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There are winners and losers in competition law

Chris Bryant is partner at law firm Berwin Leighton Paisner.

A number of recent cases involving companies such as Adidas, John Lewis and House of Fraser have highlighted the need for the fashion industry to remain mindful of competition law.

Adidas has recently dropped a ban on retailers selling via eBay and Amazon in response to an investigation by the German Cartel Office. Selective distribution systems such as that operated by Adidas are subject to the competition rules. These systems are typically used by suppliers of luxury goods to maintain control over the resale of their products. The European Commission has held that high-end watches and fine fragrances, for example, justify restrictions concerning sales premises and staff expertise. However, any such restrictions must be non-discriminatory, applied consistently and not go beyond what is necessary to protect the brand image.

Some key restrictions are banned outright, for example on a distributor’s freedom to determine its resale price, and resale price maintenance remains a key point to watch. The UK’s Competition & Markets Authority has investigated
a complaint that DB Apparel and Debenhams, House of Fraser and John Lewis had set a fixed or minimum resale price on products in the Shock Absorber sports bra range.

Companies can also use competition law to their benefit where they have been harmed by the infringements of others. For example, following a European Commission finding that the credit card fees paid between banks broke competition law, several retailers including New Look and Next are suing MasterCard over these fees.

As such, competition law presents risks and opportunities for the fashion industry. The above cases highlight the need to consider competition law when drafting agreements with resellers. The Adidas case shows agreements that restrict online sales may infringe competition law. Meanwhile, although UK regulators concluded they had no grounds for action in the recent sports bra case, firms should be mindful of the continued scrutiny by competition authorities of resale price maintenance agreements.

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