The Court of Appeal has recently issued its ruling in Deckers UK Limited v Up & Running (UK) Limited [2026] EWCA Civ 553.  It overturned a judgment of the Competition Appeal Tribunal that had found that Deckers's termination of its selective distribution agreement with Up & Running due to its use of an authorised clearance website breached the Chapter I prohibition of the Competition Act 1998.

Background

Deckers UK Limited operated a selective distribution system for its HOKA branded running shoes. Its terms required retailers to obtain consent before selling via websites, and required any approved website to use a domain name identical or similar to the retailer's bricks-and-mortar shop. Up & Running, a specialist running shoe retailer, proposed launching an anonymised clearance website to sell discounted surplus stock accumulated during the Covid period. Deckers refused permission and ultimately terminated U&R's supply agreement for breach of contract. 

U&R brought proceedings before the Competition Appeal Tribunal alleging the termination was unlawful under section 2 of the Competition Act 1998 as a restriction of competition by object, on two grounds: an unlawful online sales restriction and RPM. The CAT found for U&R, holding that Deckers's conduct constituted "hardcore" RPM and was a by-object infringement, without needing to assess whether the restriction could, in practice, sufficiently harm competition. 

The Court of Appeal's ruling

The Court of Appeal unanimously allowed Deckers's appeal. 

It said that the CAT had applied the wrong legal test. The Court held that the CAT erred by treating the objective or purpose of the restriction as the sole determinant of whether conduct amounts to a by-object infringement. Instead, the CAT should have assessed not only the objective or purpose of the restriction but also its content and legal and economic context, to determine whether it presents a "sufficient degree of harm" to competition. 

On the facts, the restriction could not amount to a by-object infringement. Having applied the correct test, the Court concluded that Deckers's conduct was incapable of exerting a sufficient adverse effect on competition. Key factors included: the restriction was narrow in scope, limited to surplus Covid stock sold via one anonymised website; the agreement was vertical, not horizontal, presenting a systemically lower risk; Deckers had a modest market share in a competitive market with approximately ten suppliers sharing around 70% of the market; retailers remained free to discount through bricks-and-mortar stores and branded websites; and there were no material barriers to entry. 

The Court of Appeal concluded that Deckers's action of termination of its contract with U&R was not a restriction by object under the Chapter I prohibition of the Competition 1998. In any event, it would have been exempt under the block exemptions for vertical agreements. 

Why this matters

Suppliers operating selective distribution systems should note that restrictions on specific sales channels, even those with an incidental muting effect on price competition, will not automatically be characterised as unlawful RPM or by-object restrictions. The legal and economic context of any restriction, including market structure, inter-brand competition, and the scope of the restriction itself, must be assessed. The ruling highlights that narrow, targeted controls designed to preserve the integrity of a distribution network may withstand scrutiny where competition in the broader market remains robust.