On October 31, 2024, the Competition Appeal Tribunal (“CAT”) ruled that British shoe supplier Decker UK Ltd infringed the Chapter I Prohibition in section 2 of the Competition Act 1998 (“the Act”). The CAT ruled that the violation occurred when Deckers stopped supplying HOKA branded running shoes to Up & Running (UK) Limited, a specialty running shoe and accessory retailer, in December 2021, after Up & Running refused to stop selling the shoes at a discount on its clearance website.
According to the Judgment, Deckers had an agreement to supply Up & Running with HOKA running shoes on a wholesale basis. In July 2020, Up & Running shared with Deckers its proposal to launch a new website, “runningshoes.co.uk” in order to sell excess stock that had accumulated during the COVID-19 pandemic, at a discount. While Deckers declined the proposal, Up & Running proceeded to sell HOKA products at a discount on the new website. In November 2020, Deckers reportedly warned Up & Running that it would refuse to supply HOKA products and terminate the account if the retailer continued to sell HOKA products on the website at a discount. When the sales continued, Deckers informed the retailer, in December 2020, that it would no longer supply HOKA products in Autumn/Winter 2021 and cease supply in accordance with the right to terminate in the Terms and Conditions of their agreement.
In response, Up & Running filed a suit alleging that the Terms and Conditions were anticompetitive because they restricted its ability to market and sell products online and enabled Deckers to maintain high prices for HOKA products, in violation of the Chapter I Prohibitions in the Act. Up & Running not only requested damages for the breach but also requested an injunction requiring Deckers to continue to supply HOKA products under the original agreement.
The CAT unanimously agreed that the Terms of Conditions amounted to an Online Sales Restriction and Retail Price Maintenance (“RPM “) Restriction, both of which infringe the Chapter I Prohibition of the Act. According to the Tribunal, the Terms and Conditions established a “by object” restriction on competition that constitutes and an Online Sales Restriction by seeking to prevent retailers in Deckers’s selective distribution system, including Up and Running, from engaging in the passive sale of HOKA products on the clearance website. The Tribunal also found that Deckers’s efforts to maintain higher prices for HOKA products and prevent their sale at a material discount was solely done in the interest of restricting price competition and indirectly fix sales prices, which constitutes a RPM Restriction. The Tribunal also rejected Deckers’s arguments that its selective distribution system was exempt from the Chapter I Prohibition under Case C-26/76 Metro v Commission and under Commission Regulation (EU) 330/2010.
The CAT ultimately ruled that Deckers was liable for any damages resulting from the infringement that Up & Running might be able to prove. A separate trial will be held to determine the amount of damages. However, the Tribunal declined to order a final injunction requiring Deckers to supply HOKA products to Up & Running.