EU law clobbers online traders

European competition chiefs yesterday announced a change in trading laws that could threaten the existence of online-only retailers.

The new rules, which are set to come into force in June, will allow manufacturers to insist that their distributors have “bricks and mortar” premises as well as online stores.

The rules provide manufacturers with an exemption from ten-year-old European competition laws that prevent them from imposing restrictions on the distribution and retail pricing of their goods, and apply to manufacturers whose market share does not exceed 30 per cent.

While manufacturers won't be able to dictate pricing once they've authorised a dealer, they can refuse to sell to cheap online-only discount traders, a change that will enable prestige brands to protect their image - and prices.

Introducing the legislation, Competition Commissioner Joaquín Almunia said: "The rules adopted today will ensure that consumers can buy goods and services at the best available prices wherever they are located in the EU while leaving companies without market power essentially free to organise their sales network as they see best."

Talking to FT.com, Guy Salter of the European Alliance, which represents more than 75 per cent of the worldwide luxury market, welcomed the measures: “A key element of the luxury goods business is a distribution model which supports and preserves the image of products . . . The commission has recognised the importance of the luxury goods industry to Europe.”

Groups including IMRG, representing online traders, were less impressed.

The Commission has promised to keep a close eye on attempts to limit distribution to online discounters, saying: "Manufacturers cannot limit the quantities sold over the Internet or charge higher prices for products to be sold online."