Deckers v Up & Running: Court of Appeal gives welcome clarity on online sales restrictions in selective distribution agreements

While selective distribution models are widely used by luxury and high‑end brands, the rules governing online sales restrictions within those systems have lacked clarity — creating a real risk that your model could be treated as anti‑competitive if you get them wrong.

The Court of Appeal’s decision in Deckers UK Ltd v Up & Running (UK) Ltd (Deckers) is significant because it gives brand owners and their retail distributors much‑needed guidance on how to draft online sales restrictions within selective distribution policies without them being treated as ‘by object’ infringements. That clarification provides greater confidence that proportionate online channel controls — assessed in their proper context — can be lawful.

Here, Matt Brown from our commercial team explores the decision, its legal context and its implications for selective distribution and online sales controls.

Context: ‘by object’ vs ‘by effect’

Chapter 1 of the Competition Act 1998 makes a distinction between restrictions that are unlawful ‘by object’ (inherently harmful, such as price fixing) and those unlawful only ‘by effect’, where actual market impact must be shown. 

The Court of Appeal’s decision in Deckers UK Ltd v Up & Running (UK) Ltd confirms that — in the context of vertical (i.e. agreements between parties at different levels of a supply chain) — a restriction shouldn’t be treated as ‘by object’ without properly considering its economic and legal context, meaning that a restriction shouldn’t automatically be treated as ‘by object’ simply because it affects pricing or online sales channels.

The decision supports a more contextual approach to selective distribution and gives brand owners greater comfort that proportionate online channel controls can be lawful, particularly when operating a selective distribution model within the VABEO safe harbour. The main risk remains unchanged: restrictions that amount in substance to resale price maintenance or an outright ban on online sales remain high risk.

However, the decision is an important development for brand owners using and distributors operating within selective distribution models as it rejects an overly rigid approach to online sales restrictions and focuses instead on economic and commercial context.

What is ‘selective distribution’?

Where a company has a strong brand and is selling via a network of retail distributors, it’ll often do so via ‘selective distribution’. This is a form of distribution agreement that allows the brand owner to exercise a greater degree of control over its retailers than a standard distribution model, achieved via setting clearly defined strict criteria brand presentation, service and online presentation.

They’re intended to balance between:

1. Intellectual property rights, which give brand owners control over how their products are presented. 
2. Competition law, which promotes open markets and price competition.
    

The model is well established but the restrictions imposed must be objective, consistently applied and proportionate and mustn’t stray into price fixing or equivalent conduct that might meaningfully remove competition.

The commercial context: controlling online channels

Deckers, the owner of the HOKA running shoe brand, operated a selective distribution system under which distributors:

1. Required approval to sell online.
2. Could generally only sell via websites aligned with Deckers’ retail identity. 
    

The dispute arose during COVID when Up & Running — one of Deckers’ distributors — sought permission to set up and use a separate discount website to clear excess stock. Deckers refused and subsequently terminated the relationship when Up & Running proceeded to set up the discount website in any event.

Up & Running alleged that Deckers’ actions amounted to an unlawful restriction on online sales and indirect resale price maintenance.

What happened during the proceedings?

The Competition Appeal Tribunal (CAT) accepted Up & Running’s argument, treating the restriction as a ‘by object’ infringement and effectively equating it with resale price maintenance because of its impact on discounting.

That approach mattered because a ‘by object’ classification avoids any need to prove actual anti-competitive effects.

Decker appealed and the Court of Appeal overturned the original decision and emphasised that ‘by object’ analysis requires a holistic assessment of the restriction’s content, aims and legal and economic context.

The Court held that CAT had focused too narrowly on the purpose of limiting price competition and had failed to engage properly with the wider market reality. That was an error of law.

The key clarification: not all online restrictions are ‘by object’

The key point isn’t that online restrictions are always lawful but that they’re not inherently suspect. The judgment makes clear that vertical agreements and selective distribution in particular require a more nuanced analysis.

1. Supplier-distributor restrictions shouldn’t be treated in the same way as horizontal cartel conduct — and the analysis must reflect that difference.
2. Selective distribution remains a legitimate model. Brand owners may protect brand positioning, prevent free-riding and maintain distribution quality — and those aims can justify controls on how and where products are sold.
3. A requirement to use an approved website isn’t the same as a ban on online sales and doesn’t automatically amount to resale price maintenance — the real question is its practical economic effect.

The VABEO safe harbour

For most businesses, the practical significance lies in the interaction with the Vertical Agreements Block Exemption Order (VABEO) and its EU equivalent, the EU Vertical Block Exemption Regulation.

Where each party’s market share is no more than 30% and the agreement contains no hardcore restrictions (a category which broadly captures the types of conduct typically treated as ‘by object’, such as price fixing), VABEO can provide a safe harbour. That makes the distinction between legitimate channel control and disguised resale price maintenance especially important in practice.

The Court of Appeal found that if an online sales restriction isn’t hardcore and the parties remain within the 30% threshold, the arrangement will often be lawful without detailed effects analysis. An approved-website requirement may therefore fit within the block exemption provided that it’s appropriately drafted.

Drawing the line: what still causes risk?

The judgment doesn’t soften the position on genuinely harmful practices. 

The following remain high risk:

• Resale price maintenance (RPM) — direct or indirect.
• Outright bans on online sales.
• Restrictions that — in substance — eliminate price competition.

The key question remains one of substance: if a website restriction is really a pricing control mechanism, it may still infringe competition law.

Key takeaways: a more commercial, less formalistic approach

Deckers is a useful reminder that competition law analysis in this area should be commercially grounded rather than formalistic. The Court of Appeal rejected rigid categorisation and placed the emphasis back on context, economic reality and practical market impact.

Most importantly, the case confirms that online sales restrictions — including limits requiring use of an approved website — aren’t automatically anti-competitive ‘by object’. For businesses within the VABEO threshold, that offers a workable framework. 

If you want your attempts to control sales channels to be more defensible, you should:

1. Structure distribution systems carefully.
2. Avoid hardcore restrictions.

Talk to us

Our 20-strong commercial team drafts and negotiates agreements that are fit for purpose and aligned with your commercial goals.

Contractual relationships are one of the most important assets of any business. Our role is to grow that value — minimising the risk of disputes arising, preventing relationships from becoming unproductive and avoiding them turning into liabilities. We’re also alert to the dangers of terms that may be anti-competitive as getting this wrong could cost your business tens of thousands (if not millions) of pounds. 

If you’d like to strengthen your contracts, reduce risk or sense‑check your current approach, email hello@brabners.com, call 0333 004 4488 or fill in our contact form.