P2B Regulation – How to adapt Platform services and Search Engines

2 August 2020

  • Europe
  • Distribution
  • Alternative Dispute Resolution
  • eCommerce

Summary: Since 12 July 2020, new rules apply for platform service providers and search engine operators – irrespective of whether they are established in the EU or not. The transition period has run out. This article provides checklists for platform service providers and search engine operators on how to adapt their services to the Regulation (EU) 2019/1150 on the promotion of fairness and transparency for commercial users of online intermediation services – the P2B Regulation.

The P2B Regulation applies to platform service providers and search engine operators, wherever established, provided only two conditions are met:

(i) the commercial users (for online intermediation services) or the users with a company website (for online search engines) are established in the EU; and

(ii) the users offer their goods/services to consumers located in the EU for at least part of the transaction.

Accordingly, there is a need for adaption for:

  • Online intermediation services, e.g. online marketplaces, app stores, hotel and other travel booking portals, social media, and
  • Online search engines.

The P2B Regulation applies to platforms in the P2B2C business in the following constellation (i.e. pure B2B platforms are exempt):

Provider -> Business -> Consumer

The article follows up on the introduction to the P2B Regulation here and the detailed analysis of mediation as method of dispute resolution here.

 Checklist how to adapt the general terms and conditions of platform services

Online intermediation services must adapt their general terms and conditions – defined as (i) conditions / provisions that regulate the contractual relationship between the provider of online intermediation services and their business users and (ii) are unilaterally determined by the provider of online intermediation services.

The checklist shows the new main requirements to be observed in the general terms and conditions (“GTC”):

  1. Draft them in plain and intelligible language (Article 3.1 a)
  2. Make them easily available at any time (also before conclusion of contract) (Article 3.1 b)
  3. Inform on reasons for suspension / termination (Article 3.1 c)
  4. Inform on additional sales channels or partner programs (Article 3.1 d)
  5. Inform on the effects of the GTC on the IP rights of users (Article 3.1 e)
  6. Inform on (any!) changes to the GTC on a durable medium, user has the right of termination (Article 3.2)
  7. Inform on main parameters and relative importance in the ranking (incl. possible influence of remuneration), without algorithms or business secrets (Article 5.1, 5.3, 5.5)
  8. Inform on the type of any ancillary goods/services offered and any entitlement/condition that users offer their own goods/services (Article 6)
  9. Inform on possible differentiated treatment of goods / services of the provider or individual users towards other users (Article 7.1, 7.2, 7.3)
  10. No retroactive changes to the GTC (Article 8a)
  11. Inform on conditions under which users can terminate contract (Article 8b)
  12. Inform on available or non-available technical and contractual access to information that the Service maintains after contract termination (Article 8c)
  13. Inform on technical and contractual access or lack thereof for users to any data made available or generated by them or by consumers during the use of services (Article 9)
  14. Inform on reasons for possible restrictions on users to offer their goods/services elsewhere under other conditions (“best price clause”); reasons must also be made easily available to the public (Article 10)
  15. Inform on access to the internal complaint-handling system (Article 11.3)
  16. Indicate at least two mediators for any out-of-court settlement of disputes (Article 12)

These requirements – apart from the clear, understandable language of the GTC, their availability and the fundamental ineffectiveness of retroactive adjustments to the GTC – clearly go beyond what e.g. the already strict German law on general terms and conditions requires.

Checklist how to adapt the design of platform services and search engines

In addition, online intermediation services and online search engines must adapt their design and, among other things, introduce internal complaint-handling. The checklist shows the main design requirements for:

a) Online intermediation services

  1. Make identity of commercial user clearly visible (Article 3.5)
  2. State reasons for suspension / limitation / termination of services (Article 4.1, 4.2)
  3. Explain possible differentiated treatment of goods / services of providers themselves or users in relation to other users (Article 7.1, 7.2, 7.3), see above
  4. Set an internal complaint handling system, with publicly available info, annual updates (Article 11, 4.3)

b) Online search engines

  1. Explain the ranking’s main parameters and their relative importance, public, easily available, always up to date (incl. possible influence of remuneration), without algorithms or trade secrets (Article 5.2, 5.3, 5.5)
  2. If ranking changes or delistings occur due to notification by third parties: offer to inspect such notification (Article 5.4)
  3. Explain possible differentiated treatment of goods / services of providers themselves or users in relation to other users (Article 7.1, 7.2, 7.3)

The European Commission will provide guidelines regarding the ranking rules in Article 5, as announced in the P2B Regulation – see the overview here. At the same time, providers of online intermediation services and online search engines shall draw up codes of conduct together with their users.

Practical Tips

  • The Regulation significantly affects contractual freedom as it obliges platform services to adapt their general terms and conditions.
  • The Regulation is to be enforced by “representative organisations” or associations and public bodies, with the EU Member States ensuring adequate and effective enforcement. The European Commission will monitor the impact of the Regulation in practice and evaluate it for the first time on 13.01.2022 (and every three years thereafter).
  • The P2B Regulation may affect distribution relationships, in particular platforms as distribution intermediaries. Under German distribution law, platforms and other Internet intermediation services acting as authorised distributors may be entitled to a goodwill indemnity at termination (details here) if they disclose their distribution channels on the basis of corresponding platform general terms and conditions, as the Regulation does not require, but at least allows to do (see also: Rohrßen, ZVertriebsR 2019, 341, 344–346). In addition, there are numerous overlaps with antitrust, competition and data protection law.

Summary – What can the owner (or licensee) of a trademark do if an unauthorized third party resells products with its trademark on an online platform? This issue was addressed in the judgment of C-567/18 of 2 April 2020, in which the Court of Justice of the European Union confirmed that platforms (Amazon Marketplace, in this case) storing goods which infringe trademark rights are not liable for such infringement, unless the platform puts them on the market or is aware of the infringement. Conversely, platforms (such as Amazon Retail) that contribute to the distribution or resell the products themselves may be liable.

Background

Coty – a German company, distributor of perfumes, holding a licence for the EU trademark “Davidoff” – noted that third-party sellers were offering on Amazon Marketplace perfumes bearing the “Davidoff Hot Water” brand, which had been put in the EU market without its consent.

After reaching an agreement with one of the sellers, Coty sued Amazon in order to prevent it from storing and shipping those perfumes unless they were placed on the EU market with Coty’s consent. Both the Court of First Instance and the Court of Appeal rejected Coty’s request, which brought an appeal before the German Court of Cassation, which in turn referred the matter to the Court of Justice of the EU.

What is the Exhaustion of the rights conferred by a trademark

The principle of exhaustion is envisaged by EU law, according to which, once a good is put on the EU market, the proprietor of the trademark right on that specific good can no longer limit its use by third parties.

This principle is effective only if the entry of the good (the reference is to the individual product) on the market is done directly by the right holder, or with its consent (e.g. through an operator holding a licence).

On the contrary, if the goods are placed on the market by third parties without the consent of the proprietor, the latter may – by exercising the trademark rights established by art. 9, par. 3 of EU Regulation 2017/1001 – prohibit the use of the trademark for the marketing of the products.

By the legal proceedings which ended before the Court of Justice of the EU, Coty sought to enforce that right also against Amazon, considering it to be a user of the trademark, and therefore liable for its infringement.

What is the role of Amazon?

The solution of the case revolves around the role of the web platform.

Although Amazon provides users with a unique search engine, it hosts two radically different sales channels. Through the Amazon Retail channel, the customer buys products directly from the Amazon company, which operates as a reseller of products previously purchased from third party suppliers.

The Amazon Marketplace, on the other hand, displays products owned by third-party vendors, so purchase agreements are concluded between the end customer and the vendor. Amazon gets a commission on these transactions, while the vendor assumes the responsibility for the sale and can manage the prices of the products independently.

According to the German courts which rejected Coty’s claims in the first and second instance, Amazon Marketplace essentially acts as a depository, without offering the goods for sale or putting them on the market.

Coty, vice versa, argues that Amazon Marketplace, by offering various marketing-services (including: communication with potential customers in order to sell the products; provision of the platform through which customers conclude the contract; and consistent promotion of the products, both on its website and through advertisements on Google), can be considered as a “user” of the trademark, within the meaning of Article 9, paragraph 3 of EU Regulation 2017/1001.

The decision of the Court of Justice of the European Union

Advocate General Campos Sanchez-Bordona, in the opinion delivered on 28 November 2019, had suggested to the Court to distinguish between: the mere depositaries of the goods, not to be considered as “users” of the trademark for the purposes of EU Regulation 2017/1001; and those who – in addition to providing the deposit service – actively participate in the distribution of the goods. These latter, in the light of art. 9, par. 3, letter b) of EU Regulation 2017/1001, should be considered as “users” of the trademark, and therefore directly responsible in case of infringements.

The Bundesgerichtshof (Federal Court of Justice of Germany), however, had already partially answered the question when it referred the matter to the European Court, stating that Amazon Marketplace “merely stored the goods concerned, without offering them for sale or putting them on the market”, both operations carried out solely by the vendor.

The EU Court of Justice ruled the case on the basis of some precedents, in which it had already stated that:

  • The expression “using” involves at the very least, the use of the sign in the commercial communication. A person may thus allow its clients to use signs which are identical or similar to trademarks without itself using those signs (see Google vs Louis Vuitton, Joined Cases C-236/08 to C-238/08, par. 56).
  • With regard to e-commerce platforms, the use of the sign identical or similar to a trademark is made by the sellers, and not by the platform operator (see L’Oréal vs eBay, C‑324/09, par. 103).
  • The service provider who simply performs a technical part of the production process cannot be qualified as a “user” of any signs on the final products. (see Frisdranken vs Red Bull, C‑119/10, par. 30. Frisdranken is an undertaking whose main activity is filling cans, supplied by a third party, already bearing signs similar to Redbull’s registered trademarks).

On the basis of that case-law and the qualification of Amazon Marketplace provided by the referring court, the European Court has ruled that a company which, on behalf of a third party, stores goods which infringe trademark rights, if it is not aware of that infringement and does not offer them for sale or place them on the market, is not making “use” of the trademark and, therefore, is not liable to the proprietor of the rights to that trademark.

Conclusion

After Coty had previously been the subject of a historic ruling on the matter (C-230/16 – link to the Legalmondo previous post), in this case the Court of Justice decision confirmed the status quo, but left the door open for change in the near future.

