Restrictions on online advertising through Adwords can constitute infringements of competition law

Which links are displayed after a Google search on the keywords is determined through an auction. From a business perspective, it might therefore make sense for e.g. a supplier to restrict its own distributors or resellers from bidding on the same Adwords as the distributor, in order to both keep the bid price on the keywords down and to limit competition between the undertakings on the traffic to their websites.

In the Guess case, the Commission found that such a ban on retailers bidding on the Guess brand name and trademark to obtain a better position in Google AdWords constituted an infringement of competition by object (i.e. a serious competition law infringement) as it restricted retailers’ ability to lead traffic to their own websites.

If the imposed restrictions are considered a restriction on passive selling, as the Guess case seems to indicate, rather than a restriction on active sales, undertakings will not be able to benefit from the block exemptions in the Vertical Block Exemption Regulation.

This is in line with the view expressed by the Commission in its e-commerce sector inquiry, where the Commission stated that restrictions on the use of trademarks for online search advertising could raise concerns if they "restrict the effective use of the internet as a sales channel by limiting the ability of retailers to direct customers to their website."

More clarity and guidance on advertising restrictions, especially regarding the types of restrictions, and the circumstances in which restrictions could be block exempted or justified, can be expected in the coming months as the Commission continues its consultation.

For more information please contact Morten Nissen or Alexander Brøchner.