Summary of Court of Appeal Judgment

Factual and Procedural Background

This is an appeal from a decision of the Competition Appeal Tribunal dated 31 October 2024. Company A operated a selective distribution system for a branded specialist running shoe ("Brand X") including supply through a sister company via a branded website and through bricks-and-mortar retail. Company B was an authorised specialist retailer with multiple physical stores and its own branded website. Company A's distributor Terms & Conditions contained a clause (Clause 15) requiring distributors to obtain permission to sell products via a website and to use certain website naming arrangements. Company A refused permission for Company B to operate an anonymised clearance website to sell surplus stock and subsequently terminated supply for breach of Clause 15 with 12 months' notice. Company B brought proceedings before the Tribunal alleging the termination breached section 2 of the Competition Act 1998. The Tribunal found a breach by object (characterising the conduct as resale price maintenance (RPM)). Company A appealed. Agency A was admitted as intervener supporting Company A's challenge to the Tribunal's legal test. The appeal was heard by a panel of the Court of Appeal and judgment was handed down on 8 May 2026.

Legal Issues Presented

1. Whether the Tribunal mischaracterised Company A's conduct as "hardcore" resale price maintenance (RPM) and therefore treated it as a restriction of competition by object.
2. What is the correct legal test for a restriction "by object" under section 2 of the Competition Act 1998 and whether the Tribunal erred by treating the objective/purpose of the practice as dispositive without assessing whether the practice revealed a "sufficient" degree of harm in its legal and economic context.
3. Whether, on the facts found by the Tribunal, the termination could in any real and material sense exert a sufficient adverse effect on competition to constitute an object restriction.
4. Whether the conduct was exempt under the Vertical Block Exemption (Commission Regulation (EU) 330/2010) (the VBE).

Arguments of the Parties

Appellant's Arguments (Company A)

• The Tribunal mischaracterised the conduct as hardcore RPM and applied the wrong legal test by treating objective as the whole inquiry.
• The correct test requires examination of content, objective, legal context and economic context; the Tribunal failed to consider whether the practice could, in a real and material sense, restrict competition to a sufficient degree.
• On the facts found (limited tranche of surplus stock, narrow scope, modest market shares, strong inter-brand competition), the termination could not have the requisite sufficiency of harm.
• Even if prima facie caught, the conduct was exempt under the VBE (below 30% market share and not within Article 4(a) or 4(c) exclusions given the narrow practical effect).

Respondent's Arguments (Company B)

• The termination was intended to prevent discounted online clearance sales and therefore constituted RPM aimed at maintaining higher prices; such a restriction is a restriction by object.
• RPM is treated as a severe restriction under the VBE and is a classic example of an object restriction; market share was not relevant to the object inquiry on their case.
• The Tribunal's findings of fact established absence of any legitimate justification for the challenged conduct.

Intervener's Arguments (Agency A)