A few considerations on the judgement, before some practical tips:

  • The Court did not define in positive terms the criteria for assessing whether an online platform performs sufficient activity to be considered as a user of the sign (and therefore liable for any infringement of the registered trademark). This choice is probably dictated by the fact that the criteria laid down could have been applied (including to the various companies belonging to the Amazon group) in a non-homogeneous manner by the various Member States’ national courts, thus jeopardising the uniform application of European law.
  • If the Court of Justice had decided the case the other way around, the ruling would have had a disruptive impact not only on Amazon’s Marketplace, but on all online operators, because it would have made them directly responsible for infringements of IP rights by third parties.
  • If the perfumes in question had been sold through Amazon Retail, there would have been no doubt about Amazon’s responsibility: through this channel, sales are concluded directly between Amazon and the end customer.
  • The Court has not considered whether: (i) Amazon could be held indirectly liable within the meaning of Article 14(1) of EU Directive 2000/31, as a “host” which – although aware of the illegal activity – did not prevent it; (ii) under Article 11 of EU Directive 2004/48, Coty could have acted against Amazon as an intermediary whose services are used by third parties to infringe its IP right. Therefore, it cannot be excluded that Amazon may be held (indirectly) liable for the infringements committed, including on the Marketplace: this aspect will have to be examined in detail on a case-by-case basis.

Practical tips

What can the owner (or licensee) of a trademark do if an unauthorized third party resells products with its trademark on an online platform?

  1. Gather as much evidence as possible of the infringement in progress: the proof of the infringement is one of the most problematic aspects of IP litigation.
  2. Contact a specialized lawyer to send a cease-and-desist letter to the unauthorized seller, ordering the removal of the products from the platform and asking the compensation for damages suffered.
  3. If the products are not removed from the marketplace, the trademark owner might take legal action to obtain the removal of the products and compensation for damages.
  4. In light of the judgment in question, the online platforms not playing an active role in the resale of goods remain not directly responsible for IP violations. Nevertheless, it is suggested to consider sending the cease-and-desist letter to them as well, in order to put more pressure on the unauthorised seller.
  5. The sending of the cease-and-desist letter also to the platform – especially in the event of several infringements – may also be useful to demonstrate its (indirect) liability for lack of vigilance, as seen in point 4) of the above list.

Geoblocking is a discriminatory practice preventing customers (mainly on-line customers) from accessing and/or purchasing products or services from a website located in another member State, because of the nationality of the customer or his place of residence or establishment.

The EU Regulation no. 2018/302 of 28 February 2018 on addressing unjustified geoblocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market will enter into force on 2 December 2018.

The current situation

The EU Commission carried out a “mystery shopping” survey on over 10 000 e-commerce websites in the EU. The geoblocking figures are quite high! 63% of the websites do not let shoppers to buy from another EU country (even 86% for electric household appliances and 79% for electronics and computer hardware).

The survey shows also that 92% of on-line retailers require customers to register on their website and to provide them with e-mail address, physical address and telephone number. The registration is denied most of the time because of a foreign delivery address for 27% of the websites. Almost half of the websites give no information about the place of delivery while shopping on the website although this information on delivery restrictions has to be provided in due time during the shopping process. At the end, according to this EC survey, only 37% of the websites truly allow e-shoppers to freely buy on-line from another EU country (without restriction as regards place of establishment, place of delivery and mean of payment).

On the other side, only 50% of European customers buy products from on-line shops based in another EU member State while the value and the volume of e-commerce, globally speaking increase thoroughly year after year, but only on a domestic scope not throughout Europe.

On 23 June 2017, the European Council asked for a real implementation of the Digital Single Market strategy in all its elements including cross border partial delivery, consumer protection and prohibition of undue geoblocking.

The lack of the current legal frameworks

The service directive (n°2006/123/CE) and article 101 of the TFUE address already the discrimination practices based on nationality or place or residence or establishment.

According to article 20 (2) of the service directive, the EU member States must ensure that professionals do not treat customers differently based on their place of residence or establishment or nationality (unless objective exception). On the other side, EU competition law on vertical restraints (article 101 TFUE and the block exemption regulation and its guidelines) considers restrictions on passive sales as hard core restrictions violating EU competition rules. However, both set of rules (service directive and competition law framework) appear not to be fully effective in practice.

With this respect, the recent report of the European commission about the competition enquiry in the e-commerce sector shows, among others, that geoblocking was used at a large scale within the European e-commerce sector.

The aim of the geoblocking regulation

The goal of the geoblocking regulation is to prevent professionals from implementing direct or indirect discrimination based on the nationality, the place of residence or the place of establishment of their customers when dealing with cross border e-commerce transactions.

The scope of the geoblocking regulations

The new Regulation will only apply to online sales between businesses and end-user consumers or businesses.

The new Regulation will apply to websites operated within the European Union or to websites operated outside the European Union but proposing goods or services to customers established throughout in the European Union.

What are the new rules of management of an e-commerce website?

„As regards the access to the website

Under the Regulation, a business may neither block nor restrict, through the use of technological measures, access to their online interfaces for reasons related to nationality, place of residence or place of establishment of an internet user. However, businesses are authorized to redirect customers to a different website than the one they were trying to access provided the customer expressly agrees thereto and can still easily visit the website version they originally tried to access.

„As regards the terms and conditions of sales of the website

The Regulation forbids businesses from applying different general conditions of access to goods or services according to a customer’s nationality or place of residence or place of establishment (as identified by their IP address in particular) in the following three cases:

  • where the goods sold by the business are delivered in a different member state to which the business offers delivery (or where the goods are collected at a location jointly agreed upon by the business and the customer);
  • where the business offers electronically supplied services such as cloud, data storage, hosting services etc. (but not services offering access to copyright-protected content such as streaming or online-gaming services);
  • where the business supplies services received by the customer in a country in which the business also operates (such as car rental and hotel accommodation services or ticketing services for sporting or cultural events).

„ As regards the means of payment on the website

The Regulation forbids businesses from applying different conditions for payment transactions to accepted means of payment for reasons related to a customer’s nationality, place of residence or place of establishment, or to the location of the payment account or the place of establishment of the payment service provider (provided that authentication requirements are fulfilled and that payment transactions are made in a currency accepted by the business).

What are the impacts of this regulation on e-retailers?

Although formally excluded from the scope of the Regulation, relations between suppliers and distributors or wholesalers will still be impacted by it since provisions of agreements between businesses under which distributors undertake not to make passive sales (e.g., by blocking or restricting access to a website) for reasons related to a customer’s nationality, place of residence or place of establishment “shall be automatically void”.

The geoblocking regulation therefore impacts distributors twofold: first, directly in their relations with customers (end-user consumers or user-businesses), and second, indirectly in regard to their obligations under the exclusive distribution agreement.

The geoblocking regulation shall have to be coordinated with the existing competition law framework, especially the guidelines on vertical restraints which set up specific rules applying to on-line sales. On-line sales are likened to passive sales. The guidelines mention four examples of practices aiming to indirectly guarantee territorial protection which are prohibited when supplier and exclusive distributor agree:

  • that the exclusive distributor shall prevent customers in another territory from visiting their website or shall automatically refer them to the supplier’s or other distributors’ websites,
  • that the exclusive distributor shall terminate an online sale if the purchaser’s credit card data show that the purchaser is not from the exclusive distributor’s exclusive territory,
  • to limit the share of sales made by the exclusive distributor through the internet (but the contract may provide for minimum offline targets in absolute terms and for online sales to remain coherent compared to offline sales).
  • that the exclusive distributor shall pay a higher price for goods intended for sale on the internet than for goods intended for sale offline.

Manufacturers will have to decide whether they adopt a unique European gateway website or multiple local commercial offers, it being known that price differentiation is still possible per category of clients.

Indeed, the new Regulation does not oblige the e-retailers to harmonize their price policies, they must only allow EU consumers to access freely and easily to any version of their website. Likewise, this Regulation does not oblige e-retailers to ship products all over Europe, but just allow EU consumers to purchase goods from whichever website they want and to arrange the shipment themselves, if need be.

Finally on a more contractual level, it is not very clear yet how the new geoblocking rules could impact directly or indirectly the conflict of law rules applicable to consumer contracts, as per the Rome I regulation especially when the consumer will be allowed to handover the product purchased on a foreign website in the country of this website (which imply no specific delivery in the country where the consumer is established).

Therefore B2C general terms and conditions of websites would need to be reviewed and adapted on both marketing and legal sides.

According to the EU E-commerce sector inquiry, over 50% of Internet marketplaces and 36% of retailers supply data-feeds to price search engines such as Idealo, Google Shopping, or Shopzilla. By contrast, around 10% of dealers are subject to price comparison engine bans (see Commission Staff Working Document SWD(2017) 154 final, S. 32 Figure B. 4 and p. 37 European Commission, Final report on the E-commerce Sector Inquiry, p. 10).

However, the Federal Court of Justice recently confirmed a price comparison engine ban as anti-competitive and void. In the concrete case, Asics generally banned retailers in Germany from supporting price search engines in online distribution:

“In addition, the authorized … dealer shall not … support the functionality of price comparison engines by providing application-specific interfaces (“APIs”) for these price comparison engines.”

In addition, the agreement contained an extensive ban on advertising on third-party platforms: Asics prohibited its authorized dealers from allowing third parties to use Asics’ trademarks in any form on the third party’s website to direct customers to the authorised Asics dealer’s website.

Asics’ distribution agreement was first investigated by the German competition authority Bundeskartellamt as a pilot case (another pilot case was started against Adidas because many sports retailers complained about the Internet resale restrictions of sports equipment manufacturers). In 2015, the Bundeskartellamt decided that Asics’ ban on price comparison engines was contrary to antitrust law, as it would infringe Article 101 (1) TFEU, sec. 1 Act against Restraints on Competition. Reason given was that such ban would primarily aim at controlling and limiting price competition at the expense of consumers. This decision was first confirmed by the Higher Regional Court of Düsseldorf (decision of 5 April 2017, case no. VI-Kart 13/15 (V), see the Legalmondo article here).

Now, the decision has been reconfirmed by the Federal Court of Justice (decision of 12 December 2017, case no. KVZ 41/17). This Asics ruling is particularly noteworthy because it is the first German court ruling following the Court of Justice of the European Union’s Coty ruling on platform bans (see the Legalmondo article here). It is therefore a first indication of how the courts will deal with Internet resale restrictions in the future.

Thus, the Federal Court of Justice states that the general ban on price search engines “at least” restricted passive sales to end consumers (para. 23, 25) – such a restriction would even be the intended purpose of such ban. According to the court, the admissibility of general platform bans pursuant to the Coty judgment (see here) would not imply the admissibility of general price comparison bans (para. 28 et seq.). In particular, the “combination of restrictions” – i.e. ban of price comparison engines and advertising on third-party platforms – would make the difference. For it did not ensure that prospective customers got “practically substantial access” to the dealer website (para. 30) – whereby the Federal Supreme Court leaves open what is sufficient or necessary to provide such “substantial access”; in such case, general price comparison engine bans could continue to be permissible.

