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Brand owners can block online sales: EU

Brussels, April 21, 2010

The European Commission has unveiled revised antitrust rules allowing luxury brand owners to block online retailers without a bricks-and-mortar shop from distributing their products.

In a bid to counter criticism from online retailers such as eBay and Amazon as well as consumer groups that the provision could restrict user choice, the European Union competition watchdog said it would monitor developments.

'The Commission will be particularly attentive to concentrated markets to which price-discounters either online only or traditional may not have access,' the European Union executive said in statement.

Brand owners -- often in the high-end or luxury goods market -- had argued for the requirement to deter so-called free-riders, competitors who may benefit from their marketing that luxury brands carry out without bearing the same costs.

Industry body European Alliance, which represents three-quarters of global luxury brands, said the regulation showed the Commission recognised the importance of the luxury goods industry, which employs 800,000 people, directly and indirectly, in Europe.

'This new regulatory framework will allow us to continue the significant investment our sector makes for our online presence well as in our physical outlets,' Guy Salter, a spokesman for the organisation said.

EBay said the updated rules did away with many unfair restrictions currently facing online companies and that it would work with EU governments to 'expose any attempts to unfairly limit online sales'.

Luxury stocks were up on Tuesday but analysts said the upward move was more driven by the general market and Burberry's  upbeat forecast and Coach's strong first-quarter earnings.

By 1423 GMT, shares in LVMH and Hermes were up more than 1 per cent, while shares in PPR which owns Gucci Group, were up 1.38 per cent.

The new, 10-year 'vertical restraints block exemption regulation' will go into force in June, with a one-year transitional period, the EU regulator said.

It replaces existing guidelines exempting distribution agreements between manufacturers and distributors from strict EU competition rules if they comply with certain criteria.

The Commission said approved distributors were free to sell on the Internet without limitations on quantities, customers' location and restrictions on prices, provided both manufacturer and distributor were not overly dominant in the market.

'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,' said Competition Commissioner Joaquin Almunia. – Reuters




Tags: EU | Brussels | European Commission | online sales | Antitrust |

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