8 September 2017 by Timothy Lucas

Restricting distributors from online selling – PING lands in the rough

Many golfers will be familiar with the feeling – all you need to push yourself to the next level is to replace that one dodgy club.  Well, snapping up a bargain online may have just become a little easier, following the Competition and Markets Authority’s decision to fine PING for anti-competitive practices.

Last month, the CMA announced it had fined golf equipment manufacturer, PING, £1.45 million for breaching UK and EU competition law.  PING had entered into agreements with two of its UK retailers, which prevented the retailers from selling PING’s golf clubs on their websites.  On the face of it, PING’s rationale for this was reasonable – its aim was to promote in-store custom fitting.

The CMA’s view was that, although this was a genuine commercial aim, it could have been achieved through less restrictive means.

In its statement, the CMA said “the internet is an increasingly important distribution channel and retailers’ ability to sell online, and reach as wide a customer base as possible, should not be unduly restricted. The fine the CMA has today imposed on PING should act as a warning to companies that preventing its products from being sold online could be illegal”.

In addition to the fine, PING is required to bring the online sales ban to an end and refrain from imposing similar bans on other retailers.

This decision serves as a reminder that, when two (or more) parties enter into a distribution agreement, they will need to ensure that the agreement does not contain any restrictions that might breach competition law.  The types of restrictions on the retailer that might be considered anti-competitive are wide-ranging.  Typical “black-listed” restrictions include price-fixing and certain territorial restrictions.  However, any term of an agreement which restricts or distorts competition within the UK or the EU could fall foul of the legislation.  In this case, even though the CMA acknowledged that PING had a genuine commercial aim, it concluded that the practice was anti-competitive.

Among other enforcement measures, businesses that are found to have breached competition law can be fined up to 10% of their worldwide annual turnover (and may be subject to damages claims from third parties).

If you would like further advice on distribution agreements, the circumstances in which they might breach competition law and whether any exemptions might apply, please contact Tim Lucas on 020 7288 4753 or by email at TimothyLucas@boltburdon.co.uk.

You can also contact one of the other solicitors in our Corporate and Commercial team here.

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