Practical Tips:

  1. At EU level, neither the Court of Justice nor the European Commission have taken a position on the validity of general bans on price comparison engines. In the United Kingdom, however, the Competition and Markets Authority takes a similarly critical view of price search engine bans (“BMW changes policy on car comparison sites following CMA action“) as German administrative practice and jurisdiction.
  2. In practice, the following differentiation, already indicated by the Higher Regional Court of Düsseldorf (Asics) and the Higher Regional Court of Frankfurt (Deuter), is thus likely to apply according to the Federal Supreme Court:
  • General price comparison engine bans are – according to the Federal Court of Justice – anti-competitive and therefore generally void – although they may still be permissible if they are not combined with a broad advertising ban, so that prospective customers are guaranteed access to the dealer website.
  • Individual price comparison engine bans and other milder restrictions / criteria for the use of price comparison portals are permissible, for example with regard to product illustrations or descriptions and the product environment (such as the requirement that dealers may only offer new products).

Further details: Rohrßen, Internetvertrieb: „Nicht Ideal(o)“ – Kombination aus Preissuchmaschinen-Verbot und Logo-Klausel, in: ZVertriebsR 2018, 118 ff.

  1. Moreover, manufacturers may – within an exclusive distribution network – prohibit their distributors active online advertising to customers reserved to the manufacturer or allocated by the manufacturer to another distributor and specify the languages used. In principle, all other conceivable quality criteria are also permissible, provided that they are equivalent to the criteria for offline distribution (because “the Commission considers any obligations which dissuade appointed dealers from using the internet to reach a greater number and variety of customers by imposing criteria for online sales which are not overall equivalent to the criteria imposed for the sales from the brick and mortar shop as a hardcore restriction”, Guidelines on Vertical Restraints, para. 56).

For more information, see

  • the overview of the current state of practice including model contract clauses: Rohrßen, Vertriebsvorgaben im E-Commerce 2018: Praxisübersichts und Folgen des “Coty”-Urteils des EuGH, in: GRUR-Prax 2018, 39-41 as well as
  • especially on platform bans and the possible drafting of distribution agreements: Rohrßen, Internetvertrieb von Markenartikeln: Zulässigkeit von Plattformverboten nach dem EuGH-Urteil Coty – Auswirkungen auf Fachhändler- bzw. Selektiv-, Exklusiv-, Franchise- und offene Vertriebsverträge –, in: DB 2018. 300-306.
  1. For the permissibility of the use of trademarks and company logos within a search function embedded in an Internet sales platform, see the press release of the Federal Court of Justice on its two very recent decisions of 15.02.2018 (case no. I ZR 138/16 re “Ortlieb” and case no. I ZR 201/16 re “gofit“).

Long expected by manufacturers of brand-name products, brick-and-mortar-distributors, internet retailers and online platform providers as Amazon, eBay, Zalando, the Court of Justice of the European Union (CJEU) just decided yesterday on 6 December 2017 – its “Santa Claus decision” – that manufacturers may lawfully ban sales via third party platforms.

In a previous Legalmondo post we analysed this dispute (“the Coty case”) just resolved by the CJEU. According to its decision, such platform ban is not necessarily an unlawful restriction of competition under article 101 Treaty on the Functioning of the European Union (“TFEU”): The court has confirmed that selective distribution systems for luxury goods, which shall primarily preserve the goods’ luxury image may comply with European antitrust law.

More specifically, the court decided that platforms bans are lawful, namely that EU law allows restricting online sales in

“a contractual clause, such as that at issue in the present case, which prohibits authorised distributors of a selective distribution network of luxury goods designed, primarily, to preserve the luxury image of those goods from using, in a discernible manner, third-party platforms for internet sales of the goods in question, provided that the following conditions are met: (i) that clause has the objective of preserving the luxury image of the goods in question; (ii) it is laid down uniformly and not applied in a discriminatory fashion; and (iii) it is proportionate in the light of the objective pursued. It will be for the Oberlandesgericht to determine whether those conditions are met.”

(cf. the CJEU’s press release No. 132/2017).

This is the intermediary result of the Coty case as it is now up to the Higher Regional Court of Frankfurt to apply these requirements in the Coty case. Simply put, the question in that case is whether owners of luxury brands may generally or at least partially ban the resale via internet on third-party platforms. The Coty case’s history is quite interesting: The luxury perfume manufacturer Coty’s German subsidiary Coty Germany GmbH (“Coty”) set up a selective distribution network and its distributors may sell via the Internet – but banned to sell via third party platforms which are externally visible as such, i.e. Amazon, eBay, Zalando & Co. The court of first instance decided that such ban of sales via third party platforms was an unlawful restriction of competition. The court of second instance, however, did not see the answer that clear. Instead, the court requested the CJEU to give a preliminary ruling on how European antitrust rules have to be interpreted, namely article 101 TFEU and article 4 lit. b and c of the Vertical Block Exemptions Regulation or “VBER” (decision of 19.04.2016, for details, see the previous post “eCommerce: restrictions on distributors in Germany”). On 30 March 2017, the hearing took place before the CJEU. Coty defended its platform ban, arguing it aimed at protecting the luxury image of brands such as Marc Jacobs, Calvin Klein or Chloe. The distributor Parfümerie Akzente GmbH instead argued that established platforms such as Amazon and eBay already sold various brand-name products, e.g. of L’Oréal. Accordingly, there was no reason for Coty to ban the resale via these marketplaces. Another argument brought forward against the platform ban was that online platforms were important for small and medium-sized enterprises. Indications on how the court could decide appeared on 26 July 2017, with the Advocate General giving his opinion, concluding that platform bans appear possible, provided that the platform ban depends “on the nature of the product, whether it is determined in a uniform fashion and applied without distinction and whether it goes beyond what is necessary” (see the previous post “Distribution online – Platform bans in selective distribution (The Coty case continues)”).

 

Practical Conclusions:

  1. This “Santa Claus decision” of 6 December 2017 is highly important for all manufacturers of brand-name products, brick-and-mortar-distributors, internet retailers and online platform providers – because it clarifies that manufacturers of brand-name products may ban sales via third party platforms (Amazon, eBay, Zalando and Co.) to ensure the same level of quality of distribution throughout all distribution channels, offline and online.
  2. As a glimpse back in advance: the district court of Amsterdam already on 4 October 2017 decided that Nike’s ban on its selective distributors not to use online platforms as Amazon was a lawful distribution criterion to safeguard Nike’s luxury brand image (case of Nike European Operations Netherlands B.V. vs. the Italy-based retailer Action Sport Soc. Coop, A.R.L., ref. no. C/13/615474 / HA ZA 16-959). More details soon!
  3. The general ban to use price comparison tools as stipulated by the sporting goods manufacturer Asics in its “Distribution System 1.0“ shall be anti-competitive – according to the Bundeskartellamt, as confirmed by the Higher Regional Court of Düsseldorf on 5 April 2017. The last word is, however, still far from being said – see the post “Ban of Price Comparison Tools anti-competitive & void?”. It will be interesting to see how the Coty case’s outcome will influence how to see such bans on price comparison tools.
  4. For further trends in distribution online, see the EU Commission’s Final report on the E-commerce Sector Inquiry and details in the Staff Working Document, „Final report on the E-commerce Sector Inquiry“.
  5. For details on distribution networks and distribution online, please see my articles

 

The Coty case is extremely relevant to distribution in Europe because more than 70% of the world’s luxury items are sold here, many of them online now. For further implications on existing and future distribution networks and the respective agreements, stay tuned: we will elaborate this argument on Legalmondo!

In this post we will briefly outline some legal aspects related to e-commerce in Iran, starting from the definition of the average Iranian user and main characteristics and advantages of e-commerce in the Islamic Republic, which is attracting several foreign investors.

We will then analyze the requirements for the issuance of online business licenses in Iran, which is mandatory in order to open an e-shop. Finally we will take a look at some successful examples of online business in Iran.

The average Iranian user

Some statistics regarding Iranian users active in the virtual space are useful for understanding the size of the Iranian market, and why it is attracting several investors.

According to the “Internet Data and Statistics”, Iran is the thirteenth country for number of internet users, as 57 million of Iranian (on 83 million of Iran’s population) have access to internet (approximately the 68% of the population), but Government sources believe these numbers are  underestimated.

What matters for the purpose of this analysis, however, is that approximatively the 58% of the internet users search on the Internet is about information on goods and services and that – until the end of Azar 1394 (December 2015) – the average internet users are male (58%) and young (47% between 20 and 29 years old).

In addition, the 42% of the Iranian internet users are involved in electronic commerce and the 13% use the e-banking services.

Online Business Licenses in Iran

Whether carried out in the traditional way or electronically, all the businesses need a business-license to operate on the Iranian market. The most important law governing  is the Union System Act 1971, amended in 1980, 2003 and in 2013, which provides that the business license is issued by the competent union or legal authority.

E-commerce is no exception, therefore all those who intend to sell goods or provide services using the virtual space must acquire a business license.

On February 19th, 2017 the Iranian Government issued an Executive Regulation in regard to the Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, dividing the activities in virtual space into two categories:

  1. Virtual Business;
  2. Network Marketing.

According to Paragraph 1 in Article 1, Virtual Business is a business established by any natural or legal person in order to provide products (goods or services) directly or indirectly on a wholesale or retail basis, to wholesalers, retailers and consumers through telecommunication means such as websites and digital software (applications).

According to Paragraph 2 of Article 1, Network Marketing is a method for selling products based on which the Network Marketing company uses its website to organize the sellers in order to sell their products directly to consumers in a place far from the regular business location. Through this method, each seller can introduce another marketer as it subset and create a multi-product sales group in order to increase sales.

The competent authority for issuance of licenses in this regard is the National Union. Therefore, any person who intends to acquire a license in order to have its activities carried out online, must apply on the website of Center for Development of Electronic Commerce (an organ of the Ministry of Industry, Mine and Commerce, hereinafter: “CDEC” – www.enamad.ir) in order to acquire the Reliance Symbol, which is a symbol necessary to certify the identity and competence of online activities.

Requirements for the Online Business License

Article 3  of the Executive Regulation on Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, which governs the Issuance of Online Business Licenses in Iran, provides that business licenses shall be issued according to the following procedure:

  1. Establishment of the virtual business conforming to the checklists provided by the CDEC.
  2. Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
  3. Upload of the required documents, which we will list below.
  4. Issuance and submission of the license (after verifying the uploaded documents and the original copies thereof) to the applicant within 15 days and submission of the license information to E-Namad website.
  5. Grant of Electronic Reliance Symbol concurrent with issuance of the license.

Furthermore, the said Regulation specifies the required documents for issuance of business license, as follows:

  1. Office or legal domicile address of the applicant;
  2. Negative criminal record from the Police;
  3. Certificate of the relevant Tax Organization regarding tax compliance;
  4. Certificate for attendance in educational courses of commerce and business;
  5. Confirmation of specialized features regarding virtual business issued by the CDED;
  6. Photocopy of ID-card/Company-Registration number, plus passport/work-permit for foreigners;
  7. Photocopy of Military Service Termination Card or Permanent or Medical Exemption Card for men under 50 or a Student Certificate.

