European Union updates legal framework of online sales

The legal framework of online sales in Europe has been updated and implemented from June in order to protect brand owners, wholesalers and resellers.

Revenue from online sales is crucial to most fashion brands but many grey areas exist concerning laws and regulations.

For most fashion brands, and especially luxury, online sales is curbed by selective distribution, where much control is exerted over the choice of multi-channel partners and marketplaces, making sure the online environment matches the look, feel and prestige of the goods, services and brand. Under the new rules, multi-channel partners can sell goods to customers, but not to third-party resellers or distributors.

From this month, the European Commission adopted tthe new Vertical Block Exemption Regulation (‘VBER') accompanied by the new Vertical Guidelines, following a thorough evaluation and review of the previously published 2010 rules. The revisions provide businesses with simpler, clearer and up-to-date rules and guidance. They will also help them to assess the compatibility of their supply and distribution agreements with EU competition rules in a business environment reshaped by the growth of e-commerce and online sales.

Selective Distribution

The rules explain selective distribution on vertical agreements - a distribution system in which the supplier undertakes to sell the goods or services covered by contract, directly or indirectly, only to distributors selected on the basis of specified criteria and in which these distributors undertake not to sell such goods or services to unauthorized resellers in the territory that the supplier has reserved for this system.

Vertical agreements are agreements between two or more undertakings operating at different levels of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services.

Under the updated rules and guidelines, brands may ban sales on online marketplaces and it is at their discretion to impose qualitative online criteria, even if they are distributed by a third party.

Fashion houses can also set different online and offline prices for distributors or resellers, which allows companies to recoup costs incurred for maintaining a brick and mortar store, for example.

New clarification of restrictions such as prohibiting online advertisement including the use of price comparison tools and online search engines.

In case of selective distribution, luxury houses will benefit from rules ensuring their products may not be sold online unwittingly.

Article sources: European Commission; Mayor Brown legal services