Introduction
The judgment of the Court of Appeal of England and Wales (“the Court of Appeal”) in Deckers UK Limited v Up & Running (UK) Limited overturned the decision of the UK Competition Appeal Tribunal (“the Tribunal” or “CAT”), which had held that Deckers’ refusal to permit Up & Running to sell its surplus stock of HOKA shoes through an unbranded website constituted a “by object” restriction of competition law. The Court of Appeal concluded that the Tribunal had misapplied the legal test, terminating its analysis prematurely once it detected an anti-competitive aim, and omitting to examine the wider legal and economic context within which the relevant contractual clause operated.
The impact of this judgment extends well beyond the particularities of the dispute itself. At a time when selective distribution systems face mounting challenges, the judgment recalibrates the limits of competition law intervention in vertical commercial relationships.
This article analyses the findings of the Tribunal and of the Court of Appeal, explains the four-limb test for characterising a restriction as one “by object”, and weighs the implications of the judgment both for selective distribution systems and for the broader application of Article 101(1) TFEU in the digital era.
Background to the case
At the heart of the case lay a dispute between Deckers UK Limited (“Deckers”), the company owning the HOKA athletic footwear brand in the United Kingdom, and Up & Running (UK) Limited (“U&R”), a British chain of running-shoe stores which had joined Deckers’ distribution network in 2016.
Deckers distributed HOKA products through a dual distribution system. On the one hand, it operated the so-called “Main Retail Channel”, through which it channelled in-season stock to a network of authorised distributors — such as U&R — who were expected to align themselves with HOKA’s positioning as a prestige product. On the other hand, it operated a separate, tightly controlled “Clearance Channel”, in which a limited number of specially approved online distributors participated for the exclusive purpose of disposing of surplus, out-of-season stock.
It is worth noting that Deckers itself sold directly to end consumers — both online and through its own physical stores — within both channels, placing it in direct competition with its own authorised distributors, including U&R. This architecture proves critical to understanding the case on two levels: on the one hand, it explains why the Tribunal adopted a sceptical stance towards Deckers’ refusal, finding that the real motive was the protection of the existing Clearance Channel from a potential internal competitor; on the other hand, it explains why the Court of Appeal considered a more careful examination of the economic context necessary before any characterisation of the restriction as one “by object”.
During the Covid-19 pandemic, U&R’s physical stores were compelled to close for an extended period and, as a result, a significant surplus of HOKA footwear accumulated. In order to clear this stock, in July 2020, U&R created a new, stand-alone, unbranded website. Through this website, the surplus HOKA products would be sold at reduced prices, with a domain name not identifiable with U&R, since it would operate on a permanent basis as a clearance outlet. As the contractual terms required, distributors had to obtain Deckers’ approval if they wished to sell the shoes through a website in addition to their physical stores. The website also had to comply with the company’s requirements as announced from time to time, while sales through third parties were likewise prohibited. U&R, in compliance with the contractual provisions, sought Deckers’ approval for the establishment of the website, which it had in fact already created. Deckers, however, refused, invoking both strategic reasons and the degradation of the brand — which is positioned as a high-quality athletic footwear label — as well as a breach of the terms of the parties’ cooperation. Deckers therefore terminated the cooperation agreement, relying on a breach of its terms.
Consequently, U&R brought proceedings before the UK Competition Appeal Tribunal, claiming damages for an unlawful restriction of competition. The grounds on which the action was brought were that (a) the terms and conditions restricted U&R’s ability to promote and sell HOKA products online, including the effective exploitation of the internet as a sales channel, and (b) by preventing U&R from selling the shoes in question on the unbranded website at a reduced price, Deckers was seeking to implement a practice of resale price maintenance (RPM), with the aim of sustaining higher prices for its products.
The findings of the Competition Appeal Tribunal (CAT)
The Tribunal held that Deckers’ refusal in relation to the establishment of the website, and the subsequent termination of the agreement, constituted a “by object” infringement of competition law. According to the Tribunal’s reasoning, Deckers’ conduct rested on its desire to prevent unwarranted price reductions on the shoes through unbranded websites, with no plausible substantive objective beyond the restriction of intra-brand competition.
Specifically, the Tribunal characterised Deckers’ conduct as resale price maintenance (RPM), amounting to the indirect imposition of a resale price. That practice constituted a hardcore restriction, which could not benefit from the exemptions of the Vertical Agreements Block Exemption Regulation (Regulation (EU) 330/2010), as then in force. In addition, because the restriction was also a restriction on passive sales, it was likewise excluded under Article 4(c).
Against that background, the Tribunal held that Deckers had infringed “by object” section 2 of the Competition Act 1998, which corresponds to Article 101(1) TFEU. Accepting U&R’s claims, it accordingly held that Deckers’ practice did not satisfy the criteria for exemption from the prohibition, as articulated in Case C-26/76, Metro v Commission.[3] In particular, it was stressed that Deckers had failed to demonstrate adequately that the contested restrictions were necessary and/or proportionate for the protection of HOKA’s image and quality. In practice, Deckers’ system was found to be poorly designed and insufficiently documented.
The appeal and the intervention of the Competition and Markets Authority (CMA)
The Court of Appeal overturned the Tribunal’s findings and, in particular, challenged its legal approach. The Court of Appeal pointed to the incomplete application of the test for identifying a “by object” restriction of competition. Specifically, as soon as the Tribunal identified an anti-competitive aim, it terminated any further analysis without examining the remaining elements. This, according to the Court of Appeal, amounted to a fundamental error of law.