In addition to those, the Regulation provides some other documents for particular sectors, so it is advisable to contact an Iranian expert in the matter to verify the compliance with all applicable regulations. For instance, the Cultural Heritage, Handicrafts and Tourism Organization of Iran has set out some specific criteria for travel and tourism activities in the virtual space, so travel agency services, accommodation centers, private entities and other tourism services must follow a special procedure to render their services on virtual space.

Successful Examples of Iranian Start-ups

In order to become familiar with this sector, hereinafter we would like to report some inspirational examples of investments.

  1. Snapp

Snapp is an Iranian ride hailing company which renders its services online. The Snapp application automatically connects the users to the nearest driver and shows the driver the user’s location. Afterwards, the nearest ready driver will pick up the users from their location, and Snapp calculates the price beforehand. This price is normally lower than the Taxi Agency Unions prices and can be received either in cash or via online payment or credit card.

  1. Digikala

Digikala is the name of one of the biggest e-marketplaces in Iran. Cellphones, laptops and computers, digital cameras, office appliances, automobiles, watches, home appliances, instruments, jewelry, toys, clothes and books are some of the items sold on this website. One of the features of this website is the detailed and comprehensive reviews of different types of digital goods which can be a reliable source for purchasers.

  1. Pintapin

Pintapin is a comprehensive tool for rendering travel services online. Accommodation services are listed in Pintapin and users can book online their desired location. It is also possible to submit the information regarding your destination, duration of stay and number of companions in order to receive suitable suggestions from Pintapin.

  1. Bamilo

Bamilo is probably the most important Marketplace businesses in Iran. It started its activity in 2014 and is now among the most viewed websites in Iran. Based on the Amazon-model, the online store is considered as the main Iranian middleman between suppliers and consumers.

  1. Eskano

Eskano is a smart system for searching real estate in Iran which is performed under international standards. With its huge database of transferable real estates divided between several Iranian cities, Eskano facilitates the sale and lease process, also with the possibility of setting up appointments directly through the website.

The author of this post is Mohammad Rahmani.

The Court of Justice of the European Union (“CJEU”) has issued a new ruling on the international scope of the Commercial Agency Directive (86/653/EEC of 18 December 1986). The new decision is in line with the rulings of

  1. the CJEU in the Ingmar case (decision of 9 November 2000, C-381/98, goodwill indemnity mandatory where the agent acts within the EU) and Unamar (decision of 17 October 2013, C-184/12, as to whether national agency law is mandatory where exceeding the Commercial Agency Directive’s minimum protection) and
  2. the German Federal Supreme Court of 5 September 2012 (German agency law as mandatory law vis-à-vis suppliers in third countries with choice-of-court clause).

The question

Now, the CJEU had to decide whether a commercial agent acting in Turkey for a supplier based in Belgium could claim goodwill indemnity on the basis of the Commercial Agency Directive. More specifically, the question was whether the territorial scope of the Commercial Agency Directive was given where the commercial agent acts in a third country and the supplier within the EU – hence opposite to the Ingmar case.

The facts

According to the agency contract, Belgian law applied and the courts in Gent (Belgium) should be competent. Belgian law, transposing the Commercial Agency Directive, provides for a goodwill indemnity claim at termination of the contract (and, additionally, compensation for damages). However, the referring court considered that the Belgian Law on Commercial Agents of 1995 was self-restraining and would apply, in accordance with its Art. 27, only if the commercial agent acted in Belgium. Otherwise, general Belgian law would apply.

The decision

The CJEU decided that the parties may derogate from the Commercial Agency Directive if the agent acts in a third country (i.e. outside the EU). This has here been the case since the agent acted in Turkey.

The decision is particularly noteworthy because it – rather by the way – continues the CJEU’s Ingmar ruling under the Rome I Regulation (I.). In addition, it indirectly confirms sec. 92c of the German Commercial Code (II.) – which allows the parties to a commercial agent agreement governed by German law to deviate from the generally mandatory agency law if the commercial agent is acting outside the European Economic Area (“EEA”). Finally, it provides legal certainty for distribution outside the EEA and illustrates what may change after a Brexit as regards commercial agents acting in the United Kingdom (III.) – if the EU and the United Kingdom do not set up intertemporal arrangements for transition.

For details, please see the article by Benedikt Rohrßen, Zeitschrift für Vertriebsrecht 2017, 186 et seq. (“Ingmar reloaded – Handelsvertreter-Ausgleich bei umgekehrter Ingmar-Konstellation nicht international zwingend”).

Manufacturers of brand-name products typically aim to ensure the same level of quality of distribution throughout all distribution channels, offline and online. To achieve this aim, they provide criteria how to resell their products. With the increase of internet sales, the use of such criteria has been increasing as well.

A total ban of online sales to end consumers within the EU is, however, hardly valid because online sales are considered as passive sales (cf. Guidelines on Vertical Restraints 2010, para. 52). Restrictions below a total ban are, however, commonplace (for examples, see the post “eCommerce: restrictions on distributors in Germany”). Yet, it is still not clear how far such restrictions are permissible.

For example, the luxury perfume manufacturer Coty’s German subsidiary Coty Germany GmbH has set up a selective distribution network and its distributors may sell via the Internet, under the following conditions. They shall

  • use their internet store as “electronic store window” of their brick and mortar store(s), thereby maintaining the products’ character as luxury goods, and
  • abstain insofar from engaging third parties as such cooperation is externally visible.

The court of first instance decided that tsuch ban of sales via third party platforms was an unlawful restriction of competition under art. 101 Treaty on the Functioning of the European Union (“TFEU”), namely a hardcore restriction under article 4 lit. c Regulation (EU) No. 330/2010 (Vertical Block Exemptions Regulation or “VBER”). The court of second instance, however, does obviously not see the answer that clear. Instead, the court requested the Court of Justice of the European Union (CJEU) to give a preliminary ruling on how European antitrust rules have to be interpreted, namely article 101 TFEU and article 4 lit. b and c VBER (decision of 19.04.2016, ref. no. 11 U 96/14 [Kart]) – see the previous post “eCommerce: restrictions on distributors in Germany”.

On 30 March 2017, the hearing took place before the CJEU:

  • Coty defended its platform ban, arguing it aimed at protecting the luxury image of brands such as Marc Jacobs, Calvin Klein or Chloe.
  • France – seat of several luxury brands such as Louis Vuitton, Chanel and Christian Dior –supported Coty.
  • The distributor instead argued that established platforms such as Amazon and eBay already sold various brand-name products, e.g. of L’Oréal. Accordingly, there was no reason for Coty to ban the resale via these marketplaces. Germany also supported this view by emphasizing the importance of online platforms for small and medium-sized enterprises (where, however, the share of distributors using online marketplaces is 62% much higher than in all other Member States, see the Staff Working Document, „Final report on the E-commerce Sector Inquiry“, para. 452).
  • Luxembourg – the seat of Amazon – considers a general platform ban to be disproportionate and therefore as anti-competitive (cf. Reuters’ article here).

Interest in the outcome of the Coty case is widespread, as the active participation of the various EU Member States illustrates (in addition to the abovementioned countries, also Italy, Sweden, the Netherlands and Austria). Simply put, the question is whether owners of luxury brands may generally or at least partially ban the resale via internet on third-party platforms.

Indications on how the court may decide have just appeared on 26 July 2017, with the Advocate General giving his opinion. The Advocate General proposes that the CJEU answers the questions referred to the court as follows:

“(1) Selective distribution systems relating to the distribution of luxury and prestige products and mainly intended to preserve the ‘luxury image’ of those products are an aspect of competition which is compatible with Article 101(1) TFEU provided that resellers are chosen on the basis of objective criteria of a qualitative nature which are determined uniformly for all and applied in a non-discriminatory manner for all potential resellers, that the nature of the product in question, including the prestige image, requires selective distribution in order to preserve the quality of the product and to ensure that it is correctly used, and that the criteria established do not go beyond what is necessary.

(2) In order to determine whether a contractual clause incorporating a prohibition on authorised distributors of a distribution network making use in a discernible manner of third-party platforms for online sales is compatible with Article 101(1) TFEU, it is for the referring court to examine whether that contractual clause is dependent on the nature of the product, whether it is determined in a uniform fashion and applied without distinction and whether it goes beyond what is necessary.

(3 The prohibition imposed on the members of a selective distribution system who operate as retailers on the market from making use in a discernible manner of third undertakings for internet sales does not constitute a restriction of the retailer’s customers within the meaning of Article 4(b) of Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) on the Treaty of the Functioning of the European Union to categories of vertical agreements and concerted practices.

(4) The prohibition imposed on the members of a selective distribution system, who operate as retailers on the market, from making use in a discernible manner of third undertakings for internet sales does not constitute a restriction of passive sales to end users within the meaning of Article 4(c) of Regulation No 330/2010.”

The Advocate General’s complete opinion can be found at CJEU’s website here.

The updated overview of the procedure can be found at CJEU’s website here.

Practical Conclusions

  1. The Coty case is extremely relevant to distribution in Europe because more than 70% of the world’s luxury items are sold here, many of them online now.
  2. The general ban to use price comparison tools shall be anti-competitive – according to the Bundeskartellamt, as confirmed by the Higher Regional Court of Düsseldorf on 5 April 2017. The last word is, however, still far from being said – see the post “Asics’ Distribution of Sporting Goods: Ban of Price Comparison Tools anti-competitive & void?!?”. Besides, also the Coty case’s outcome may influence how to see such bans.
  3. The Coty case is setting the course for future Internet sales. Depending on the decision of the CJEU, manufacturers of luxury or brand-name products can continue to ban the use of marketplaces like Amazon or eBay for the distribution of their products – or not any more or only under certain conditions. If the court follows the Advocate General’s conclusions, such platform bans appear possible, provided that the platform ban depends “on the nature of the product, whether it is determined in a uniform fashion and applied without distinction and whether it goes beyond what is necessary” (see above).
  4. For further trends in distribution online, see the EU Commission’s Final report on the E-commerce Sector Inquiry and details in the Staff Working Document, „Final report on the E-commerce Sector Inquiry“.
  5. For details on distribution networks and antitrust, please see my article „Plattformverbote im Selektivvertrieb – der EuGH-Vorlagebeschluss des OLG Frankfurt vom 19.4.2016“, in: Zeitschrift für Vertriebsrecht 2016, p. 278–283.

Benedikt Rohrssen

Practice areas

  • Agency
  • Distribution
  • e-commerce
  • Franchising
  • Investments
Contact Benedikt

Contact Benedikt





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    When is Amazon liable for trademark infringements on its Marketplace?

