The OFT tackles restrictions on the online availability of medical devices

14.01.2014

In August 2013, the OFT issued its decision in the Roma-branded Mobility Scooters case. This arose from an OFT investigation into arrangements between Roma and its distributors that were designed to restrict the availability of certain Roma mobility scooters online. The classification of mobility scooters as ‘medical devices’ makes this decision relevant to all manufacturers and distributors of medical devices.
Agreements restricting competition
Agreements that affect trade in the UK and have as their ‘object’ or ‘effect’ the restriction of competition within the UK are prohibited under competition law. Unless a company is dominant, an ’agreement’ is required for competition law to bite.
The ‘agreements’ in this case arose from Roma communications to its retailers stating that certain models of mobility scooter should be sold “in-store only”. A number of retailers expressly agreed to Roma’s request. Roma had a policy of threatening to withdraw/actually withdrawing supply from retailers who did not comply. The OFT inferred that any retailers which did not sell online had acquiesced and had therefore entered into an ‘agreement’ for competition law purposes. A number of retailers had attempted to “cheat” the restrictions, but even this did not prevent the OFT from finding that an ‘agreement’ was in place between Roma and those retailers.
The specific restrictions of competition related to prohibitions of online sales and online advertising.
The ‘object’ of the restrictions
Restrictions that are by their very nature detrimental to competition are seen as anticompetitive by ‘object’. Such restrictions are prohibited without any need to show that they have an anti-competitive ‘effect’. The OFT took the view the online sales prohibition would obviously restrict competition between retailers and therefore fell into the anticompetitive by ‘object’ category.
In a confusing section, the OFT then considered the subjective ‘objects’ /aims of the parties (and to some extent the effects of the conduct). Roma argued that its primary aim had been to protect consumers, highlighting that mobility scooters are classified as medical devices by the MHRA. As such, consumers needed to receive an “assessment” prior to buying a mobility scooter and this could not be carried out if the sale was made online.
The OFT found that contemporaneous documents did not suggest that the restrictions imposed (or rather ’agreed‘) were motivated by the products’ characteristics. It found that they were instead designed to incentivise bricks and mortar retailers to stock and sell Roma products on the understanding that they would not face ‘intra-brand’ competition from online Roma retailers. The OFT emphasised that the relevant medical devices regulations imposed requirements only on the way that the scooters were manufactured, constructed and packaged, and not the way in which they were distributed, sold or advertised. As a result, there was certainly no requirement for a manufacturer to ban online sales or online price advertising to meet regulatory obligations.
Comment
From a competition law perspective, the low threshold used by the OFT to identify an ‘agreement‘ is certainly noteworthy. This remains an area of the law that needs further clarification. The OFT’s readiness to find that the prohibition of online sales was an ‘object’ type restriction also reflects the increasing tendency of competition authorities to categorise restrictions in this way. The practical consequence of doing so is to remove any requirement to demonstrate anticompetitive effects before finding that the conduct is in breach of the law.
It is interesting to note that when considering consumer harm and industry developments, the OFT emphasised the fact that consumers with limited mobility may find it difficult to visit more than one bricks and mortar store, particularly in light of Roma’s selective distribution system (with a limited number of distributors). Making the products available online would make it easier to compare prices and to involve friends and family in the purchase more easily. Manufacturers and distributors of medical devices should take note: it seems that the OFT may employ a higher standard for devices where the vulnerability of consumers is directly relevant to the devices in question.
Finally, it is important for manufacturers and distributors of medical devices to be aware that restrictions on the availability of products online that are not required by a regulatory obligation could give rise to competition concern. Competition law is inherently sceptical of any arrangements that restrict the use of the internet to distribute products. In its 2013-14 Annual Plan the OFT has reiterated that it will focus on protecting online channels. Given this (which is reflected in the position of competition authorities elsewhere in Europe), any restriction on the online distribution of any goods, including medical devices, should be carefully considered.