Restrictions in a selective distribution model affecting online channels or discounting are not automatically illegal but need to be carefully assessed in their legal and economic context.
On 8 May, the Court of Appeal (CoA) in Deckers UK Limited v Up & Running (UK) Limited1 held that Deckers did not breach competition law by preventing an authorised retailer from selling on its unbranded discount website, overturning a 2024 judgment of the Competition Appeal Tribunal (CAT). The original CAT judgment of the standalone claim from Deckers’ authorised retailer Up & Running (U&R) was analysed in an earlier article.
The CoA judgment confirms, in line with long standing case law such as Coty2, that some restrictions in selective distribution systems relating to online sales channels require a careful analysis of the content, objective, legal and economic context to prove “a sufficient degree of harm” and should not be presumed to infringe competition law. This by no means indicates a softening of competition enforcement against certain practices such as classic resale price maintenance (RPM). The European Commission fined Gucci, Chloé and Loewe €157 million for resale price fixing last October (see our previous article). In March this year, the Italian Competition Authority fined Morellato €26 million for RPM and online sales restrictions (see our article).
Practical takeaways for brands
Businesses should avoid engaging in any conduct that falls under the ‘hardcore’ restrictions e.g. price fixing, RPM or a blanket ban of online sales.
Brands can minimise the risk of costly and lengthy litigation by documenting transparent and objective criteria for their selective distribution models.
Criteria relating to websites, channel architecture and the use of third-party marketplaces should be based on brand positioning, network integrity or prevention of free-riding.
Brand owners should periodically audit selective distribution terms, online sales policies and internal approval processes to ensure they remain principled, proportionate and competition-law compliant. Note that businesses operating in the EU and the UK need to comply with both the 2022 European Vertical Block Exemption Regulations3 and the UK Vertical Block Exemption Order.4
Background
In summary, the CAT found that Deckers operated a selective distribution system for HOKA running shoes. Deckers had appointed U&R as one of several UK distributors and U&R operated several “bricks and mortar” stores and a branded online channel. U&R decided to launch a new clearance website called “runningshoes.co.uk” to sell out-of-season discounted stock that had accumulated during covid. Whilst Deckers set a recommended retail price, retailers such as U&R remained free to set the actual retail price, and Deckers did not interfere in instances where distributors deviated from the recommended price.
The supply agreement between Deckers and U&R required retailers to seek permission for selling online and to sell only on their branded websites. There was no further published guidance on how Deckers approved or denied permission thus granting Deckers wide discretion for online sales. Deckers denied U&R permission to launch its clearance website and, when U&R went ahead, Deckers terminated U&R’s supply agreement citing a breach of the online sales requirement. U&R issued a standalone claim in the CAT alleging that the termination infringed competition law because it restricted online sales and amounted, in substance, to indirect resale price maintenance as it prevented deeper discounting of HOKA shoes.
CAT judgment finding Deckers had breached competition law because it had intended to prevent deeper discounting of HOKA shoes
The CAT accepted that Deckers was partly seeking to protect the integrity of its selective distribution model. Nevertheless, the CAT considered Deckers’ wide discretion in exercising the contractual restriction and refusal to permit online sales on the retailer’s unbranded website, as a method of preventing excessive discounting. The CAT concluded that any intention to curb discounting was a hardcore prohibited restriction as it was both RPM (under Article 4(a)) and restricted passive sales (under Article 4(c)) of the EU Vertical Block Exemption Regulation (VBER) (as then applicable in the UK)5 and fell outside the VBER. The CAT held that the intention behind the RPM alone was sufficient to make it an ‘object’ infringement (i.e. conduct that reveals, by its very nature, a sufficient degree of harm to competition).
Court of Appeal judgment overturns CAT judgement requiring courts to consider the effects
The central question the CoA considered was whether Deckers, by terminating U&R’s supply agreement to prevent it from selling surplus stock on its clearance website at deep discounts, amounted to an ‘object’ infringement. The CMA joined the proceedings as it agreed with Deckers that the CAT had applied the wrong legal test.
The key point of the judgment is that, based on the specific facts of this case, the Court decided that the alleged infringer’s intent alone was not determinative of whether a restriction should be classified as ‘by object’. The correct test, drawn from the established case law, also required consideration of a restriction’s (i) content, (ii) objective, (iii) legal context and (iv) economic context.
The Court also indicated that the amount of evidence required to prove a “sufficient degree of harm” to competition is dependent on the legal and economic context. In this case, the Court emphasised that vertical restraints may generally be considered less harmful than, say, a price fixing cartel between competitors, and therefore required higher evidential thresholds to establish an object type infringement.
On the specific set of facts, the Court considered that the restriction concerned a narrow and specific route to market: a proposed anonymised clearance website for a limited tranche of excess stock. Against that backdrop and given the evidence of modest market shares and strong inter-brand competition (U&R was 6th out of 10 suppliers in the market), the Court concluded that the conduct did not reveal a sufficient degree of harm to competition to qualify as an ‘object’ infringement.
Hardcore restrictions are not automatically ‘by object’
The Court also confirmed that a restraint characterised as a ‘hardcore’ restriction under the VBER is not automatically or presumptively an ‘object’ restriction. The Court held that Deckers’ conduct did not amount to the hardcore restriction of a fixed or minimum resale price6, nor to a restriction on active or passive sales to end users,7 as retailers remained free to discount and sell at whatever price they pleased while consumers could also buy actively and passively from dealers’ branded websites and through bricks and mortar stores.
Footnotes
[1] [2026] EWCA Civ 553
[2] Case C-230/16 Coty Germany GmbH v Parfümerie Akzente GmbH, ECLI:EU:C:2017:941.
[3] Commission Regulation (EU) 2022/720 of 10 May 2022 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices
[4] The Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022
[5] Note that this has since expired and businesses operating in the UK need to apply the UK-specific Vertical Block Exemption Order and Guidance.
/Passle/5f3d6e345354880e28b1fb63/MediaLibrary/Images/2025-09-29-13-48-10-128-68da8e1af6347a2c4b96de4e.png)
/Passle/5f3d6e345354880e28b1fb63/MediaLibrary/Images/2024-08-01-13-11-10-549-66ab896ee543bf94f9636c73.png)
/Passle/5f3d6e345354880e28b1fb63/SearchServiceImages/2026-05-21-11-21-13-368-6a0eeaa9ce5ff08b4a812c4a.jpg)
/Passle/5f3d6e345354880e28b1fb63/SearchServiceImages/2026-05-18-09-09-55-443-6a0ad76352418ebe61643213.jpg)