    7 April 2020

    • Europe
    • Italy
    • eCommerce
    • Intellectual property

    Summary: Since 12 July 2020, new rules apply for platform service providers and search engine operators – irrespective of whether they are established in the EU or not. The transition period has run out. This article provides checklists for platform service providers and search engine operators on how to adapt their services to the Regulation (EU) 2019/1150 on the promotion of fairness and transparency for commercial users of online intermediation services – the P2B Regulation.

    The P2B Regulation applies to platform service providers and search engine operators, wherever established, provided only two conditions are met:

    (i) the commercial users (for online intermediation services) or the users with a company website (for online search engines) are established in the EU; and

    (ii) the users offer their goods/services to consumers located in the EU for at least part of the transaction.

    Accordingly, there is a need for adaption for:

    • Online intermediation services, e.g. online marketplaces, app stores, hotel and other travel booking portals, social media, and
    • Online search engines.

    The P2B Regulation applies to platforms in the P2B2C business in the following constellation (i.e. pure B2B platforms are exempt):

    Provider -> Business -> Consumer

    The article follows up on the introduction to the P2B Regulation here and the detailed analysis of mediation as method of dispute resolution here.

     Checklist how to adapt the general terms and conditions of platform services

    Online intermediation services must adapt their general terms and conditions – defined as (i) conditions / provisions that regulate the contractual relationship between the provider of online intermediation services and their business users and (ii) are unilaterally determined by the provider of online intermediation services.

    The checklist shows the new main requirements to be observed in the general terms and conditions (“GTC”):

    1. Draft them in plain and intelligible language (Article 3.1 a)
    2. Make them easily available at any time (also before conclusion of contract) (Article 3.1 b)
    3. Inform on reasons for suspension / termination (Article 3.1 c)
    4. Inform on additional sales channels or partner programs (Article 3.1 d)
    5. Inform on the effects of the GTC on the IP rights of users (Article 3.1 e)
    6. Inform on (any!) changes to the GTC on a durable medium, user has the right of termination (Article 3.2)
    7. Inform on main parameters and relative importance in the ranking (incl. possible influence of remuneration), without algorithms or business secrets (Article 5.1, 5.3, 5.5)
    8. Inform on the type of any ancillary goods/services offered and any entitlement/condition that users offer their own goods/services (Article 6)
    9. Inform on possible differentiated treatment of goods / services of the provider or individual users towards other users (Article 7.1, 7.2, 7.3)
    10. No retroactive changes to the GTC (Article 8a)
    11. Inform on conditions under which users can terminate contract (Article 8b)
    12. Inform on available or non-available technical and contractual access to information that the Service maintains after contract termination (Article 8c)
    13. Inform on technical and contractual access or lack thereof for users to any data made available or generated by them or by consumers during the use of services (Article 9)
    14. Inform on reasons for possible restrictions on users to offer their goods/services elsewhere under other conditions (“best price clause”); reasons must also be made easily available to the public (Article 10)
    15. Inform on access to the internal complaint-handling system (Article 11.3)
    16. Indicate at least two mediators for any out-of-court settlement of disputes (Article 12)

    These requirements – apart from the clear, understandable language of the GTC, their availability and the fundamental ineffectiveness of retroactive adjustments to the GTC – clearly go beyond what e.g. the already strict German law on general terms and conditions requires.

    Checklist how to adapt the design of platform services and search engines

    In addition, online intermediation services and online search engines must adapt their design and, among other things, introduce internal complaint-handling. The checklist shows the main design requirements for:

    a) Online intermediation services

    1. Make identity of commercial user clearly visible (Article 3.5)
    2. State reasons for suspension / limitation / termination of services (Article 4.1, 4.2)
    3. Explain possible differentiated treatment of goods / services of providers themselves or users in relation to other users (Article 7.1, 7.2, 7.3), see above
    4. Set an internal complaint handling system, with publicly available info, annual updates (Article 11, 4.3)

    b) Online search engines

    1. Explain the ranking’s main parameters and their relative importance, public, easily available, always up to date (incl. possible influence of remuneration), without algorithms or trade secrets (Article 5.2, 5.3, 5.5)
    2. If ranking changes or delistings occur due to notification by third parties: offer to inspect such notification (Article 5.4)
    3. Explain possible differentiated treatment of goods / services of providers themselves or users in relation to other users (Article 7.1, 7.2, 7.3)

    The European Commission will provide guidelines regarding the ranking rules in Article 5, as announced in the P2B Regulation – see the overview here. At the same time, providers of online intermediation services and online search engines shall draw up codes of conduct together with their users.

    Practical Tips

    • The Regulation significantly affects contractual freedom as it obliges platform services to adapt their general terms and conditions.
    • The Regulation is to be enforced by “representative organisations” or associations and public bodies, with the EU Member States ensuring adequate and effective enforcement. The European Commission will monitor the impact of the Regulation in practice and evaluate it for the first time on 13.01.2022 (and every three years thereafter).
    • The P2B Regulation may affect distribution relationships, in particular platforms as distribution intermediaries. Under German distribution law, platforms and other Internet intermediation services acting as authorised distributors may be entitled to a goodwill indemnity at termination (details here) if they disclose their distribution channels on the basis of corresponding platform general terms and conditions, as the Regulation does not require, but at least allows to do (see also: Rohrßen, ZVertriebsR 2019, 341, 344–346). In addition, there are numerous overlaps with antitrust, competition and data protection law.

    Summary – What can the owner (or licensee) of a trademark do if an unauthorized third party resells products with its trademark on an online platform? This issue was addressed in the judgment of C-567/18 of 2 April 2020, in which the Court of Justice of the European Union confirmed that platforms (Amazon Marketplace, in this case) storing goods which infringe trademark rights are not liable for such infringement, unless the platform puts them on the market or is aware of the infringement. Conversely, platforms (such as Amazon Retail) that contribute to the distribution or resell the products themselves may be liable.

    Background

    Coty – a German company, distributor of perfumes, holding a licence for the EU trademark “Davidoff” – noted that third-party sellers were offering on Amazon Marketplace perfumes bearing the “Davidoff Hot Water” brand, which had been put in the EU market without its consent.

    After reaching an agreement with one of the sellers, Coty sued Amazon in order to prevent it from storing and shipping those perfumes unless they were placed on the EU market with Coty’s consent. Both the Court of First Instance and the Court of Appeal rejected Coty’s request, which brought an appeal before the German Court of Cassation, which in turn referred the matter to the Court of Justice of the EU.

    What is the Exhaustion of the rights conferred by a trademark

    The principle of exhaustion is envisaged by EU law, according to which, once a good is put on the EU market, the proprietor of the trademark right on that specific good can no longer limit its use by third parties.

    This principle is effective only if the entry of the good (the reference is to the individual product) on the market is done directly by the right holder, or with its consent (e.g. through an operator holding a licence).

    On the contrary, if the goods are placed on the market by third parties without the consent of the proprietor, the latter may – by exercising the trademark rights established by art. 9, par. 3 of EU Regulation 2017/1001 – prohibit the use of the trademark for the marketing of the products.

    By the legal proceedings which ended before the Court of Justice of the EU, Coty sought to enforce that right also against Amazon, considering it to be a user of the trademark, and therefore liable for its infringement.

    What is the role of Amazon?

    The solution of the case revolves around the role of the web platform.

    Although Amazon provides users with a unique search engine, it hosts two radically different sales channels. Through the Amazon Retail channel, the customer buys products directly from the Amazon company, which operates as a reseller of products previously purchased from third party suppliers.

    The Amazon Marketplace, on the other hand, displays products owned by third-party vendors, so purchase agreements are concluded between the end customer and the vendor. Amazon gets a commission on these transactions, while the vendor assumes the responsibility for the sale and can manage the prices of the products independently.

    According to the German courts which rejected Coty’s claims in the first and second instance, Amazon Marketplace essentially acts as a depository, without offering the goods for sale or putting them on the market.

    Coty, vice versa, argues that Amazon Marketplace, by offering various marketing-services (including: communication with potential customers in order to sell the products; provision of the platform through which customers conclude the contract; and consistent promotion of the products, both on its website and through advertisements on Google), can be considered as a “user” of the trademark, within the meaning of Article 9, paragraph 3 of EU Regulation 2017/1001.

    The decision of the Court of Justice of the European Union

    Advocate General Campos Sanchez-Bordona, in the opinion delivered on 28 November 2019, had suggested to the Court to distinguish between: the mere depositaries of the goods, not to be considered as “users” of the trademark for the purposes of EU Regulation 2017/1001; and those who – in addition to providing the deposit service – actively participate in the distribution of the goods. These latter, in the light of art. 9, par. 3, letter b) of EU Regulation 2017/1001, should be considered as “users” of the trademark, and therefore directly responsible in case of infringements.

    The Bundesgerichtshof (Federal Court of Justice of Germany), however, had already partially answered the question when it referred the matter to the European Court, stating that Amazon Marketplace “merely stored the goods concerned, without offering them for sale or putting them on the market”, both operations carried out solely by the vendor.

    The EU Court of Justice ruled the case on the basis of some precedents, in which it had already stated that:

    • The expression “using” involves at the very least, the use of the sign in the commercial communication. A person may thus allow its clients to use signs which are identical or similar to trademarks without itself using those signs (see Google vs Louis Vuitton, Joined Cases C-236/08 to C-238/08, par. 56).
    • With regard to e-commerce platforms, the use of the sign identical or similar to a trademark is made by the sellers, and not by the platform operator (see L’Oréal vs eBay, C‑324/09, par. 103).
    • The service provider who simply performs a technical part of the production process cannot be qualified as a “user” of any signs on the final products. (see Frisdranken vs Red Bull, C‑119/10, par. 30. Frisdranken is an undertaking whose main activity is filling cans, supplied by a third party, already bearing signs similar to Redbull’s registered trademarks).

    On the basis of that case-law and the qualification of Amazon Marketplace provided by the referring court, the European Court has ruled that a company which, on behalf of a third party, stores goods which infringe trademark rights, if it is not aware of that infringement and does not offer them for sale or place them on the market, is not making “use” of the trademark and, therefore, is not liable to the proprietor of the rights to that trademark.

    Conclusion

    After Coty had previously been the subject of a historic ruling on the matter (C-230/16 – link to the Legalmondo previous post), in this case the Court of Justice decision confirmed the status quo, but left the door open for change in the near future.

