EBay Objects To Luxury Goods Makers' Retail Control

Brand holders have too much power over the way their goods are sold, online auction site EBay has said. It said that 250,000 people in the UK back its campaign to change EU competition law to give retailers more power.

European Union law allows the maker of goods the right to control its distribution and sale in some circumstances. Luxury brand owners, in parcicular, can stop shops from selling their goods if they do not have the right fixtures, fittings, stock levels or staff training.

Normal competition laws do not apply as long as the restrictions are in line with the European Commission's Guidelines on Vertical Restraints (44-page / 262KB PDF).

These guidelines give the makers of luxury goods the right to have exclusive or restricted chains of distribution said Alan Davis, a competition law expert at Pinsent Masons, the law firm behind OUT-LAW.COM.

"Luxury goods manufacturers are allowed to require distributors to meet certain standards of knowledge, to have a certain standard of shop fit-out and sense of luxury to match the brand," he said. "These brands usually do not sell online."

EBay has said, though, that those rights represent a restriction on its members' ability to trade and is anti-competitive. It said that such restrictions were "unfair trade practices".

"EBay was built on a simple idea - that it could empower individuals by building a global marketplace where practically anyone could buy or sell practically anything," said eBay director general Alex von Schirmeister.

"Unfortunately, that idea is under threat from certain brand owners and manufacturers who are trying to block and restrict unfairly the sale of legitimate products on the internet."

"Through this online petition our community of users is calling on policymakers to amend European competition law to stop these unfair trade practices," he said.

The European Commission is about to complete a consultation process on the guidelines with a view to publishing revised rules next year. EBay said that it has gathered a petition containing 750,000 signatures opposing the current rules, 250,000 of them gathered in the UK.

"We believe that such restrictions represent an unfair restraint on the right to buy and sell goods freely in the European Single Market and are based less on a motivation to benefit consumers than they are on a desire to artificially inflate prices and profits by eliminating competition from online sellers, many of them small businesses," says the petition.

"We accept that brand owners should be able to determine, within limits, how their products are initially sold. However, we believe strongly that they should not be allowed to impose blanket bans on internet selling, and any other restrictions on trade must be based on objective and publicly available criteria which are of proven benefit to consumers," it says.

"[We] call on European policymakers to amend EU competition law to outlaw excessive limitations on internet selling and force brands to publish all vertical agreements which are designed to limit the trade in their products," says the petition.

Davis said that the rules probably do bar second hand sales of goods. "I think that is an unintended consequence of it, though. It would be almost impossible to have a carve out for second hand goods," he said.

"It is difficult to argue against the Commission's approach, which is to maintain some degree of protection for luxury goods because they do make significant investments in their distribution," he said.