Is the branded manufacturer's branded goods legitimate

Internet trading: When manufacturers want to prescribe the distribution channels

The Cartel Office is investigating several sporting goods manufacturers who prohibit retailers from selling their branded goods on Ebay or Amazon. In the heise resale interview, attorney Thomas Seifried explains why these sales channels are often not wanted by manufacturers and whether corresponding sales stops may be legitimate.

Why is the sale of their goods on platforms such as eBay or Amazon a thorn in the side of many brand manufacturers?

Seifried: Brand manufacturers don't like sales via eBay or Amazon for several reasons. Brands live from the emotional associations with which they are charged through large advertising expenditure. It plays an important role where and how the goods are presented. The feeling of exclusivity is cultivated especially in the luxury sector. You wear a "Kelly Bag" to stand out from Krethi and Plethi, so to speak. If branded products are now offered on eBay or Amazon between cat scratching posts and gas grill carts by after-work sellers, this can destroy the painstakingly built brand image. It is precisely those brand manufacturers who are particularly reluctant to see eBay and Amazon offers that sell either through exclusive distribution, i.e. an exclusive licensee, or through selective, i.e. selected distribution.

Thomas Seifried is a lawyer and specialist lawyer for commercial legal protection. Seifried IP Rechtsanwälte, based in Frankfurt a. M. represent and advise medium-sized companies nationwide in trademark law, competition law, advertising law, design law and internet law in the advertising, internet (platforms, portals), wholesale and retail, fashion and textile sectors.

Can brand manufacturers generally forbid trading their goods on such platforms?

Seifried: When it comes to the online sale of branded goods, two areas of law meet with almost opposing objectives. On the one hand there is antitrust law, which the Commission wants to promote internet sales through increased price competition, a wider range of products and a free internal market. Antitrust law severely restricts the ability of brand manufacturers to ban or restrict online sales entirely. Clauses in distribution contracts that absolutely prohibit online distribution are often ineffective. On the other hand, clauses that only restrict online sales, e.g. by requiring a certain type of product presentation as part of the "look & feel" of the brand owner, are permitted to a certain extent. Trademark law, in turn, allows the trademark owner to control to a certain extent how, where and in what condition he sells his goods.

Authorized dealers have partner agreements with the manufacturer. Could the manufacturer prescribe / restrict the distribution channels in it?

Seifried: Brand manufacturers can almost never effectively rule out "passive" Internet sales. An online offer is passive if it is not specifically advertised. Anyone who maintains a web shop with the option to order and who only carries out customer orders is still selling passively. This also applies if the webshop, thanks to its language selection option, can also be used by customers in countries that have not been assigned to it by the brand manufacturer.

However, if the shop operator specifically targets those customers who are not exclusively assigned to him, e.g. through banner advertising, he is actively selling. Such sales can be effectively prohibited. The brand manufacturer may also set specifications for the operation of the online retailer and make requirements for the presentation of the products. The brand manufacturer can, for example, legitimately require the online retailer who would like to become a member of its selective sales force to also maintain stationary exhibition or presentation rooms. He may also set up requirements for the online shop himself and z. B. contractually restrict the amount of products to be sold to a single end user in order to make it more difficult to deliver to unauthorized dealers.

Or take the detour of stipulating exactly how the products are to be presented? On ebay or Amazon, a retailer would then have problems implementing these requirements.

Seifried: It is permissible for online retailers to be required to ensure that their shop or the third-party platform to be used must match the "look and feel" of the brand. A brand manufacturer can also dictate to its retailer that the third-party platform on which the goods are to be offered must not have the logo of this platform. This means that the brand manufacturer can ultimately also prohibit sales via Amazon or eBay.

After the sporting goods manufacturer Asics had issued a corresponding ban, the Federal Cartel Office started investigations and suspected that competition was being restricted. What signal is this to the dealers? Can you simply ignore the manufacturer's prohibitions because they are presumably illegal?

Seifried: A clause in a dealer contract that violates antitrust law is ineffective. In terms of antitrust law, for example, price targets for dealers are highly toxic, as reported by press reports that Asics is said to have been the case. Whether a trader ignores such ineffective clauses, he will consider carefully. Because the brand manufacturer will be able to properly terminate the contract with the retailer and stop delivering. Knowledge of such ineffective clauses can, however, strengthen the trader's negotiating position.

Can the retailer then also procure the goods elsewhere?

Seifried: As a matter of fact, the retailer can procure original goods anywhere. If, however, the original goods have not previously been sold in the European Union for the first time with the consent of the trademark owner, the trademark owner threatens to file a lawsuit for infringement of the trademark. The problem with this is that dealers can rarely prove that. In the past, for example, branded textiles have appeared to a large extent at discounters. How these goods got there could not be explained. The brand manufacturer claimed that the goods had never been sold in the EU for the first time with their consent. According to case law, the retailer who purchases the branded goods from an item buyer or an Eastern European middleman must first prove that these goods were first sold in the EU with the consent of the brand owner and did not get there directly from the USA via unknown routes. He will hardly ever be able to do that.

However, no retailer wants to spoil a good partnership with a manufacturer. Do you have a tip on how retailers can proceed to be on the safe side in any case?

Seifried: If a retailer purchases its goods exclusively from the brand manufacturer, the online sales channels should be clarified in detail. In particular, the “where” and “how” of the offers should be regulated. If the retailer does not purchase directly from the brand manufacturer or its licensee, he must check the origin of the goods, even if they are undoubtedly original goods. Of course, he can also try to secure himself with a recourse clause in the contract against compensation payments due to trademark infringements. Such a clause will not infrequently only have theoretical value, especially if the seriousness of the supplier is doubtful. (masi)

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