NEW FRONTIERS OF ANTITRUST
Online distribution: Are the rules now set?

Interview with Florian Schaefer

General Counsel, Leica Camera, Frankfurt

Florian Schaefer (Leica Camera) has been interviewed by Mark Powell (White & Case) in anticipation of the 9th edition of the New Frontiers of Antitrust conference organised by Concurrences review in partnership with ESSEC Business School and University Paris II - Panthéon-Assas.

They will both join the second panel dedicated to online distribution, together with Andreas Mundt (Bundeskartellamt, International Competition Network), Guillaume Loriot (DG COMP) and Cristina Caffarra (CRA).

To read the full program and register, click here.

Online marketplaces are becoming increasingly important as sales channels for retailers and manufacturers. What would be the main justifications for a restriction limiting the ability of retailers to sell via online marketplaces in your industry?

Online distribution as sales channel or a website as additional window to the customer has undoubtedly gained importance over the last decade.

Today, as retailer and manufacturer you have many options on how to offer your products and approach the customer. Whether you provide information online only, or run an online shop yourself: In either case it is under the seller’s control how the product portfolio is presented, e.g. in line with CI and CD standards, and that the (online) environment complies or even enhances the brand image and value.

In contrast, online marketplaces are operated differently. The product portfolio is not compulsory shown under one brand only. The sales offers are not filtered according to their source which allows counterfeits being offered as well. Further, online marketplaces are often setup with a focus on price competition only. Quality, innovation, extraordinary promises of guarantee and brand image are disregarded. What it comes down to is the ultimate need to protect the brand image, especially as manufacturer of luxury and premium products.

The proportion of retailers using marketplaces varies significantly between the various Member States. Do you take such differences into account when determining the commercial policy of Leica with regard to online sales?

No, because a differentiation would be contradictory to a holistic approach in terms of cultivating and protecting the brand image.

Apart from that, business complexity increases every day, be it due to new regulatory requirements or digitization and globalization in general. For this reason the coordination of an international selective distribution network requires as much harmonization as possible. Otherwise, the ability to manage the business diligently will be put on risk.

The retail industry is currently experiencing a significant structural change. What are the main challenges posed by the online distribution of goods to the manufacturers of high-tech products?

For Leica as manufacturer of high-tech products under a premium to luxury brand it is all about customer satisfaction. The customer has to feel confident that the product perfectly suits his needs. The product’s functionalities and USPs have to be explained and advice shall be given on proper handling as well as warranty/guarantee. In addition any such explanation ideally has to be put in context with the uncompromising quality, the brand image and the manufacturer’s availability for after sales services.

In a brick-and-mortar store this can obviously be easily done in an empathic dialogue with the customer. Online such dialogue is not possible.

The challenge is to compensate this disadvantage and identify other ways for ensuring customer satisfaction when offering products online.

The Court of Justice in Coty clarified that selective distribution systems for luxury goods and clauses which restrict sales of luxury goods on third party online platforms are compatible with EU competition law. How is the company currently interpreting this judgement in relation to high-tech, high quality products?

Leica interprets the judgement in relation to high-tech or high-quality products not any different. Fortunately, the European Commission has in the meantime published a brief including an interpretation of the judgement which supports this view.

Accordingly, from Leica’s standpoint it is now clear that a selective distribution system may be installed for a much broader scope of product types and may include a marketplace ban for authorized retailers as well.