The legal framework for e-commerce in Europe has been updated. The new regulations are to be implemented from June to protect brands, wholesalers and resellers.
E-commerce is vital for most fashion brands, but there are many gray areas when it comes to laws and regulations.
For most fashion brands – and luxury brands in particular – online commerce is constrained by selective distribution, where a lot of control is exercised over the choice of multi-channel partners and marketplaces to ensure that the online environment matches the look, the feel and prestige of the goods, services and brand. Under the new rules, multi-channel partners can sell goods to their end customers, but not to third-party providers or other retailers.
The European Commission has recently adopted the new Block Exemption Regulation for Vertical Agreements (“Vertical BER”) together with the new Vertical Guidelines, after a thorough evaluation and revision of the previously published rules from 2010. The revisions provide companies with simpler, clearer and more up-to-date rules and guidelines. They are also designed to help them assess the compatibility of their supply and distribution agreements with EU competition rules in a business environment transformed by the growth of e-commerce and online commerce.
Selective distribution
The regulations explain selective distribution via vertical agreements – a distribution system in which the offeror agrees to sell the contracted goods or services, directly or indirectly, only to distributors who are selected on the basis of certain criteria, and in which oblige these trading companies not to sell these goods or services to unauthorized resellers in the territory that the offeror has reserved for this system.
Vertical agreements are agreements between two or more companies operating at different levels of the production or distribution chain that concern the terms on which the parties may source, sell or resell certain goods or services.
Under the updated rules and guidelines, brands can ban sales on online marketplaces and have discretion to establish online quality criteria even if they are distributed by a third party.
Fashion houses can also set different online and offline prices for distributors or resellers, allowing businesses to recoup the costs of running a physical store, for example.
There is also a new clarification of restrictions such as the ban on online advertising including the use of price comparison tools and online search engines.
In the case of selective distribution, luxury companies benefit from rules that ensure their products are not unknowingly allowed to be sold online.
Article sources: European Commission; Mayor Brown legal services
This article was previously published on FashionUnited.uk. Translation and editing: Barbara Russ