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Passive sales meaning

What does Passive sales mean?
In competition and distribution practice, passive sales are sales made by simply responding to unsolicited requests from individual customers, including delivering goods or services to them, without actively targeting those customers or their territory or customer group. The term is used across vertical agreements and online sales and is defined and explained in UK and EU competition law guidance (UK VABEO 2022 and CMA guidance; EU VBER 2022 and Commission Guidelines). Key features: - The initiative comes from the customer. - Typical examples include fulfilling orders received via a generally accessible website, responding to inbound enquiries, or supplying repeat orders not prompted by targeted marketing. - By contrast, active sales involve targeted approaches (for example, direct marketing, targeted online ads, or visits) to a territory or customer group. Practical significance: - Clauses restricting passive sales are generally “hardcore” restrictions under UK competition law (Chapter I Competition Act 1998 and VABEO) and EU/Irish competition law (Article 101 TFEU and VBER) and are usually void and unenforceable. - Limited exceptions may apply, but businesses should take care when drafting exclusive or selective distribution, franchise and online sales restrictions. Usage and approach are broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland.
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NEWS
UK: CAT finds Deckers’ HOKA passive online sales and RPM restrictions breach Chapter I; VABE inapplicable; damages to be determined; no supply injunction

Antitrust CAT holds Deckers breached the Chapter I prohibition concerning restrictions on the sale HOKA running shoe brand The CAT has delivered its judgment in Up & Running (UK) Limited v Deckers UK Ltd, stemming from a damages claim issued by Up & Running (UK) Limited (Up & Running) against Deckers UK Limited (Deckers). Up & Running alleged a breach of the Chapter I prohibition in the Competition Act 1998 relating to sales of the HOKA running shoe brand. These proceedings focused on restrictions affecting the sale of HOKA running shoes. The claim sought damages for the alleged breach. The CAT found that Deckers had breached Chapter I by placing restrictions on the sale of the running shoes. Background Up & Running operates a retail business specialising in running footwear and accessories. Deckers had previously supplied HOKA-branded running shoes to Up & Running on a wholesale basis. In July 2020, Up & Running submitted a business proposal to Deckers for the launch of a new website through...

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NEWS
Re Coinfloor: novation by conduct via informed inaction—High Court blueprint for managing passive stakeholders in business sales and liquidations (England and Wales)

Re Coinfloor Ltd (in members’ voluntary liquidation) [2024] EWHC 2767 (Ch) What are the practical implications of this case? This ruling is significant for: confirming that doing nothing can, in context, amount to agreement to a novation by conduct; and setting out a practical framework for dealing with inactive customers or stakeholders, such as shareholders or creditors, who do not engage with a business sale or a liquidation. Conceptual implications As a general rule, novating a contract requires the agreement of all parties, and a court may infer that agreement after the event from the parties’ conduct (unless the contract insists on express consent). This judgment widens the notion of ‘action’ to encompass a party’s inaction. However, inaction alone will not prove novation; it must be accompanied by knowledge of the novation. Put another way, the passive party must be told of the transfer and still choose to remain inactive, thereby signalling tacit consent to the novation. The difficulty, inevitably,...

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View the related Practice Notes about Passive sales

PRACTICE NOTES
European Commission Article 101 TFEU decision: €6.678m fine on Meliá for geo-blocking hotel sales via tour operators (AT.40528)

CASE HUB ARCHIVED This archived case hub sets out the position as at the decision dated 21 February 2020 and is no longer maintained. For more detail, see the timeline, commentary and related cases... Case facts Outline European Commission Article 101 TFEU probe into whether hotel accommodation contracts between the largest European tour operators (Kuoni, REWE, Thomas Cook and TUI) and Meliá Hotels International S.A. contained terms that unlawfully differentiated between customers on the basis of nationality or country of residence (AT.40528)... Latest development On 21 February 2020, the Commission adopted an infringement decision against Meliá Hotels International S.A., imposing a €6,678,000 fine for concluding agreements with tour operators that curtailed both active and passive sales of hotel accommodation. In light of cooperation provided during the inquiry, Meliá received a 30% reduction. Following an assessment of the evidence and the case circumstances, the Commission also decided to close its investigations into the four tour operators... Parties Meliá Hotels International S.A....

