The Competition Appeal Tribunal's (CAT) recent judgment in Up and Running v. Deckers has highlighted some important considerations for businesses that operate and participate in selective distribution systems in the UK.

Deckers had enforced the terms and conditions of its selective distribution system to try to prevent one of its retailers, Up and Running, from launching a new website to sell out-of-season (i.e. clearance) HOKA running shoes at discounted prices.

Crucially, the terms and conditions and the opaque selection criteria of Deckers' selective distribution system allowed it to apply its selective distribution requirements arbitrarily and to discriminate against certain retailers. This led the CAT to conclude that Deckers' conduct infringed competition law, as there was no plausible legitimate purpose to treating Up and Running in this way beyond restricting its ability to access alternative sales channels and to lower its retail prices for HOKA products.

The CAT was keen to emphasise that the case is fact-specific, but the judgment does present a couple of key takeaways for those involved in selective distribution:

• Record selection criteria clearly and specifically: Selective distribution systems that satisfy the Metro test are not prohibited as anti-competitive agreements. That test requires that the characteristics of the relevant product(s) necessitate selective distribution, and that resellers in the system are chosen based on proportionate and objective qualitative criteria which are applied uniformly to all resellers. Poorly constructed or vaguely recorded selection criteria (like Deckers') can result in an inconsistent and discriminatory assessment of current and potential resellers, which could cause a selective distribution system to fail the Metro test.
• Failing the Metro test is not necessarily fatal: A selective distribution system that does not meet the Metro test does not necessarily restrict competition "by object" (i.e. by its very nature and purpose). The restrictions need to be assessed in the relevant economic and legal context to determine whether this might be the case. However, it might be more difficult to argue that a particular selective distribution system is intended to pursue a legitimate aim (as opposed to restricting competition) in the absence of a clearly articulated and consistently applied set of selection criteria.