In the February legal circular, we briefly addressed competition, specifically vertical agreements. That is, agreements arising as agreements between competitors which occur at different levels of the market, typically in the relationship between manufacturer (or supplier) – further distributor (including final retailers), and which relate to the purchase or sale of goods or services. In this issue of the circular, we shall focus on what specific impacts these rules have in the environment of internet trading.

The legal regulations governing this area establish a simple rule: “Every distributor must be permitted to freely use the internet for advertising and selling products.” The internet is, by virtue of its technical nature, suited to reaching all customers without restriction by territory or group of customers. This means that traders should have the possibility of distributing goods via the internet, both actively and passively.

In this connection, the European Commission has declared by way of example several restrictions of competition at the vertical level which it will penalise severely. These are primarily:

• requirements that a distributor (including final retailers) terminate a transaction via the internet as soon as it ascertains from the data on the payment card that the address is not located in the territory allocated to the distributor;

• requirements that a distributor (including final retailers) prevent customers from another territory from accessing its internet site or introduce redirection to other sites for the same reason;

• requirements that a distributor (including final retailers) pay a higher price for products which it sells via the internet than for products which it sells in the traditional manner in a brick-and-mortar establishment;

• requirements that a distributor (including final retailers) limit the share of total sales volume via the internet.

Also, a situation where one of the suppliers of goods prohibits the sale of competing goods via the internet is regarded as a prohibition on competing, in circumstances where this prohibition leads to a restriction on the purchase of competing goods from another supplier to less than 20% of the total volume of the trader’s purchases. This will be based primarily on the annual volume of purchases.

In general, therefore, it may be said that the internet is understood merely as a form of sale and should not be reflected in the quality of goods; therefore, a distributor may require, irrespective of further use of the goods, compliance with a certain standard of quality of goods, or compliance with standards in the area of distribution and advertising. Nevertheless, any measure which will deter distributors from using the internet by setting criteria different from those for sale in brick-and-mortar shops will be regarded as a hard and anti-competitive measure. All this, of course, only on the condition that these criteria are not natural to the different nature of distribution of goods.

Mgr. Lukáš Barnet

Law Firm Mašek, Kočí, Aujezdský www.e-Advokacie.cz – on-line legal consultancy

This text was originally prepared by the law firm Mašek, Kočí, Aujezdský in cooperation with the association Association for Electronic Commerce (APEK) as legal circular No. 4/2013 intended for members of this association.

This text was translated from Czech to English using an AI translator.