    A few considerations on the judgement, before some practical tips:

    • The Court did not define in positive terms the criteria for assessing whether an online platform performs sufficient activity to be considered as a user of the sign (and therefore liable for any infringement of the registered trademark). This choice is probably dictated by the fact that the criteria laid down could have been applied (including to the various companies belonging to the Amazon group) in a non-homogeneous manner by the various Member States’ national courts, thus jeopardising the uniform application of European law.
    • If the Court of Justice had decided the case the other way around, the ruling would have had a disruptive impact not only on Amazon’s Marketplace, but on all online operators, because it would have made them directly responsible for infringements of IP rights by third parties.
    • If the perfumes in question had been sold through Amazon Retail, there would have been no doubt about Amazon’s responsibility: through this channel, sales are concluded directly between Amazon and the end customer.
    • The Court has not considered whether: (i) Amazon could be held indirectly liable within the meaning of Article 14(1) of EU Directive 2000/31, as a “host” which – although aware of the illegal activity – did not prevent it; (ii) under Article 11 of EU Directive 2004/48, Coty could have acted against Amazon as an intermediary whose services are used by third parties to infringe its IP right. Therefore, it cannot be excluded that Amazon may be held (indirectly) liable for the infringements committed, including on the Marketplace: this aspect will have to be examined in detail on a case-by-case basis.

    Practical tips

    What can the owner (or licensee) of a trademark do if an unauthorized third party resells products with its trademark on an online platform?

    1. Gather as much evidence as possible of the infringement in progress: the proof of the infringement is one of the most problematic aspects of IP litigation.
    2. Contact a specialized lawyer to send a cease-and-desist letter to the unauthorized seller, ordering the removal of the products from the platform and asking the compensation for damages suffered.
    3. If the products are not removed from the marketplace, the trademark owner might take legal action to obtain the removal of the products and compensation for damages.
    4. In light of the judgment in question, the online platforms not playing an active role in the resale of goods remain not directly responsible for IP violations. Nevertheless, it is suggested to consider sending the cease-and-desist letter to them as well, in order to put more pressure on the unauthorised seller.
    5. The sending of the cease-and-desist letter also to the platform – especially in the event of several infringements – may also be useful to demonstrate its (indirect) liability for lack of vigilance, as seen in point 4) of the above list.

    Geoblocking is a discriminatory practice preventing customers (mainly on-line customers) from accessing and/or purchasing products or services from a website located in another member State, because of the nationality of the customer or his place of residence or establishment.

    The EU Regulation no. 2018/302 of 28 February 2018 on addressing unjustified geoblocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market will enter into force on 2 December 2018.

    The current situation

    The EU Commission carried out a “mystery shopping” survey on over 10 000 e-commerce websites in the EU. The geoblocking figures are quite high! 63% of the websites do not let shoppers to buy from another EU country (even 86% for electric household appliances and 79% for electronics and computer hardware).

    The survey shows also that 92% of on-line retailers require customers to register on their website and to provide them with e-mail address, physical address and telephone number. The registration is denied most of the time because of a foreign delivery address for 27% of the websites. Almost half of the websites give no information about the place of delivery while shopping on the website although this information on delivery restrictions has to be provided in due time during the shopping process. At the end, according to this EC survey, only 37% of the websites truly allow e-shoppers to freely buy on-line from another EU country (without restriction as regards place of establishment, place of delivery and mean of payment).

    On the other side, only 50% of European customers buy products from on-line shops based in another EU member State while the value and the volume of e-commerce, globally speaking increase thoroughly year after year, but only on a domestic scope not throughout Europe.

    On 23 June 2017, the European Council asked for a real implementation of the Digital Single Market strategy in all its elements including cross border partial delivery, consumer protection and prohibition of undue geoblocking.

    The lack of the current legal frameworks

    The service directive (n°2006/123/CE) and article 101 of the TFUE address already the discrimination practices based on nationality or place or residence or establishment.

    According to article 20 (2) of the service directive, the EU member States must ensure that professionals do not treat customers differently based on their place of residence or establishment or nationality (unless objective exception). On the other side, EU competition law on vertical restraints (article 101 TFUE and the block exemption regulation and its guidelines) considers restrictions on passive sales as hard core restrictions violating EU competition rules. However, both set of rules (service directive and competition law framework) appear not to be fully effective in practice.

    With this respect, the recent report of the European commission about the competition enquiry in the e-commerce sector shows, among others, that geoblocking was used at a large scale within the European e-commerce sector.

    The aim of the geoblocking regulation

    The goal of the geoblocking regulation is to prevent professionals from implementing direct or indirect discrimination based on the nationality, the place of residence or the place of establishment of their customers when dealing with cross border e-commerce transactions.

    The scope of the geoblocking regulations

    The new Regulation will only apply to online sales between businesses and end-user consumers or businesses.

    The new Regulation will apply to websites operated within the European Union or to websites operated outside the European Union but proposing goods or services to customers established throughout in the European Union.

    What are the new rules of management of an e-commerce website?

    „As regards the access to the website

    Under the Regulation, a business may neither block nor restrict, through the use of technological measures, access to their online interfaces for reasons related to nationality, place of residence or place of establishment of an internet user. However, businesses are authorized to redirect customers to a different website than the one they were trying to access provided the customer expressly agrees thereto and can still easily visit the website version they originally tried to access.

    „As regards the terms and conditions of sales of the website

    The Regulation forbids businesses from applying different general conditions of access to goods or services according to a customer’s nationality or place of residence or place of establishment (as identified by their IP address in particular) in the following three cases:

    • where the goods sold by the business are delivered in a different member state to which the business offers delivery (or where the goods are collected at a location jointly agreed upon by the business and the customer);
    • where the business offers electronically supplied services such as cloud, data storage, hosting services etc. (but not services offering access to copyright-protected content such as streaming or online-gaming services);
    • where the business supplies services received by the customer in a country in which the business also operates (such as car rental and hotel accommodation services or ticketing services for sporting or cultural events).

    „ As regards the means of payment on the website

    The Regulation forbids businesses from applying different conditions for payment transactions to accepted means of payment for reasons related to a customer’s nationality, place of residence or place of establishment, or to the location of the payment account or the place of establishment of the payment service provider (provided that authentication requirements are fulfilled and that payment transactions are made in a currency accepted by the business).

    What are the impacts of this regulation on e-retailers?

    Although formally excluded from the scope of the Regulation, relations between suppliers and distributors or wholesalers will still be impacted by it since provisions of agreements between businesses under which distributors undertake not to make passive sales (e.g., by blocking or restricting access to a website) for reasons related to a customer’s nationality, place of residence or place of establishment “shall be automatically void”.

    The geoblocking regulation therefore impacts distributors twofold: first, directly in their relations with customers (end-user consumers or user-businesses), and second, indirectly in regard to their obligations under the exclusive distribution agreement.

    The geoblocking regulation shall have to be coordinated with the existing competition law framework, especially the guidelines on vertical restraints which set up specific rules applying to on-line sales. On-line sales are likened to passive sales. The guidelines mention four examples of practices aiming to indirectly guarantee territorial protection which are prohibited when supplier and exclusive distributor agree:

    • that the exclusive distributor shall prevent customers in another territory from visiting their website or shall automatically refer them to the supplier’s or other distributors’ websites,
    • that the exclusive distributor shall terminate an online sale if the purchaser’s credit card data show that the purchaser is not from the exclusive distributor’s exclusive territory,
    • to limit the share of sales made by the exclusive distributor through the internet (but the contract may provide for minimum offline targets in absolute terms and for online sales to remain coherent compared to offline sales).
    • that the exclusive distributor shall pay a higher price for goods intended for sale on the internet than for goods intended for sale offline.

    Manufacturers will have to decide whether they adopt a unique European gateway website or multiple local commercial offers, it being known that price differentiation is still possible per category of clients.

    Indeed, the new Regulation does not oblige the e-retailers to harmonize their price policies, they must only allow EU consumers to access freely and easily to any version of their website. Likewise, this Regulation does not oblige e-retailers to ship products all over Europe, but just allow EU consumers to purchase goods from whichever website they want and to arrange the shipment themselves, if need be.

    Finally on a more contractual level, it is not very clear yet how the new geoblocking rules could impact directly or indirectly the conflict of law rules applicable to consumer contracts, as per the Rome I regulation especially when the consumer will be allowed to handover the product purchased on a foreign website in the country of this website (which imply no specific delivery in the country where the consumer is established).

    Therefore B2C general terms and conditions of websites would need to be reviewed and adapted on both marketing and legal sides.

    According to the EU E-commerce sector inquiry, over 50% of Internet marketplaces and 36% of retailers supply data-feeds to price search engines such as Idealo, Google Shopping, or Shopzilla. By contrast, around 10% of dealers are subject to price comparison engine bans (see Commission Staff Working Document SWD(2017) 154 final, S. 32 Figure B. 4 and p. 37 European Commission, Final report on the E-commerce Sector Inquiry, p. 10).

    However, the Federal Court of Justice recently confirmed a price comparison engine ban as anti-competitive and void. In the concrete case, Asics generally banned retailers in Germany from supporting price search engines in online distribution:

    “In addition, the authorized … dealer shall not … support the functionality of price comparison engines by providing application-specific interfaces (“APIs”) for these price comparison engines.”

    In addition, the agreement contained an extensive ban on advertising on third-party platforms: Asics prohibited its authorized dealers from allowing third parties to use Asics’ trademarks in any form on the third party’s website to direct customers to the authorised Asics dealer’s website.

    Asics’ distribution agreement was first investigated by the German competition authority Bundeskartellamt as a pilot case (another pilot case was started against Adidas because many sports retailers complained about the Internet resale restrictions of sports equipment manufacturers). In 2015, the Bundeskartellamt decided that Asics’ ban on price comparison engines was contrary to antitrust law, as it would infringe Article 101 (1) TFEU, sec. 1 Act against Restraints on Competition. Reason given was that such ban would primarily aim at controlling and limiting price competition at the expense of consumers. This decision was first confirmed by the Higher Regional Court of Düsseldorf (decision of 5 April 2017, case no. VI-Kart 13/15 (V), see the Legalmondo article here).

    Now, the decision has been reconfirmed by the Federal Court of Justice (decision of 12 December 2017, case no. KVZ 41/17). This Asics ruling is particularly noteworthy because it is the first German court ruling following the Court of Justice of the European Union’s Coty ruling on platform bans (see the Legalmondo article here). It is therefore a first indication of how the courts will deal with Internet resale restrictions in the future.

    Thus, the Federal Court of Justice states that the general ban on price search engines “at least” restricted passive sales to end consumers (para. 23, 25) – such a restriction would even be the intended purpose of such ban. According to the court, the admissibility of general platform bans pursuant to the Coty judgment (see here) would not imply the admissibility of general price comparison bans (para. 28 et seq.). In particular, the “combination of restrictions” – i.e. ban of price comparison engines and advertising on third-party platforms – would make the difference. For it did not ensure that prospective customers got “practically substantial access” to the dealer website (para. 30) – whereby the Federal Supreme Court leaves open what is sufficient or necessary to provide such “substantial access”; in such case, general price comparison engine bans could continue to be permissible.

