overly-restrictive selective distribution terms, further clarifies how national authorities will apply the landmark Coty judgment to their own investigations. As in Coty, the ADLC recognised that in principle selective distribution systems are permissible to allow brands to protect the reputation of their high-quality products, and noted that this extends to Trek bicycles, which it accepted are highly technical, require specialist sales staff, and operate at an elevated price-point. However, the ADLC once again found that restricting consumers’ ability to buy products online will lead to monetary sanctions. This case therefore acts as another reminder to brand owners that although they can protect the ‘luxury aura’ of their products through selective distribution, any further and unnecessary restrictions will be deemed infringements of competition law.