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German Media Newsletter, March 2018

March 2018

CJEU Approves Third-Party Platform Ban for the Sale of Luxury Goods

On Dec. 6, 2017, the CJEU ruled that a seller of luxury goods may prohibit its authorized distributors from selling those goods on third-party platforms (C-230/16 – Coty). The CJEU hereby confirmed the Advocate Generals’ Opinion, according to which a luxury image is a product-characteristic which justifies selective distribution systems under Art. 101 para. 1 TFEU.

In its ruling, the CJEU reconfirms and clarifies its settled case law (C-439/09 – Pierre Fabre). The court recalled the two main criteria from the Pierre Fabre decision under which selective distribution systems are compatible with Article 101 para 1 TFEU: (i) the resellers are selected “on the basis of objective criteria of a qualitative nature, laid down uniformly for all potential resellers” and (ii) the criteria do “not go beyond what is necessary” and are not “applied in a discriminatory fashion”.

Against this background, the CJEU then analyses the contractual clause at issue, prohibiting sales of luxury goods on third-party online platforms. The court confirms that the operator of a selective distribution model may rightfully restrict sales via third party platforms under EU competition law, if the following criteria are fulfilled: (i) necessity of the selective distribution system to safeguard the product’s luxury image, (ii) restrictions do not go beyond what is indispensable to achieve the protection, (iii) selection of resellers on the basis of uniformly applicable and objective criteria and (iv) restrictions do not entail a de facto prohibition of online sales.

The CJEU’s decision primarily concerns manufacturers of luxury goods that are planning to or already established a selective distribution system. Although the ruling shows that the (national) courts will still assess on a case by case basis, the CJEU provided a good framework for companies as to what is legally enforceable under EU competition law. At the same time the CJEU resolved the uncertainties regarding its ruling in the Pierre Fabre decision and took the opportunity to clarify that the decision never intended to prohibit the use of selective distribution systems in the first place.

Federal Administrative Court Confirms Internet Ban on Certain Types of Gambling

On Oct. 27, 2017, the German Federal Administrative Court (Bundesverwaltungsgericht, FAC) ruled that the prohibition of casino games, lottery scratch tickets and poker games does not infringe on constitutional or EU law, thereby confirming the already existing prohibition on such internet games. The complaint was brought to courts by two online gambling providers located in Malta and Gibraltar seeking legal protection against a prohibition order (Untersagungsverfügung).

European Parliament Adopts Draft Resolution on ePrivacy Regulation

On Oct. 26, 2017, the EU Parliament adopted a draft resolution of the ePrivacy Regulation (2017/0003(COD)). In comparison with the EU Commission proposal, the resolution strives for more strict regulation of cookie use and related tracking technologies. In this context, the draft resolution also supports technical solutions such as the Do-Not-Track-Standard of the World Wide Web Consortium (W3C). Further, the draft supports the consent requirement as well as privacy-by-default settings. This also includes the use of end-to-end encryption solutions for data communications and a clear rejection of (governmental) backdoors.

Some associations have expressed reservations about the draft resolution and argue that the financing of digital offerings might be jeopardized. This may delay the enactment of the ePrivacy Regulations and the GDPR, expected to come into force May 2018.

EU Parliament Votes in Favour of the Country-Of-Origin Principle (Territory-by-Territory Licensing)

On Dec. 12, 2017, the EU Parliament rejected the EU Commission’s so-called “SatCab proposal” (2016/0284 (COD)) in favour of territory-by-territory licensing. The EU Parliament confirmed the decision of the Legal Committee (Rechtsausschuss) to pursue a rather strict interpretation of the country-of-origin principle. In consequence, the country-of-origin principle shall only apply to online retransmission of “News & Current Affairs”. The EU Parliament stresses that such interpretation is sufficient to meet the needs of the free flow of information (Freier Informationsfluss). With its decision, the EU Parliament reinforces the respect and legality of the exclusive licensing of territorial rights to films and television which is crucial for investment in audio-visual content and ensures the diversity and quality of European TV-programs and productions on behalf of the consumer’s interests.

ECJ Hands Down Decision on Uber in the EU

The European Court of Justice (ECJ) has ruled that the U.S. company Uber is a transport services company, requiring it to accept stricter regulation and licensing within the EU as a taxi operator. This decision in Luxembourg, after a challenge brought by taxi drivers in Barcelona, will apply across the whole of the EU, including the UK, and cannot be appealed.

EU rules on the freedom to provide services expressly exclude transport. The lawyers for Barcelona’s Asociación Profesional Elite Taxi argued that Uber was directly involved in carrying passengers, so Uber is a transport company. Uber denied it was a transport company, arguing it was a computer services business with operations that should be subject to an EU directive governing e-commerce and prohibiting restrictions on the establishment of such organisations.

In its ruling, the ECJ said an “intermediation service”, “the purpose of which is to connect, by means of a smartphone application and for remuneration, non-professional drivers using their own vehicle with persons who wish to make urban journeys, must be regarded as being inherently linked to a transport service and, accordingly, must be classified as ‘a service in the field of transport’ within the meaning of EU law”. Thus, the ECJ found that Uber provides an intermediation service.

The court also pointed out that Uber exercised “decisive influence” over the conditions under which drivers provided their services. Such an intermediation service, the ECJ concluded, must be regarded as forming an integral part of an overall service, the main component of which is transport. 

Consequently, the ECJ concluded that Uber is a transportation firm and not a digital company, which means its services must be excluded from the scope of the freedom to provide services in general, as well as the directive on services in the internal market and the directive on e-commerce. This also means member states can regulate the conditions for providing that service, according to the ECJ ruling. Therefore, Uber must now deal more closely with local governments that set transportation rules and licensing requirements.

Regional Court of Berlin Partially Prohibits Social Network’s Data Collection Practice

On Jan. 16, 2018, the Regional Court (Landgericht) of Berlin ruled that a popular social media network’s default settings, as well as parts of the General Terms and Conditions and Privacy Policy, infringe on German Data Protection Law. In particular, the court ruled that the default privacy settings require the prior consent by the user.

Most of the ruling deals with the insufficiency of various declarations of consent (Zustimmungserklärungen) that the network obtains from its users through its General Terms and Conditions. Among the unlawful declarations are those concerning the transfer and processing of personal data to/in the United States, as well as the use of plain-text (Klarname) names and profile pictures for commercial, sponsored, or related content. The Court explicitly stated, however, that the data processing based on the General Terms and Conditions was not subject to this ruling. The Court’s decision is not final and both parties may wish to appeal.

Higher Regional Court of Cologne Permits Use of Customers’ Routers for the Purposes of Implementing a Comprehensive Network of Hotspots

On Feb. 2, 2018, the Higher Regional Court (Oberlandesgericht) of Köln ruled that Unitymedia NRW may use its customers’ routers to establish an exhaustive WiFi network by means of switching on a second WiFi signal (“WIFI Spots”) without requiring explicit consent (“opt in”) by the customers. According to the ruling, however, Unitymedia NRW must ensure that customers are able to opt out.

The Higher Regional Court states that the company has legitimate interests in implementing additional functions to expand its range of services. The ruling also took into account that many Unitymedia customers want to use WiFi spots outside their private homes. Against this background, the court balanced the interests of Unitymedia and the customers and decided that the use of the routers does not imply an unfair burden for the customers and has to be tolerated if the customer did not object by opting out. The Higher Regional Court’s decision is not final yet.