In Czechia, Supreme Court rules for online retailers while shops are closed

In Czech Republic, the delivery of goods bought from online stores was banned when traditional shops had to remain closed during public holidays. But the Supreme Court ruled in favor of a giant online retailer.

Since 2016, the Act on Retail and Wholesale Opening Hours has prohibited some stores to sell products during several public holidays in Czech Republic. To allow people enjoy this time off with their family, stores cannot be open on New Year’s Eve, Easter Monday, or from December 24 afternoon until December 27 for example. Some places are yet exempt of this ban, like stores smaller than 200 square meters (2,153 square feet), gas stations or medical facilities for example.

The Czech Trade Inspection Authority, a body under the jurisdiction of the Ministry of Industry and Trade, can impose a fine up to CZK 1,000,000 (USD 46,000) to the offenders it inspects. And the CTIA had a grudge with a large Czech online retailer: Alza.cz.

With a turnover of more than 1.14 billion euros in 2020 according to the company’s website, Alza.cz is one of the largest e‑commerce operators of Central Europe. This Amazon-like business has also about 40 physical stores in Czech Republic, along with more than 600 locations for Alzaboxes – where customers can pick up their purchased items — spread throughout the country. It also expanded with outlets or showrooms in Slovakia, Austria or Hungary.

Alza stores remain open during the days of the ban, selling products despite the controls of the CTIA. And in September 2017, during the Czech national holiday, an inspection led to a fine of CZK 100,000 (USD 4,500). Except that Alza.cz filed a lawsuit, which went up until the Czech Supreme Court.

Alza.cz store in Pilsen, where an inspector considered the shop violated the ban of operating during the Czech national holiday | Alza.cz

Alza.cz considers the stores act as dispensers of goods

On September 28, 2017, an inspector came to one of Alza’s electronic stores opened in Pilsen and asked for a wireless computer mouse.

However, because of the Opening Hours Act that ban direct sales on the Czech national day, the employee offered the alternative to buy the product online from a laptop dedicated to customers in the store. The inspector then ordered the product from the e‑commerce website, chose the store as a pick-up location, received an text confirmation and went to a payment machine. After the payment in cash was processed, the employee then gave the product to the inspector based on the receipt. During the entire purchasing process, the inspector was physically inside the store.

CTIA considered Alza.cz violated the regulation, while the company considered it respected the law. In fact, Alza.cz argues that on those specific days, the locations are dispensers of goods. For the CTIA however, the ban should apply to any stage of a sale cycle because delivering a product is part of the sale process, which would not be complete without it.

The core of the dispute lies in resolving the question on what a purchase actually is.

The Court of Pilsen forbid Alza.cz to open its stores, setting online retailers on the same level as traditional shops. But five years after the lawsuit, the Czech Supreme Administrative Court eventually concluded the online retailer was right.

Payment terminals in a Alza.cz showroom — Payment terminal in an Alza store | Alza.cz

The order, the moment that defines an online sale

For the court, the order is the core definition of the sale.

“The mere delivery in the shop, including the possible payment for the products in the premises, is not a retail sale as the decisive phase of the sale (conclusion of the purchase contract) did not take place in the store, but in the virtual space of the e‑shop”, the court ruled. “The delivery of goods ordered on the Internet is only one of the stages of the sale process, and is not decisive”.

The court defines a purchase as the moment when both parties express the agreement on the purchasing contract. For an online sale, it is for example when the products in the shopping basket are ordered by the user and accepted by the seller. The payment or the delivery are accessory phases of the sale process.

As such, the Act “does not apply to online stores and their outlets at all”. The stores offer pick-up or delivery services, similar to those of the post office or traditional courier services.

The court annulled the primary decision of the regional tribunal because of a misinterpretation of the Act on Retail and Wholesale Opening Hours. It considers the process for an online purchase has fundamental differences with a direct sale in a brick-and-mortar store. Moreover, if the law banned online sales delivered in a store, the legislator should have explicitly included this situation.

In the complaint, Alza.cz also tried to justify the stores were smaller than 200 m² given that the “demonstration area” was not part of the “sale area”. The court dismissed this argument but in view of the annulment of the decision, the company didn’t dispute it.

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