• The Tribunal erred in elevating objective to be the sole test; the assessment of object requires considering whether the measure reveals a sufficient degree of harm to competition having regard to legal and economic context, including market power.
• A proper analysis must examine inter-brand competition and market structure before concluding an object infringement; decisional practice and Commission guidance point in that direction.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Case 26/76 Metro SB-Großmärkte v Commission [1977] ECR 1875	The "Metro" safe harbour for selective distribution and criteria for its application.	The Tribunal found the Metro safe harbour did not apply. The Court summarised the Metro criteria and treated the Tribunal's acceptance that Metro did not apply as uncontested.
Case 31/80 L'Oréal [1980] ECR 3775	Confirmation of Metro principles in selective distribution contexts.	Cited with Metro and AEG as part of established selective distribution jurisprudence relied on by the Tribunal.
Case 107/82 AEG-Telefunken v Commission [1983] ECR 3151	Selective distribution may affect competition; arbitrariness in admission criteria can indicate restriction by object.	The Tribunal relied on AEG in discussing how discretion and arbitrary administration of criteria can reveal restrictive object; the Court noted this authority was cited by the Tribunal.
Case C-211/22 Super Bock Bebidas SA v Autoridade da Concorrência	Recent CJEU statements on RPM and the need to assess whether an agreement presents a sufficient degree of harm.	The Tribunal relied on Super Bock to treat RPM as generally restrictive by object. The Court held the Tribunal misapplied Super Bock by elevating objective above the broader contextual assessment required.
Case C-307/18 Generics (UK) Ltd v CMA	Guidance on when settlement agreements reveal a plain anticompetitive object; the "no other plausible explanation" formulation.	The Tribunal relied on Generics to treat objective as central. The Court held Generics does not displace the four-part analysis and that the Tribunal mischaracterised Generics by treating objective as the sole test.
Case C32/11 Allianz Hungaria v Gazdasági Versenyhivatal	Support for considering legal/economic context when assessing object.	Cited by the Tribunal and by the Court as part of the corpus requiring contextual analysis.
Case C-439/09 Pierre Fabre Dermo-Cosmétique SAS v Président de l'Autorité de la concurrence (13th October 2011) ("Pierre Fabre")	Selective distribution clause prohibiting internet sales may be a restriction by object but requires individual and specific examination of content, objective and legal/economic context.	The Tribunal relied on a passage from Pierre Fabre to support its conclusion; the Court emphasised Pierre Fabre requires analysis of content, objective and context rather than objective alone.
Case C-67/13P Groupement des Cartes bancaires (CB) v European Commission (11th September 2014) ("Cartes Bancaires")	Requirement to show a "sufficient" degree of harm and to interpret object restrictively.	The Court relied on Cartes Bancaires to underline that the Tribunal must show sufficient degree of harm and apply the object test restrictively; it noted the Tribunal had not performed this analysis fully.
Ping Europe Limited v CMA [2020] EWCA Civ 13	Application of the multi-stage test and the standard of proof for "sufficient" harm in object cases.	The Court cited Ping for the standard that the impugned measure must "reveal a sufficient degree of harm" and for calibration of evidence intensity by context; relied on Ping in concluding the Tribunal's approach to standard of proof was incorrect.
Case C-112/22 Super Bock Bebidas SA v Autoridade de Concorencia (29th June 2023) ("Super Bock")	RPM is not automatically an object restriction; the need to assess content, objectives, legal and economic context.	The Court treated Super Bock as confirming that categorisation under the VBE as "hardcore" is relevant to legal context but does not obviate the need to assess sufficiency of harm; it concluded the Tribunal overstated Super Bock's effect.
Case c-333/21 European Superleague v FIFA (21st December 2023) ("Superleague")	Rules lacking transparent substantive criteria may, by their nature, reveal sufficient harm; discretion without framework can indicate object restriction in the relevant context.	The Tribunal relied on Superleague to treat contractual discretion as revealing object. The Court distinguished Superleague on its facts (dominant, EU-wide regulatory context) and held the Tribunal had over-generalised from that authority.
Case C-298/22 Banco BPN/BIC Português SA and others v Autoridade de Concorrencia BNP (29th July 2024) ("BNP")	Economic context (market concentration/oligopoly) is central; in certain oligopolistic contexts limited evidence may suffice.	The Court cited BNP to show the amount of evidence needed is context-specific and that oligopolistic facts can reduce evidential burden; it used BNP to reject a simplistic form-based approach.
Case AT.40428 - Guess (Commission decision dated 17th December 2018)	Commission analysis that objective illegitimacy alone is not dispositive; economic context must be assessed.	The Tribunal relied on Guess but the Court noted the Commission itself took economic context into account before concluding on object; the Court cited Guess as supportive of a contextual approach.
Case C-230/16 Coty Germany GmbH v Parfümerie Akzente GmbH ("Coty")	Partial restrictions on internet sales in selective distribution for luxury goods are not automatically excluded from the block exemption; whether customers can still find authorised offers in practice is material.	The Court applied Coty when addressing the VBE issues and concluded Coty supports examining the practical/usual effect of restrictions before excluding block exemption application.
Phenytoin [2020] EWCA Civ 399	Recognition of competition law's quasi-criminal character for Article 6 ECHR considerations (context on seriousness and evidential caution).	The Court referred to Phenytoin in emphasising the need for a solid evidential base before finding a breach.
Allianz Hungária Biztosító and Others (EU:C:2013:160)	Support for taking parties' intention into account but not treating subjective intention as decisive.	Cited by the Court to underline that objective is one element among others; Tribunal must consider context beyond subjective intent.