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PRACTICE NOTES
UK competition and consumer law in digital markets: guidance on horizontal/vertical agreements, platform dominance, market studies, and the DMCCA 2024

This Practice Note offers direction on how UK competition law applies to digital markets. It examines: the reach of the Chapter I prohibition in digital trade, including competition law concerns with horizontal and vertical arrangements; abuse of dominance by online platforms; UK market studies and market investigations concerning digital markets; and reforms brought in by the Digital Markets, Competition and Consumers Act 2024 (DMCCA 2024). It underscores both the benefits and the difficulties of maintaining competition law compliance across the digital commerce lifecycle. This applies at every stage and touchpoint in practice today. Introduction to competition law and digital trading Over recent decades, the manner in which traders buy and sell goods has changed dramatically. As the internet and other forms of digital connectivity become embedded within society, traders are ever more dependent on digital platforms to transact with business customers and consumers. Traders can now reach customers via numerous platforms, including social media, online marketplaces, and virtual reality platforms. This evolution has expanded audience reach and improved...

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PRACTICE NOTES
Archived: EU vertical agreements (VBER 2010)—Articles 101/102 TFEU analysis, active/passive and internet sales, geo‑blocking, motor vehicle aftermarkets, and block exemption rules

ARCHIVED: This Practice Note is archived and no longer updated. It is not maintained. On 10 May 2022, the Commission introduced the new Vertical Block Exemption Regulation 2022/720 (VBER 2022). This measure was formally adopted by the Commission. With effect from 1 June 2022, VBER 2022 superseded the former Vertical Restraints Block Regulation 330/2010 (VBER 2010, also called the VRBE in this Practice Note). This Practice Note was prepared with VBER 2010 in mind. Note—the VBER 2010 lapsed on 31 May 2022 and, from 1 June 2022, was succeeded by the VBER 2022. Under Article 10 of VBER 2022, a 12‑month transition period (ending on 31 May 2023) applied to pre-existing vertical agreements in force on 31 May 2022 that met the exemption criteria under VBER 2010 on 31 May 2022 but did not meet the exemption criteria under VBER 2022. Accordingly, this Practice Note is provided for background information only...

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PRECEDENTS
Exclusive (or Shared Exclusive) EEA Distribution Agreement — England and Wales law; VBER-compliant; active and passive sales restrictions; online marketplace restrictions; minimum purchase targets; IP licence; termination and compliance schedules

Parties This Agreement is executed on [ date ] [ insert name of party ] [ of OR a company incorporated in England and Wales under number [ insert registered number ] with its registered office at ] [ insert address ] ( Manufacturer ); and [ insert name of party ] [ of OR a company incorporated in [ country ] under number [ insert registered number ] with its registered office at ] [ insert address ] ( Distributor ); Each of the Manufacturer and the Distributor is a party, and together they constitute the parties. Background (A) The Manufacturer produces [ and supplies ] the Products. (B) The Distributor has agreed to distribute [ and support ] the Products on [ an exclusive OR a shared exclusive ] basis in the Territory, in accordance with the provisions of this Agreement...

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PRECEDENTS
Precedent Selective Distribution Agreement (Non‑Exclusive): VABEO‑Compliant terms on Active/Passive Sales, Online Marketplaces, Minimum Purchases and Trade Mark Licensing (England and Wales Law)

This Agreement is entered into on [ insert date ] Parties 1 [ insert name of party ] [ of OR a company incorporated in [ England and Wales ] under number [ insert registered number ] whose registered office is at ] [ insert address ] ( Manufacturer ) 2 [ insert name of party ] [ of OR a company incorporated in [ England and Wales ] under number [ insert registered number ] whose registered office is at ] [ insert address ] ( Distributor ) (The Manufacturer and the Distributor are each a party and, collectively, both the parties.) Background (A) The Manufacturer [ manufactures and ] supplies the [ [ luxury OR premium OR top of market ] ] Products, which are [ associated with [ high OR the highest ] standards of quality in their field ]. (B) The image, and the level of service linked to the Products, are of [ the...

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