Judgment

Judgment by the Tribunal on a claim brought by Up & Running (UK) Limited ("Up & Running") against Deckers UK Ltd ("Deckers") under section 47A of the Competition Act 1998 (“the Act”).

Up & Running operates a retail business selling specialist running shoes and accessories. Deckers previously supplied HOKA branded running shoes to Up & Running on a wholesale basis. In July 2020, Up & Running presented a business proposal to Deckers involving the launch of a new website on which excess stock, including HOKA products, would be sold at a discount. This proposal was declined by Deckers. Up & Running nevertheless commenced selling HOKA products on the new website, following which Deckers ceased supply of the products to Up & Running in reliance on its Terms and Conditions.

Up & Running alleged that the Terms and Conditions are an agreement that contravenes section 2 of the Act ("the Chapter I Prohibition"). Up & Running sought damages arising from the alleged contraventions of the Chapter I Prohibition, and an injunction requiring Deckers to recommence supply of HOKA products to Up & Running.

Deckers denied that there had been a breach of the Chapter I Prohibition, and contended that its agreement with Up & Running must be viewed within the context of a selective distribution system it operated. It argued that its selective distribution system was exempt from the Chapter I Prohibition because it met the criteria set out within Case C-26/76 Metro v Commission (“Metro”), and by virtue of Commission Regulation (EU) 330/2010 (the “VBE”).

 The Tribunal unanimously found:

• Deckers operated a two-channel distribution strategy, involving a Main Retail Channel and a Clearance Channel. Deckers' distribution system did not meet the Metro criteria, because it lacked transparency, the criteria on which it was based were not clearly set out, it employed some quantitative criteria and was applied in a discriminatory manner.
• The real reason Deckers refused to grant Up & Running permission to sell HOKA products via the new website was to protect the selective distribution model for the Main Retail Channel which Deckers had in place, and in particular to prevent the establishment of a new clearance website in the Clearance Channel.
• The relevant Terms and Conditions (as applied) amounted to a by object restriction on competition in contravention of the Chapter I prohibition, because:
  • they sought to prevent retailers in Deckers’s selective distribution system, such as Up & Running, from making passive sales to consumers by way of a specialised channel of clearance retailers which Deckers controlled. That amounted as a matter of law to a restriction on internet sales under the Chapter I Prohibition. The relevant Terms and Conditions pursue no plausible material objective other than the restriction of intra-brand competition and so their application was restrictive of competition by its very nature.
  • they sought to prevent retailers in Deckers’s selective distribution system who sell HOKA product in the Main Retail Channel, such as Up & Running, from selling HOKA product at a material discount through the Clearance Channel on clearance websites. That amounted as a matter of law to a restriction of price competition between retailers and an attempt to indirectly fix selling prices under Chapter I Prohibition, which is an established category of by object infringement known as resale price maintenance.
• The VBE did not apply, because Deckers had committed two separate infringements of the Chapter I Prohibition, both of which constitute hardcore restrictions.
• Up & Running has suffered loss as a result of the Chapter I Prohibition infringements.

The Tribunal declined to make an injunction requiring Deckers to supply HOKA product to Up & Running. The question of damages is to be determined in a separate trial.