Deckers v Up & Running: Court of Appeal finds CAT out of step with law on object infringements

On 8 May 2026, the UK Court of Appeal set aside the Competition Appeal Tribunal's (CAT) October 2024 judgment in relation to Deckers' selective distribution system, which had found that banning an authorised retailer from setting up a new, unbranded discount website constituted resale price maintenance (RPM) and was therefore a restriction of competition "by object".

The judgment has implications for brand owners, retailers and other operators of selective distribution systems in the UK.

What you need to know

• Establishing an object restriction of competition law requires a cumulative assessment of its content, purpose, and legal and economic context. It is not sufficient to look at a single factor, such as objective purpose or subjective intention, in isolation.
• Market dynamics, including the parties' market shares, are relevant to assessing whether an agreement restricts competition by object. It is not necessary to show actual effects, but an object infringement must reveal a sufficient degree of harm to competition.
• Distribution arrangements are generally less likely to harm competition than agreements between competitors. Brand owners can apply contractual levers to protect their brands within the bounds of competition law.

Background and CAT judgment

Deckers UK Limited operates a selective distribution system for its HOKA-branded shoes in the UK. Between 2016 and 2021, Deckers supplied HOKA shoes to Up & Running (UK) Limited (U&R), a UK retailer of specialist running shoes and accessories. U&R operated through physical stores and its eponymous website.

Selective distribution systems can fall outside the prohibition on anti-competitive agreements in Chapter I of the Competition Act 1998 and Article 101 of the Treaty on the Functioning of the European Union if they satisfy the criteria set out in Metro v Commission (Case 26/76). If they do not meet the Metro criteria, they must comply with competition law or benefit from an exemption, such as under the EU Vertical Block Exemption Regulation (VBER) (or its UK equivalent, Vertical Agreement Block Exemption Order (VABEO)), by meeting certain market share thresholds and ensuring there are no “hardcore” restrictions (see our March 2026 update).

Deckers required retailers to obtain permission to sell shoes via a website. U&R sought to set up a new, unbranded website (runningshoes.co.uk) to sell excess stock that had accumulated during the Covid-19 period at a discount, as well as any future clearance stock.

Deckers rejected U&R's request as being inconsistent with its brand strategy, but U&R proceeded to sell discounted stock (including HOKA shoes) via the website. In response, Deckers terminated its contract with U&R for breach of its terms. U&R argued this termination was unlawful and sought damages on the basis that Deckers' terms restricted competition by object for the following reasons:

• the terms and conditions restricted U&R's ability to market and sell HOKA products online, including making effective use of the internet as a sales channel; and
• by preventing U&R from selling HOKA shoes on the anonymised website at a discounted price, Deckers was attempting to engage in RPM with the aim of maintaining higher prices for HOKA products.

The CAT agreed with U&R on both counts, finding that Deckers' objective in terminating the agreement was to prevent undue discounting of HOKA shoes via U&R's anonymised website, amounting to RPM. The CAT considered that, where the only plausible objective is the restriction of competition on the merits, the provision will constitute a "by object" infringement. The CAT considered that no exemption under the version of VBER then in force was available because the infringements were "hardcore" RPM, as well as an excluded restriction on passive sales.

Deckers appealed to the Court of Appeal. The Competition and Markets Authority (CMA) intervened in support of Deckers in the interests of clarifying the test for "by object" restrictions.

Court of Appeal judgment

The Court of Appeal's judgment of 8 May 2026 set aside the CAT's judgment and clarified the legal test to be applied when assessing object restrictions, in the context of selective distribution systems and more generally.

The legal test for object infringements

The Court of Appeal summarised the existing EU and UK case law on the assessment of object infringements. In particular:

• The question is whether the agreement in question "revealed a sufficient degree of harm” to competition to be classified as a restriction by object. While there is no need to investigate the actual effects, the "sufficient degree of harm" must be substantiated and not simply asserted.
• Assessments of object restrictions in horizontal and vertical agreements require an examination of the (i) content (i.e. the scope of the restriction), (ii) objectives / purpose (which requires an objective analysis), (iii) legal context, and (iv) economic context (including strength of inter-brand competition and market shares). These factors are cumulative.

