Golf club manufacturer Ping has been fined £1.45m by the Competition and Markets Authority (CMA) for unlawfully restricting online sales of its products.
With this decision, the CMA reminds suppliers that online sales bans will often be prohibited. Ping imposed online sales restrictions on two of its retailers in the UK to encourage bricks and mortar stores. However, the CMA found that the restrictions went beyond what was necessary.
Ping imposed online sales bans on two of its retailers in the UK in an effort to encourage in-store custom fittings of their golf clubs.
Generally, suppliers are permitted to impose restrictions on their online sales channels as long as these are justifiable and comparable to the restrictions imposed on bricks and mortar outlets. However, it is well established in competition law that banning internet sales outright without sufficient justification is prohibited.
In this case, while the CMA recognised Ping's justifiable commercial strategy of encouraging customers to visit a physical store, the CMA ultimately found that the restrictions imposed by Ping went beyond what was necessary to reach their goal.
Managing online sales
Understandably, many businesses and brand owners are concerned about online distribution channels, which can be difficult to manage and can sometimes present a risk to brand image.
However, it is clear that both the European Commission (EC) as part of its Digital Single Market initiative and the CMA are taking an increased interest in how online sales are managed. In the last few months, the EC has published its final Report on E-commerce which surveyed a wide range of businesses on their online selling practices. More recently, the Advocate General Wahl has given his opinion to the Court of Justice of the European Union (CJEU) in the Coty case relating to restrictions on sales through marketplaces. These developments show that the law in this area is still developing and that there is yet to be a harmonised approach across the EU.
The CMA has yet to publish its decision relating to Ping's arrangements, so its full reasoning is not yet available. In its press release relating, the CMA recognised that Ping was pursuing a genuine commercial aim of promoting in-store custom fitting, but comments that it could have achieved this through less restrictive means. It remains to be seen whether the CMA's decision will offer any insight into what 'less restrictive means' might have been acceptable, and whether brand owners can take comfort that there are circumstances in which they can legitimately control internet selling.
In the meantime, this case serves as a reminder that absolute bans on online sales will very rarely be tolerated in the UK or the EU and that companies should properly consider any restrictions they impose on online sales.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.