Online Sales Threaten Car Dealer Profitability. With this headline, the E-Commerce Times wrote on January 17, 2000 about the effects of e-commerce on the traditional ways of distribution. The article referred to Amazon.com’s leaping into the car business by taking a five percent stake in Greenlight.com.

E-commerce has revolutionized marketing and distribution. Marketing and distribution can now be more direct. Many Internet companies, such as Amazon.com, Inc. and eBay Inc., are fully based on Internet-backed marketing concepts. Traditional companies, such as banks, insurance companies and even automobile manufacturers, such as BMW Group, offer both lines of distribution: the classical channels with intermediaries and e-commerce.2 Manufacturers and service providers are attracted to the cost savings associated with e-commerce but they still need intermediaries like independent dealers and distributors. As reselling becomes more centralized by e-commerce, the roles of the dealers might then change from mere resellers to service providers and advisors. Both services and advising are, by their nature, functions the Internet cannot absorb.

In many cases, the classical distribution networks will have to coexist with the direct e-tailing networks. This creates a tension between these two competing networks, which is also mirrored by the fact that dealers and distributors may also start selling on the Internet. Therefore, while the manufacturers and dealer/distributors were once in a noncompetitive, symbiotic, vertical relationship, the advent and rise of ecommerce may lead those participants to be in direct competition with each other.

As manufacturers begin to compete with their distributors for retail sales, both groups will have to prepare for the future by aligning their distribution agreements accordingly. Can manufacturers reserve for themselves all e-tailing outlets and exclude their distributors from competition in that medium, or must they provide for some coexistence?

In addition to other potential legal constraints, direct sales by manufacturers to consumers via e-commerce will raise antitrust issues, since the reservation of certain markets (e-commerce) between competitors may be deemed a horizontal allocation of markets. Or is the relationship between manufacturers and distributors still a mere vertical one in light of e-commerce? How far might antitrust control extend for e-commerce?

The Internet’s lack of geographical territorial boundaries facilitates international e-commerce transactions. This can lead to global legal problems, but due to the absence of any international antitrust regimes, these problems have to be managed by national antitrust regimes.

This article will look at the antitrust regulatory regimes of the United States (U.S.) and the European Union (E.U.), whose economies compose a substantial percentage of GDP worldwide. This article, by analyzing recent statements of the FTC in the U.S. and U.S. antitrust jurisprudence, will conclude that the issue presented here has not been addressed directly. Additionally, Congress has not passed any specific legislation so far on this subject.

On the other side of the Atlantic Ocean, the E.U. has addressed the antitrust aspects of e-commerce in the Block Exemption Regulation on Vertical Restraints 2790/1999 and its commentaries thereon. However, the E.U. also lacks landmark decisions, and both the legislature and European courts have not gone global so far. 

So, for the immediate future, the problem is left to scholars and practitioners who have to apply rudimentary statutes and old court rulings. At present it appears that manufacturers/service providers cannot completely exclude their distributors by reserving e-commerce exclusively for their own direct sales efforts. Such an attempt may be deemed a horizontal cartel which will be explained further below. However, limited e-commerce restriction clauses seem to pass muster in what would be mere vertical relationships between manufacturers and their distributors. At the end of the day, both sides have to be prepared for a fruitful but sometimes contentious coexistence. However, since practitioners rely on guidance from both the legislation and the courts in the U.S. as well as in the E.U., new rulemaking is required. At the end of the day, antitrust laws play an important role in the relationship between manufacturers and distributors, but given the limited guidance available, antitrust laws will hardly control this phenomenon.