The Court of Appeal concluded that the CAT had erred in its application of the test for an object infringement. The Court held that:

• While a restrictive intent or objective is relevant evidence, the test for an object infringement cannot be determined by the objective or purpose of the agreement alone. An agreement with a restrictive purpose will not satisfy the test for an object infringement if it does not reveal a sufficient degree of harm to competition.
• A selective distribution agreement falling outside the Metro safe harbour does not automatically amount to, or very likely amount to, a restriction of competition by object.
• Clauses that are classified as “hardcore” by the VBER are not automatically considered to restrict competition by object (citing Case C-211/22 Super Bock).
• Clauses that provide the owner of a selective distribution system with discretion that could potentially be used for an anti-competitive purpose do not automatically restrict competition by object (distinguishing Case C-333/21 Superleague) – regard must be had to the wider economic context of the agreement.

Deckers did not commit an object infringement

Having found that the CAT applied the wrong test for object infringements, the Court of Appeal decided not to remit the case to the CAT. On the basis of the facts found by the CAT, the Court of Appeal found no basis to conclude that Deckers had infringed the Chapter I prohibition by object, taking into account the content and proper legal and economic context for the arrangements. In particular:

• The content or scope of the restriction was narrow: U&R and other retailers were not prevented from discounting products in their physical stores or on their name-branded websites.
• Deckers' purpose was to protect the integrity of its selective distribution model through control over the establishment of new websites and the level of discount U&R intended to offer. However, Deckers' purpose did not include limiting discounting in physical stores or via branded websites.
• In relation to legal context, the Court of Appeal noted several points: (i) case law recognises that selective distribution systems may contain restrictions that mute price competition in order for the agreement to operate effectively; (ii) restrictions on internet sales can be legitimately designed to protect the integrity of a selective distribution system (see Case C-230/16 Coty); (iii) there is no presumption that RPM is an object restriction; (iv) permitting price restrictions is not contrary to overarching competition policy; and (v) the role of competition law is not to save parties from "bad bargains, or deals they come to regret".
• When considering the economic context, the issues to consider include whether the agreement is horizontal or vertical, the product markets and the parties' shares on those markets, the number of other competitors and their strength, barriers to entry, the strength of inter-brand competition, and the real-life effect of the agreement.

The CAT had found that Deckers’ and U&R's market shares were unlikely to be significant and that there were a significant number of competing suppliers with comparable market shares, indicating the price-competitive nature of the market. Vertical restrictions of intra-brand competition, where inter-brand competition is strong, are far less of a concern. The shoes affected by the restrictions represent a very small proportion of the total product market, which was highly relevant to the question of whether the restriction could sufficiently harm competition.

Application of VBER

Although an object restriction of competition had not been established, the Court of Appeal addressed the CAT's findings in relation to the VBER. It found that the exemption in Article 2 of the VBER could apply to the terms of the selective distribution system because:

• the general position was that dealers ultimately had control over their pricing and in a real and practical sense could discount freely – this was not a hardcore RPM restriction under Article 4(a) VBER; and
• consumers could purchase goods freely and were not denied access to retailers' branded websites and physical stores – this was not an excluded restriction on passive sales under Article 4(c) VBER.

Comment

The judgment emphasises the importance of economic context when assessing object infringements, although the weight placed on economic evidence in relation to the product market and in particular the parties' market shares could be interpreted as the Court of Appeal straying into the territory of an "effects analysis".

The CMA’s intervention in support of Deckers made clear that the CMA considers inter-brand competition to be central when considering the economic context for vertical restraints: "in relation to selective distribution a consideration of relevant economic context includes the market position of the supplier and its competitors. A loss of intra-brand competition is only problematic where inter-brand competition is limited. Market power was always relevant".

Want to know more?

• New rules on vertical arrangements in the EU and UK (March 2026)
• Podcast, Vertical Agreements in the EU and UK: Traditional Distribution Issues.
• Podcast, Vertical Agreements in the EU and UK: Online Distribution.
• Podcast, Vertical Agreements in the EU and UK: Comparing the UK and EU Rules.

Other author: Tobias Sales, Trainee Solicitor.