Court's Reasoning and Analysis

The Court addressed three core issues: (1) the correct legal test for an object restriction; (2) application of that test to the Tribunal's factual findings; and (3) the effect of the VBE.

1. The correct legal test

The Court summarised settled authority as requiring a multipartite, contextual inquiry into whether a measure "can in fact" be classified as a restriction by object. That inquiry requires, cumulatively, consideration of:

• the content (scope) of the provision;
• its objective or purpose;
• the legal context (including decisional practice and whether categorisation under a block exemption affects but does not displace the inquiry); and
• the economic context (market structure, inter-brand competition, market shares, barriers to entry).

The Court held that the Tribunal erred by treating the objective/purpose inquiry as the whole test and by elevating objective to the sole determinative factor. The Court emphasised that case law (Cartes Bancaires, Pierre Fabre, Generics, Super Bock, Ping and others) requires a restrictive and fact-sensitive approach: an identified restrictive purpose must still be measured against whether the measure reveals a sufficient degree of harm in its legal and economic context.

2. Application to the facts found by the Tribunal

The Court accepted the Tribunal's factual findings as given. It then analysed them under the four-part test:

• Content/scope: the restriction related to a one-off tranche of surplus Covid stock sold via a single anonymised website; authorised retailers remained free to discount via physical stores and branded websites.
• Objective: the Tribunal found both a legitimate aim (protecting the selective distribution system and brand integrity) and a material motivation to prevent discounted clearance sales via the anonymised site.
• Legal context: the agreement was vertical (selective distribution). The Court emphasised that vertical restraints are generally less likely to be object restrictions and that classification as "hardcore" under the VBE does not automatically equal an object infringement.
• Economic context: expert evidence accepted by the Tribunal indicated the parties' market shares were unlikely to be significant; there were numerous competing suppliers and no material barriers to entry; the tranche of stock affected was a very small portion of the market.

Applying the correct test to the Tribunal's own findings, the Court concluded that the termination, as found, could not have the requisite "sufficient" degree of harm to competition to justify classification as an object restriction under section 2 CA 1998.

3. The VBE

The Court addressed whether the conduct would in any event be exempt under Regulation 330/2010. Applying Coty and the Tribunal's factual findings, the Court concluded that Articles 4(a) and 4(c) (the VBE hardcore exclusions relied on by the Tribunal) did not preclude application of the block exemption in this case because the practical/usual effect of the restriction was narrow: retailers retained freedom to discount via stores and branded websites, and consumers could still access Brand X via multiple channels. The Tribunal's characterisation of the restriction as Article 4(a) or 4(c) hardcore was therefore unsustainable on the facts found.

Holding and Implications

APPEAL ALLOWED

Holding: The Court allowed the appeal. It held that, on the facts found by the Tribunal, the act of termination did not amount to a restriction by object contrary to section 2 of the Competition Act 1998. The Court further held that, in any event, the conduct would have been exempt under Article 2 of Commission Regulation (EU) 330/2010.

Implications: The Tribunal's judgment is set aside to the extent it found an object infringement. The Court concluded the Tribunal erred in law by treating objective/purpose as the sole legal test and by insufficiently applying the required contextual assessment (content, objective, legal context and economic context). The direct effect is that Company A's termination is not, on the Tribunal's findings, an unlawful object restriction and would have been block-exempt under the VBE. The Court emphasised the need for a strict, contextual application of the object test in future cases.