Ping Europe Ltd v Competition and Markets Authority

A blanket contractual ban on internet sales by authorised dealers in a selective distribution system is capable of being a restriction of competition by object. The decisive inquiry is whether the agreement’s content, objectives and legal and economic context reveal a sufficient degree of harm to competition. A ban which prevents passive and out-of-area sales, and reduces price competition between authorised dealers, satisfies that standard unless the context negates the harm.

A supplier’s legitimate wish to promote product quality does not itself displace that conclusion. Nor does classification as a hardcore restriction automatically establish an object infringement. The analysis must remain distinct, although the boundaries between the Metro assessment, object analysis and individual exemption are not marked by a bright line.

Ping supplied golf clubs through a selective network of authorised dealers. Its internet sales policy prohibited those dealers from completing online sales of Ping golf clubs, although they could advertise the clubs and their prices online. Ping said that the policy promoted face-to-face dynamic custom fitting.

The Competition and Markets Authority found that the policy was a restriction of competition by object contrary to Article 101 and section 2(1) of the Competition Act 1998. It ordered Ping to remove the ban and imposed a penalty. The Competition Appeal Tribunal upheld liability in [2018] CAT 13, but reduced the penalty to £1.25 million.

Ping appealed on whether the internet sales ban was an object restriction and whether the penalty should be further reduced.

1. Appeal dismissed unanimously. Lady Justice Rose held, with whom Lord Justice Flaux and the Chancellor agreed, that Ping’s blanket internet sales policy was a restriction of competition by object within Article 101(1).

2. The correct inquiry, drawn from Cartes Bancaires, was whether the content, objectives and legal and economic context of the agreement revealed a sufficient degree of harm to competition. The policy prevented authorised dealers from making online passive sales to customers outside their local areas. It also reduced price competition between authorised dealers because customers could not readily buy from a cheaper dealer elsewhere.

3. The established treatment of internet sales bans supported that conclusion. A supplier may maintain qualitative requirements for its selective network and may impose equivalent quality standards for online sales. It may not, however, impose a complete ban which goes beyond restrictions permitted for sales from physical premises. Pierre Fabre and Coty fell on opposite sides of that line. Ping’s policy was an absolute ban and was materially more restrictive than the third-party-platform restriction upheld in Coty.

4. Ping’s genuine aim of promoting dynamic custom fitting did not prevent the policy being an object restriction. The evidence did not establish that any modest difference in custom-fitting rates was caused by the ban. Nor did the selective distribution context neutralise the harm. The objection was not to the legitimate exclusion of non-authorised retailers, but to the prevention of competition among authorised dealers themselves.

5. The court rejected a rigid division between the Metro criteria, object analysis and individual exemption under Article 101(3). It also held that an object restriction must reveal a sufficient degree of harm; a merely non-fanciful possibility of harm would be insufficient. The CAT had nevertheless applied the correct test.

6. The CAT was entitled to find that Ping had acted negligently for the purposes of sections 36(1) and 36(3) of the Competition Act 1998. During the relevant period, the case law and guidance put Ping on notice that an absolute online-sales prohibition was very likely to infringe competition law. The CAT was also entitled to assess the fine in the round and to uphold a penalty of £1.25 million.

• Court of Appeal (Civil Division). Ping’s appeal was dismissed in [2020] EWCA Civ 13.
• Competition Appeal Tribunal. In [2018] CAT 13, the tribunal upheld the finding of an object restriction, set aside the aggravating-factor uplift, and reduced the penalty from £1.45 million to £1.25 million.
• Competition and Markets Authority. The CMA found that Ping’s internet sales policy infringed Article 101 and section 2(1) of the Competition Act 1998, directed Ping to remove the policy, and imposed a £1.45 million penalty.