Internet sales ban prohibited

The Competition Appeal Tribunal (CAT) has given what has been described as a 'landmark' judgment relating to the attempts by a company to ban online sales of its products.

Ping Europe Limited (Ping) is a company that manufactures golf clubs and accessories.  Ping only supplies its products to authorised retailers - mostly golf club shops.  Ping argued that part of its brand identity is 'custom fitting' i.e. The buyers of the golf clubs have a face to face session to enable the seller to ensure that the golf club fits the customer. As a result of this, Ping included a clause in its contracts prohibiting retailers from selling its golf clubs on line. Ping argued that on line sales would result in ill-fitting golf clubs which harm the customer and, ultimately, would damage its brand.

The UK Competition and Markets Authority (CMA) held that Ping had breached the Chapter I prohibition of the Competition Act 1998 and Article 101 of the Treaty on the Functioning of the European Union by operating an online sales ban that was not objectively justified. On appeal by Ping, the CAT upheld the CMA judgment. Ping were fined £1.25m.

Whilst custom fitting was held to be a legitimate aim, the prohibition on internet sales was not objectively justified and was a restriction of competition.

The size of the fine is an indication of how important the CAT considers the non-restraint of internet trade to be and the steps that it will go to uphold this view.

It is therefore very important for retailers to take specialist advice if they are considering restricting the sale of its products on the internet. The competition authorities will aggressively protect the right of the consumer to buy goods on line.

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