Clifford Chance

UK Competition Appeal Tribunal judgment complicates suppliers' ability to control sales of clearance stock

11 November 2024

Most consumer goods companies will be familiar with the difficult question of what to do with unsold, out-of-season stock (clearance stock). Destroying it gives rise to sustainability concerns but selling it at steep discounts can cannibalise sales of higher priced in-season stock and upset consumers that have already purchased those more expensive products. A recent judgment of the UK Competition Appeal Tribunal considered the competition law compliance of certain aspects of a selective distribution system that had been put in place by Deckers – supplier of HOKA branded running shoes – to address this question.

A key takeaway from the judgment is that operators of a selective distribution system should ensure that they have appropriately specified criteria for the selection and rejection of authorised distributors, and any new sales formats that those distributors wish to launch for sales of clearance stock. However, the judgment creates new uncertainties for suppliers with respect to the degree of detail with which they must specify their selection criteria and the extent to which they must be able to justify their criteria by reference to the protection of their brands.
 

 

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