    Practical Tips:

    1. At EU level, neither the Court of Justice nor the European Commission have taken a position on the validity of general bans on price comparison engines. In the United Kingdom, however, the Competition and Markets Authority takes a similarly critical view of price search engine bans (“BMW changes policy on car comparison sites following CMA action“) as German administrative practice and jurisdiction.
    2. In practice, the following differentiation, already indicated by the Higher Regional Court of Düsseldorf (Asics) and the Higher Regional Court of Frankfurt (Deuter), is thus likely to apply according to the Federal Supreme Court:
    • General price comparison engine bans are – according to the Federal Court of Justice – anti-competitive and therefore generally void – although they may still be permissible if they are not combined with a broad advertising ban, so that prospective customers are guaranteed access to the dealer website.
    • Individual price comparison engine bans and other milder restrictions / criteria for the use of price comparison portals are permissible, for example with regard to product illustrations or descriptions and the product environment (such as the requirement that dealers may only offer new products).

    Further details: Rohrßen, Internetvertrieb: „Nicht Ideal(o)“ – Kombination aus Preissuchmaschinen-Verbot und Logo-Klausel, in: ZVertriebsR 2018, 118 ff.

    1. Moreover, manufacturers may – within an exclusive distribution network – prohibit their distributors active online advertising to customers reserved to the manufacturer or allocated by the manufacturer to another distributor and specify the languages used. In principle, all other conceivable quality criteria are also permissible, provided that they are equivalent to the criteria for offline distribution (because “the Commission considers any obligations which dissuade appointed dealers from using the internet to reach a greater number and variety of customers by imposing criteria for online sales which are not overall equivalent to the criteria imposed for the sales from the brick and mortar shop as a hardcore restriction”, Guidelines on Vertical Restraints, para. 56).

    For more information, see

    • the overview of the current state of practice including model contract clauses: Rohrßen, Vertriebsvorgaben im E-Commerce 2018: Praxisübersichts und Folgen des “Coty”-Urteils des EuGH, in: GRUR-Prax 2018, 39-41 as well as
    • especially on platform bans and the possible drafting of distribution agreements: Rohrßen, Internetvertrieb von Markenartikeln: Zulässigkeit von Plattformverboten nach dem EuGH-Urteil Coty – Auswirkungen auf Fachhändler- bzw. Selektiv-, Exklusiv-, Franchise- und offene Vertriebsverträge –, in: DB 2018. 300-306.
    1. For the permissibility of the use of trademarks and company logos within a search function embedded in an Internet sales platform, see the press release of the Federal Court of Justice on its two very recent decisions of 15.02.2018 (case no. I ZR 138/16 re “Ortlieb” and case no. I ZR 201/16 re “gofit“).

    Long expected by manufacturers of brand-name products, brick-and-mortar-distributors, internet retailers and online platform providers as Amazon, eBay, Zalando, the Court of Justice of the European Union (CJEU) just decided yesterday on 6 December 2017 – its “Santa Claus decision” – that manufacturers may lawfully ban sales via third party platforms.

    In a previous Legalmondo post we analysed this dispute (“the Coty case”) just resolved by the CJEU. According to its decision, such platform ban is not necessarily an unlawful restriction of competition under article 101 Treaty on the Functioning of the European Union (“TFEU”): The court has confirmed that selective distribution systems for luxury goods, which shall primarily preserve the goods’ luxury image may comply with European antitrust law.

    More specifically, the court decided that platforms bans are lawful, namely that EU law allows restricting online sales in

    “a contractual clause, such as that at issue in the present case, which prohibits authorised distributors of a selective distribution network of luxury goods designed, primarily, to preserve the luxury image of those goods from using, in a discernible manner, third-party platforms for internet sales of the goods in question, provided that the following conditions are met: (i) that clause has the objective of preserving the luxury image of the goods in question; (ii) it is laid down uniformly and not applied in a discriminatory fashion; and (iii) it is proportionate in the light of the objective pursued. It will be for the Oberlandesgericht to determine whether those conditions are met.”

    (cf. the CJEU’s press release No. 132/2017).

    This is the intermediary result of the Coty case as it is now up to the Higher Regional Court of Frankfurt to apply these requirements in the Coty case. Simply put, the question in that case is whether owners of luxury brands may generally or at least partially ban the resale via internet on third-party platforms. The Coty case’s history is quite interesting: The luxury perfume manufacturer Coty’s German subsidiary Coty Germany GmbH (“Coty”) set up a selective distribution network and its distributors may sell via the Internet – but banned to sell via third party platforms which are externally visible as such, i.e. Amazon, eBay, Zalando & Co. The court of first instance decided that such ban of sales via third party platforms was an unlawful restriction of competition. The court of second instance, however, did not see the answer that clear. Instead, the court requested the CJEU to give a preliminary ruling on how European antitrust rules have to be interpreted, namely article 101 TFEU and article 4 lit. b and c of the Vertical Block Exemptions Regulation or “VBER” (decision of 19.04.2016, for details, see the previous post “eCommerce: restrictions on distributors in Germany”). On 30 March 2017, the hearing took place before the CJEU. Coty defended its platform ban, arguing it aimed at protecting the luxury image of brands such as Marc Jacobs, Calvin Klein or Chloe. The distributor Parfümerie Akzente GmbH instead argued that established platforms such as Amazon and eBay already sold various brand-name products, e.g. of L’Oréal. Accordingly, there was no reason for Coty to ban the resale via these marketplaces. Another argument brought forward against the platform ban was that online platforms were important for small and medium-sized enterprises. Indications on how the court could decide appeared on 26 July 2017, with the Advocate General giving his opinion, concluding that platform bans appear possible, provided that the platform ban depends “on the nature of the product, whether it is determined in a uniform fashion and applied without distinction and whether it goes beyond what is necessary” (see the previous post “Distribution online – Platform bans in selective distribution (The Coty case continues)”).

     

    Practical Conclusions:

    1. This “Santa Claus decision” of 6 December 2017 is highly important for all manufacturers of brand-name products, brick-and-mortar-distributors, internet retailers and online platform providers – because it clarifies that manufacturers of brand-name products may ban sales via third party platforms (Amazon, eBay, Zalando and Co.) to ensure the same level of quality of distribution throughout all distribution channels, offline and online.
    2. As a glimpse back in advance: the district court of Amsterdam already on 4 October 2017 decided that Nike’s ban on its selective distributors not to use online platforms as Amazon was a lawful distribution criterion to safeguard Nike’s luxury brand image (case of Nike European Operations Netherlands B.V. vs. the Italy-based retailer Action Sport Soc. Coop, A.R.L., ref. no. C/13/615474 / HA ZA 16-959). More details soon!
    3. The general ban to use price comparison tools as stipulated by the sporting goods manufacturer Asics in its “Distribution System 1.0“ shall be anti-competitive – according to the Bundeskartellamt, as confirmed by the Higher Regional Court of Düsseldorf on 5 April 2017. The last word is, however, still far from being said – see the post “Ban of Price Comparison Tools anti-competitive & void?”. It will be interesting to see how the Coty case’s outcome will influence how to see such bans on price comparison tools.
    4. For further trends in distribution online, see the EU Commission’s Final report on the E-commerce Sector Inquiry and details in the Staff Working Document, „Final report on the E-commerce Sector Inquiry“.
    5. For details on distribution networks and distribution online, please see my articles

     

    The Coty case is extremely relevant to distribution in Europe because more than 70% of the world’s luxury items are sold here, many of them online now. For further implications on existing and future distribution networks and the respective agreements, stay tuned: we will elaborate this argument on Legalmondo!

    In this post we will briefly outline some legal aspects related to e-commerce in Iran, starting from the definition of the average Iranian user and main characteristics and advantages of e-commerce in the Islamic Republic, which is attracting several foreign investors.

    We will then analyze the requirements for the issuance of online business licenses in Iran, which is mandatory in order to open an e-shop. Finally we will take a look at some successful examples of online business in Iran.

    The average Iranian user

    Some statistics regarding Iranian users active in the virtual space are useful for understanding the size of the Iranian market, and why it is attracting several investors.

    According to the “Internet Data and Statistics”, Iran is the thirteenth country for number of internet users, as 57 million of Iranian (on 83 million of Iran’s population) have access to internet (approximately the 68% of the population), but Government sources believe these numbers are  underestimated.

    What matters for the purpose of this analysis, however, is that approximatively the 58% of the internet users search on the Internet is about information on goods and services and that – until the end of Azar 1394 (December 2015) – the average internet users are male (58%) and young (47% between 20 and 29 years old).

    In addition, the 42% of the Iranian internet users are involved in electronic commerce and the 13% use the e-banking services.

    Online Business Licenses in Iran

    Whether carried out in the traditional way or electronically, all the businesses need a business-license to operate on the Iranian market. The most important law governing  is the Union System Act 1971, amended in 1980, 2003 and in 2013, which provides that the business license is issued by the competent union or legal authority.

    E-commerce is no exception, therefore all those who intend to sell goods or provide services using the virtual space must acquire a business license.

    On February 19th, 2017 the Iranian Government issued an Executive Regulation in regard to the Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, dividing the activities in virtual space into two categories:

    1. Virtual Business;
    2. Network Marketing.

    According to Paragraph 1 in Article 1, Virtual Business is a business established by any natural or legal person in order to provide products (goods or services) directly or indirectly on a wholesale or retail basis, to wholesalers, retailers and consumers through telecommunication means such as websites and digital software (applications).

    According to Paragraph 2 of Article 1, Network Marketing is a method for selling products based on which the Network Marketing company uses its website to organize the sellers in order to sell their products directly to consumers in a place far from the regular business location. Through this method, each seller can introduce another marketer as it subset and create a multi-product sales group in order to increase sales.

    The competent authority for issuance of licenses in this regard is the National Union. Therefore, any person who intends to acquire a license in order to have its activities carried out online, must apply on the website of Center for Development of Electronic Commerce (an organ of the Ministry of Industry, Mine and Commerce, hereinafter: “CDEC” – www.enamad.ir) in order to acquire the Reliance Symbol, which is a symbol necessary to certify the identity and competence of online activities.

    Requirements for the Online Business License

    Article 3  of the Executive Regulation on Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, which governs the Issuance of Online Business Licenses in Iran, provides that business licenses shall be issued according to the following procedure:

    1. Establishment of the virtual business conforming to the checklists provided by the CDEC.
    2. Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
    3. Upload of the required documents, which we will list below.
    4. Issuance and submission of the license (after verifying the uploaded documents and the original copies thereof) to the applicant within 15 days and submission of the license information to E-Namad website.
    5. Grant of Electronic Reliance Symbol concurrent with issuance of the license.

    Furthermore, the said Regulation specifies the required documents for issuance of business license, as follows:

    1. Office or legal domicile address of the applicant;
    2. Negative criminal record from the Police;
    3. Certificate of the relevant Tax Organization regarding tax compliance;
    4. Certificate for attendance in educational courses of commerce and business;
    5. Confirmation of specialized features regarding virtual business issued by the CDED;
    6. Photocopy of ID-card/Company-Registration number, plus passport/work-permit for foreigners;
    7. Photocopy of Military Service Termination Card or Permanent or Medical Exemption Card for men under 50 or a Student Certificate.

