In a dispute between a bicycle manufacturer and a bicycle dealer, the Amsterdam Court has again ruled in preliminary relief proceedings that termination of a distribution agreement on the grounds of resale price maintenance is prohibited. Interestingly, the court also noted that an assembly obligation and a physical delivery obligation do constitute active or passive sales restrictions, but may nevertheless be allowed in selective distribution if it is justified on quality or brand image grounds.
The reason for the ruling was the termination of a dealer agreement by bicycle manufacturer Trek, on the grounds that a Dutch dealer had allegedly breached the general conditions. Those general conditions provide that a dealer must physically deliver an assembled bicycle to a customer also if the bicycle is sold via the Internet. A Finnish bicycle dealer had complained to Trek that the Dutch dealer had delivered an unassembled bicycle. The customer had assembled the bike himself, after which problems with the brakes occurred and the customer contacted the Finnish bicycle dealer. Trek also found that the Dutch dealer was guilty of price dumping by offering high discounts on the recommended retail price. Trek had terminated the dealership agreement on that ground. The Dutch dealer instituted preliminary relief proceedings challenging that termination while relying on the cartel prohibition, among other things (Article 6 of the Dutch Competition Act and Article 101 of the TFEU).
After addressing aspects of competition law and selective distribution, the court found that the pressure that Trek exerted on dealers to maintain a certain price level is prohibited. Trek's defence that retail price maintenance may be justified in order to maintain a certain level of service and thereby a certain brand image is plausible in and of itself, but Trek insufficiently explained why that was allegedly necessary in this specific case. If Trek wishes to force its dealers to charge the recommended retail prices, that constitutes a hardcore restriction within the meaning of the Vertical Block Exemption Regulation that renders such agreements null and void. Trek did not argue or demonstrate that the exemption conditions of Article 6(3) of the Competition Act had been met.
In the court’s opinion, the reasons given by Trek for the requirement that dealers deliver the bicycles to the customers in personal, in a brick-and-mortar shop and in an assembled condition may be in keeping with a system of selective distribution that is justified by the quality requirements desired by Trek. In its Copad/Dior judgment, the Europe Court of Justice (ECJ) also classified the lack of such presentation and sales service requirements as possibly detrimental to quality. In the opinion of the court ruling in the preliminary relief proceedings, the requirement that the bicycle must be assembled and must be physically delivered to the customer does indeed constitute a restriction on the active or passive sales of Trek bicycles, but that is justified by the market segment supplied by Trek and the luxury brand image that Trek aims to maintain. The top-end Trek bicycles are made of lightweight and very delicate materials, and Trek's latest technology requires careful assembly and adjustment. It is likely that a court ruling on the merits will allow this restriction. The court drew a parallel to the ECJ’s Coty judgment in that regard, but nevertheless found that Trek must comply with the dealer agreement because the resale price maintenance is in any event in breach of competition law.
This blog was previously published in the Snelrecht section of the Mr. law journal. The article can be found here.
Information on dawn raids by ACM and the European Commission can be found at invalacm.nl.
