- John is a company operating in various fashion manufacturing and retail markets around the world. John is the parent company of both SouthFront and DJSports. SouthFront manufactures puffer jackets for wearing outdoors. While once seen as highly unfashionable hiking gear, their puffer jackets have recently become must-have items. SouthFront jackets have a distinctive look: white in colour, with “SouthFront” sewn in black on the front and back. SouthFront puffer jackets are generally sold at retail for €300, a price that is half of outdoor coats and jackets from designer brands but is also four-times the price of comparable outdoor coats and jackets from high street brands. While there is no intellectual property protecting the white-and-black look of their puffer jackets, new producers of similar puffer jackets would struggle to overcome consumer perceptions that SouthFront has authenticity, having produced the same style of puffer jacket for around fifty years. SouthFront jackets are currently only sold in the EU.
DJSports is a chain of retail stores selling various sports and fashion products, with physical and online stores in all EU Member States. One of the products it sells is SouthFront puffer jackets. SouthFront has been keen to maintain its brand image, so only allows for its puffer jackets to be sold by two retail chains throughout the EU: DJSports and ExerciseDirect. From 2020 to 2022, DJSports sold 30% of SouthFront puffer jackets in the EU, while ExerciseDirect accounted for the remaining 70% of sales. While there are no notable differences between DJSports and ExerciseDirect as retailers of SouthFront jackets, research suggests that the disparity in sales is because ExerciseDirect also exclusively sells WindStrength trainers, the pairing of which with a SouthFront jacket is a popular look. In January 2023, John changed the commercial strategies of SouthFront and DJSports.
First, John instructed SouthFront to increase the wholesale price at which its puffer jackets are sold to DJSports and ExerciseDirect (from €200 to €250), while requiring DJSports to maintain its retail price for the sale of SouthFront jackets to consumers at the existing level (€300). John has suggested that this increase is to cover the rising energy cost of manufacturing SouthFront jackets.
Second, John entered an agreement with WindStrength for their trainers to only be sold by DJSports in the EU for the next two years. As a result, WindStrength trainers are no longer sold by ExerciseDirect.
Third, John instructed its lawyers to pursue ExerciseDirect in courts throughout the EU on the – fictitious – claim that ExerciseDirect sold counterfeit SouthFront jackets. John also started advertising on social media that DJSports were the only “trusted” retailer of SouthFront puffer jackets. Between January and April 2023, DJSports sold 32% of SouthFront jackets throughout the EU, while ExerciseDirect accounted for the remaining 68% of sales. There is no indication that ExerciseDirect is experiencing financial difficulties. It has nevertheless complained to the European Commission about John’s conduct.
Advise John as to whether its conduct may amount to an abuse of dominance pursuant to Article 102 TFEU.