As established by the Court of Justice of the European Union (CJEU), the characterisation of an agreement as restrictive “by object” must satisfy four cumulative elements. First, the content of the agreement — that is, the scope of the restriction as it emerges from the contractual terms. Second, the objective of the restriction, which is assessed objectively and not by reference to the parties’ intentions. Third, the character of the contractual relationship as horizontal or vertical. Fourth, the economic context, which encompasses market shares, market structure and the likelihood of harm to competition. The Court of Appeal here held that the Tribunal had failed to address the second constituent element of the concept. The mere existence of a restrictive objective does not, of itself, suffice to characterise a restriction as one “by object”.
The Court of Appeal then emphasised the significance of the economic dimension of the case and found that the restriction affected only a small part of the market. Specifically, the evidence before the court showed that Deckers ranked as the sixth-largest supplier of specialist athletic footwear, in a market where approximately ten suppliers collectively accounted for around 70% of sales volume. This factor decisively reinforced the conclusion of insufficient harmfulness, given that the volume of products affected by the contested restriction corresponded to a negligible proportion of both the market shares of Deckers and U&R and, by extension, of the overall relevant market. In those circumstances, competition could not have been harmed to a degree amounting to a restriction.
The approach adopted by the court was analogous to that of the CJEU in Case C-230/16, Coty Germany v Parfümerie Akzente. In that case, the Court held that a prohibition on sales through third-party online marketplaces constituted a partial and legitimate restriction of online sales — in contrast to the absolute prohibition condemned by the same Court in Case C-439/09, Pierre Fabre Dermo-Cosmétique SAS v Président de l’Autorité de la concurrence and Ministre de l’Économie, de l’Industrie et de l’Emploi.
On the one hand, the Court of Appeal focused on Deckers’ decision to rely on its contractual clause with U&R in order to terminate their cooperation, finding that the clause afforded the supplier a margin of discretion. On the other hand, it rejected the Tribunal’s reasoning that the mere existence of an approval clause equates to a “by object” restriction of competition, since the manner in which the clause operated within its legal and economic context had not been examined. In particular, the clause pursued a legitimate objective — the protection of the integrity of Deckers’ selective distribution system — while the termination of the agreement was attributable to the company’s concern over excessive levels of discounting. As regards the legal and economic context, the Court of Appeal referred to the judgments in Cartes Bancaires, Generics (UK), Pierre Fabre, Super Bock and Superleague. According to that line of authority, the characterisation of a practice as a “by object” restriction presupposes that it reveals a sufficient degree of harm to competition, such that an examination of its effects becomes unnecessary.
Within this framework, the observation that Deckers’ position as the sixth-largest supplier in a fragmented market precluded from the outset the requisite degree of harmfulness was held to be critical. Moreover, the Court of Appeal implicitly underlined that the assessment of the harmfulness of a contractual clause cannot be conducted in the abstract, but requires consideration of the parties’ position in the market, the structure of the distribution network and the economic function served by the specific contractual provision. These elements are critical in determining whether the agreement genuinely displays such a degree of inherent harm as to justify its characterisation as a “by object” restriction.
As regards the characterisation of the conduct as a “hardcore restriction”, the Court of Appeal held that the Tribunal had erred in treating Deckers’ conduct as a form of RPM falling outside the “safe harbour” afforded by the Vertical Agreements Block Exemption Regulation (Regulation (EU) 330/2010), as then in force. It found, indeed, that Deckers’ conduct did not undermine U&R’s ability to price freely — or below recommended retail prices — through its own websites and physical stores, and did not prevent customers from having active or passive access to HOKA products through those same channels. It also made clear that even where restrictive conduct technically falls within a category of hardcore restriction under the Vertical Agreements Block Exemption Regulation, this does not give rise to a presumption that it will automatically restrict competition.
In the proceedings before the Court of Appeal, an important role was played by the intervention of the UK Competition and Markets Authority (CMA). The CMA intervened, considering it imperative to clarify the correct legal test for “by object” restrictions.
Notably, the CMA agreed with Deckers that the Tribunal had applied the wrong legal test — an indication that even the regulator did not wish to see an excessively expansive application of the category of “by object” infringements. According to the CMA, the error is also apparent from Case AT.40428 – Guess, which concerned the lawfulness of the restrictions imposed by Guess on the use of online sales advertising by its authorised distributors. The Tribunal had relied on that decision — and principally on paragraph 49 — in which the European Commission had concluded that the objective aim of the relevant provision was not legitimate. The Commission, however, did not treat that element as decisive before reaching its finding of a “by object” restriction of competition.
Concluding remarks
This case constitutes a landmark judgment, as it demonstrates the doctrinal discipline that is necessary in the way restrictions of competition are approached in the digital era. The “by object” criterion cannot be applied loosely and mechanistically. An attempt by a supplier to control prices does not suffice to establish an infringement unless the legal and economic context and the structure of the market are first assessed. At the same time, the judgment vindicates the enduring utility of selective distribution systems, recognising that suppliers enjoy a margin of discretion to safeguard the quality of their networks — above all where inter-brand competition remains robust.
Particular weight attaches, at this point, to the Court of Appeal’s own observation that it is not the mission of competition law to unwind freely concluded contracts which, owing to unforeseen circumstances, proved with hindsight to be disadvantageous for one of the contracting parties. It is not for competition law to rescue undertakings from agreements which, in retrospect, they regret. This reflection delineates the limits of intervention with clarity: competition law intervenes where competition itself is harmed — not where a commercial relationship has simply evolved unfavourably for one of the parties.
Finally, the judgment sets a stricter framework for future intervention by authorities and courts alike, making clear that economic reality prevails over formalistic legal characterisations.
This article was prepared by Panayiota Georgiou during her summer 2026 internship at Trojan Economics.