    In addition to those, the Regulation provides some other documents for particular sectors, so it is advisable to contact an Iranian expert in the matter to verify the compliance with all applicable regulations. For instance, the Cultural Heritage, Handicrafts and Tourism Organization of Iran has set out some specific criteria for travel and tourism activities in the virtual space, so travel agency services, accommodation centers, private entities and other tourism services must follow a special procedure to render their services on virtual space.

    Successful Examples of Iranian Start-ups

    In order to become familiar with this sector, hereinafter we would like to report some inspirational examples of investments.

    1. Snapp

    Snapp is an Iranian ride hailing company which renders its services online. The Snapp application automatically connects the users to the nearest driver and shows the driver the user’s location. Afterwards, the nearest ready driver will pick up the users from their location, and Snapp calculates the price beforehand. This price is normally lower than the Taxi Agency Unions prices and can be received either in cash or via online payment or credit card.

    1. Digikala

    Digikala is the name of one of the biggest e-marketplaces in Iran. Cellphones, laptops and computers, digital cameras, office appliances, automobiles, watches, home appliances, instruments, jewelry, toys, clothes and books are some of the items sold on this website. One of the features of this website is the detailed and comprehensive reviews of different types of digital goods which can be a reliable source for purchasers.

    1. Pintapin

    Pintapin is a comprehensive tool for rendering travel services online. Accommodation services are listed in Pintapin and users can book online their desired location. It is also possible to submit the information regarding your destination, duration of stay and number of companions in order to receive suitable suggestions from Pintapin.

    1. Bamilo

    Bamilo is probably the most important Marketplace businesses in Iran. It started its activity in 2014 and is now among the most viewed websites in Iran. Based on the Amazon-model, the online store is considered as the main Iranian middleman between suppliers and consumers.

    1. Eskano

    Eskano is a smart system for searching real estate in Iran which is performed under international standards. With its huge database of transferable real estates divided between several Iranian cities, Eskano facilitates the sale and lease process, also with the possibility of setting up appointments directly through the website.

    The author of this post is Mohammad Rahmani.

    The Court of Justice of the European Union (“CJEU”) has issued a new ruling on the international scope of the Commercial Agency Directive (86/653/EEC of 18 December 1986). The new decision is in line with the rulings of

    1. the CJEU in the Ingmar case (decision of 9 November 2000, C-381/98, goodwill indemnity mandatory where the agent acts within the EU) and Unamar (decision of 17 October 2013, C-184/12, as to whether national agency law is mandatory where exceeding the Commercial Agency Directive’s minimum protection) and
    2. the German Federal Supreme Court of 5 September 2012 (German agency law as mandatory law vis-à-vis suppliers in third countries with choice-of-court clause).

    The question

    Now, the CJEU had to decide whether a commercial agent acting in Turkey for a supplier based in Belgium could claim goodwill indemnity on the basis of the Commercial Agency Directive. More specifically, the question was whether the territorial scope of the Commercial Agency Directive was given where the commercial agent acts in a third country and the supplier within the EU – hence opposite to the Ingmar case.

    The facts

    According to the agency contract, Belgian law applied and the courts in Gent (Belgium) should be competent. Belgian law, transposing the Commercial Agency Directive, provides for a goodwill indemnity claim at termination of the contract (and, additionally, compensation for damages). However, the referring court considered that the Belgian Law on Commercial Agents of 1995 was self-restraining and would apply, in accordance with its Art. 27, only if the commercial agent acted in Belgium. Otherwise, general Belgian law would apply.

    The decision

    The CJEU decided that the parties may derogate from the Commercial Agency Directive if the agent acts in a third country (i.e. outside the EU). This has here been the case since the agent acted in Turkey.

    The decision is particularly noteworthy because it – rather by the way – continues the CJEU’s Ingmar ruling under the Rome I Regulation (I.). In addition, it indirectly confirms sec. 92c of the German Commercial Code (II.) – which allows the parties to a commercial agent agreement governed by German law to deviate from the generally mandatory agency law if the commercial agent is acting outside the European Economic Area (“EEA”). Finally, it provides legal certainty for distribution outside the EEA and illustrates what may change after a Brexit as regards commercial agents acting in the United Kingdom (III.) – if the EU and the United Kingdom do not set up intertemporal arrangements for transition.

    For details, please see the article by Benedikt Rohrßen, Zeitschrift für Vertriebsrecht 2017, 186 et seq. (“Ingmar reloaded – Handelsvertreter-Ausgleich bei umgekehrter Ingmar-Konstellation nicht international zwingend”).

    Manufacturers of brand-name products typically aim to ensure the same level of quality of distribution throughout all distribution channels, offline and online. To achieve this aim, they provide criteria how to resell their products. With the increase of internet sales, the use of such criteria has been increasing as well.

    A total ban of online sales to end consumers within the EU is, however, hardly valid because online sales are considered as passive sales (cf. Guidelines on Vertical Restraints 2010, para. 52). Restrictions below a total ban are, however, commonplace (for examples, see the post “eCommerce: restrictions on distributors in Germany”). Yet, it is still not clear how far such restrictions are permissible.

    For example, the luxury perfume manufacturer Coty’s German subsidiary Coty Germany GmbH has set up a selective distribution network and its distributors may sell via the Internet, under the following conditions. They shall

    • use their internet store as “electronic store window” of their brick and mortar store(s), thereby maintaining the products’ character as luxury goods, and
    • abstain insofar from engaging third parties as such cooperation is externally visible.

    The court of first instance decided that tsuch ban of sales via third party platforms was an unlawful restriction of competition under art. 101 Treaty on the Functioning of the European Union (“TFEU”), namely a hardcore restriction under article 4 lit. c Regulation (EU) No. 330/2010 (Vertical Block Exemptions Regulation or “VBER”). The court of second instance, however, does obviously not see the answer that clear. Instead, the court requested the Court of Justice of the European Union (CJEU) to give a preliminary ruling on how European antitrust rules have to be interpreted, namely article 101 TFEU and article 4 lit. b and c VBER (decision of 19.04.2016, ref. no. 11 U 96/14 [Kart]) – see the previous post “eCommerce: restrictions on distributors in Germany”.

    On 30 March 2017, the hearing took place before the CJEU:

    • Coty defended its platform ban, arguing it aimed at protecting the luxury image of brands such as Marc Jacobs, Calvin Klein or Chloe.
    • France – seat of several luxury brands such as Louis Vuitton, Chanel and Christian Dior –supported Coty.
    • The distributor instead argued that established platforms such as Amazon and eBay already sold various brand-name products, e.g. of L’Oréal. Accordingly, there was no reason for Coty to ban the resale via these marketplaces. Germany also supported this view by emphasizing the importance of online platforms for small and medium-sized enterprises (where, however, the share of distributors using online marketplaces is 62% much higher than in all other Member States, see the Staff Working Document, „Final report on the E-commerce Sector Inquiry“, para. 452).
    • Luxembourg – the seat of Amazon – considers a general platform ban to be disproportionate and therefore as anti-competitive (cf. Reuters’ article here).

    Interest in the outcome of the Coty case is widespread, as the active participation of the various EU Member States illustrates (in addition to the abovementioned countries, also Italy, Sweden, the Netherlands and Austria). Simply put, the question is whether owners of luxury brands may generally or at least partially ban the resale via internet on third-party platforms.

    Indications on how the court may decide have just appeared on 26 July 2017, with the Advocate General giving his opinion. The Advocate General proposes that the CJEU answers the questions referred to the court as follows:

    “(1) Selective distribution systems relating to the distribution of luxury and prestige products and mainly intended to preserve the ‘luxury image’ of those products are an aspect of competition which is compatible with Article 101(1) TFEU provided that resellers are chosen on the basis of objective criteria of a qualitative nature which are determined uniformly for all and applied in a non-discriminatory manner for all potential resellers, that the nature of the product in question, including the prestige image, requires selective distribution in order to preserve the quality of the product and to ensure that it is correctly used, and that the criteria established do not go beyond what is necessary.

    (2) In order to determine whether a contractual clause incorporating a prohibition on authorised distributors of a distribution network making use in a discernible manner of third-party platforms for online sales is compatible with Article 101(1) TFEU, it is for the referring court to examine whether that contractual clause is dependent on the nature of the product, whether it is determined in a uniform fashion and applied without distinction and whether it goes beyond what is necessary.

    (3 The prohibition imposed on the members of a selective distribution system who operate as retailers on the market from making use in a discernible manner of third undertakings for internet sales does not constitute a restriction of the retailer’s customers within the meaning of Article 4(b) of Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) on the Treaty of the Functioning of the European Union to categories of vertical agreements and concerted practices.

    (4) The prohibition imposed on the members of a selective distribution system, who operate as retailers on the market, from making use in a discernible manner of third undertakings for internet sales does not constitute a restriction of passive sales to end users within the meaning of Article 4(c) of Regulation No 330/2010.”

    The Advocate General’s complete opinion can be found at CJEU’s website here.

    The updated overview of the procedure can be found at CJEU’s website here.

    Practical Conclusions

    1. The Coty case is extremely relevant to distribution in Europe because more than 70% of the world’s luxury items are sold here, many of them online now.
    2. The general ban to use price comparison tools shall be anti-competitive – according to the Bundeskartellamt, as confirmed by the Higher Regional Court of Düsseldorf on 5 April 2017. The last word is, however, still far from being said – see the post “Asics’ Distribution of Sporting Goods: Ban of Price Comparison Tools anti-competitive & void?!?”. Besides, also the Coty case’s outcome may influence how to see such bans.
    3. The Coty case is setting the course for future Internet sales. Depending on the decision of the CJEU, manufacturers of luxury or brand-name products can continue to ban the use of marketplaces like Amazon or eBay for the distribution of their products – or not any more or only under certain conditions. If the court follows the Advocate General’s conclusions, such platform bans appear possible, provided that the platform ban depends “on the nature of the product, whether it is determined in a uniform fashion and applied without distinction and whether it goes beyond what is necessary” (see above).
    4. For further trends in distribution online, see the EU Commission’s Final report on the E-commerce Sector Inquiry and details in the Staff Working Document, „Final report on the E-commerce Sector Inquiry“.
    5. For details on distribution networks and antitrust, please see my article „Plattformverbote im Selektivvertrieb – der EuGH-Vorlagebeschluss des OLG Frankfurt vom 19.4.2016“, in: Zeitschrift für Vertriebsrecht 2016, p. 278–283.

    Giuliano Stasio

    Practice areas

    • Arbitration
    • Contracts
    • e-commerce
    • Intellectual property
    • Real estate
    Contact Giuliano