Background

Economic theory of vertical restraints

Economic theory and competition law

Should distributors have more protection?

Vertical restraints put to the test of economic analysis

Structure of distribution law - Book plan

General bibliography

Introduction

Localizing the anticompetitive effects

Effect on trade between Member States

Scope ratione loci

Concept of an undertaking

Intra-group agreements

Scope ratione personae

Applicability of competition law to vertical agreements

Definition of the relevant market

Anticompetitive object or effect

Appreciability threshold

Concept of agreement and concerted practice

Prohibition of vertical restraints

Block exemptions

Individual exemptions and rule of reason

Exemption of vertical restraints

Control of vertical restraints

Prohibition

Exoneration

Restrictive agreements

Principle

Applications

Abuse of dominant position

Exclusive purchase/Exclusive supply

Resale outside network

International agreement

Exclusive distribution agreements

Manufacturer's guarantee

Protection of the brand

Protecting the network against third parties

Relations between the parties

Selective distribution

Hardcore restrictions

Individual exemptions

Rule of reason

Prohibition of restrictive agreements and individual exemptions

Distribution of new motor vehicles : Regulation No 330/2010

After-sales : Regulation No 461/2010

Block exemption

Motor vehicle distribution agreements

Merger control

Franchising

Commercial agency and competition

EU harmonization

International agency

Commercial agents

This book provides a wide-ranging review of the European rules relating to distribution: exclusive purchase and exclusive supply, exclusive and selective distribution, motor vehicle distribution, franchises, commercial agents.

European Distribution Law

Aware of the difficulties raised by the traditional rules, the EU authorities decided to develop more flexible rules on exemptions. Today, the regulations no longer establish lists of exempted clauses, but merely identify clauses which will prevent the exemption even if the market share thresholds are not exceeded. Black clauses deprive the agreement in its entirety of the benefit of the exemption. Red clauses cannot qualify for an exemption relative to a determined obligation but do not call into question the exemption for the overall agreement.

On 22 December 1999, Regulation No 2790/1999 was adopted on the implementation of Article 81(3) [now Article 101(3)] of the Treaty to categories of vertical agreements , which laid down a presumed legality for agreements below the threshold of 30% of market share and which included no hardcore restrictions or red clauses, constituted the first culmination of the reform of the rules of competition undertaken by the Commission to improve legal certainty for businesses, to reduce the costs relating to notifications and lighten the workload of the EU authorities.

The scope of the regulation was very wide as it applied to virtually all vertical agreements, i.e. all agreements between undertakings located at different levels of the production and distribution chain having as their object the buying, selling or resale of certain goods and services. Only motor vehicle distribution agreements were excluded, as the Commission considered that the particular nature of that sector justified a special treatment. The regulation's extensive scope of application showed a concern for simplification and standardization of the rules governing the various distribution systems. The Commission wished to allow undertakings to freely choose their marketing method depending only on their strategic interests and not on the Commission's policy towards a given distribution system.

Regulation No 2790/1999 has been replaced by Regulation No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices . The text, accompanied by guidelines , retains a very broad scope of application since it covers all vertical agreements , as well as agreements containing ancillary provisions on the assignment or use of intellectual property rights directly related to the use, sale or resale of goods or services. According to the European authority, Regulation No 330/2010 should enable distributors to meet the demand of consumers, who, wherever they are in the Union, should be able to purchase goods or services at the most attractive price. 

The regulation lays down a presumption of legality of agreements which do not contain restrictions having serious anticompetitive effects where the supplier and the buyer each hold a market share that does not exceed 30%, it being specified that the supplier's market share is calculated on the downstream market, on which he sells the contract goods or services, while the buyer's market share is calculated on the upstream market, on which he buys the contract goods or services (Article 3) . Only agreements which are contrary to the provisions of Article 101(1) but which meet with sufficient certainty the conditions of application of Article 101(3) are included in the category (Article 2). Beyond this, the parties must assess their agreement with the Guidelines published by the Commission. The exemption is now retroactive and is valid from the conclusion of the agreement.

The Commission's position becomes more flexible towards hardcore restrictions. Although the anticompetitive nature of the agreement may be presumed where it contains such restrictions, such a presumption is now rebuttable (Guidelines, point 47). Exemption will be granted if it is established that including a black clause in the agreement results in efficiency gains and that the conditions laid down in Article 101(3) TFEU are fulfilled. The prohibition of resale price maintenance is no longer absolute. According to the guidelines, resale price maintenance may not result in restricting competition and may lead to efficiencies (points 223 and 225 et seq.). 

Although restrictions on the sales made over the internet remain prohibited, the Commission recognizes to selective distribution network suppliers the right to impose quality standards for the use of the internet site just as for a shop or for advertising. The supplier may thus require the distributor to have one or more traditional shops or showrooms before selling over the internet . 

Lastly, upfront access payments paid by suppliers which allow them to get access to the network and remunerate services provided by the distributor for a certain period are exempted below the 30% threshold. Above, they are likely to result in anticompetitive foreclosure since they induce the supplier to channel its products through only one distributor and constitute a barrier to entry for other suppliers (point 203 et seq.). The same applies for category management agreements (point 209 et seq.). 

The Commission gave up the idea of purely and simply substituting the new general regulation for the motor vehicle regulation No 1400/2002, expired on 31 May 2010 and proposed, for that industry, to apply different legal systems for distribution (extension of the motor vehicle regulation for three years then application of the general regulation) and the aftermarket. In the motor vehicle regulation No 461/2010 of 27 May 2010, the Commission has adopted an original solution consisting in submitting, for the main part, aftermarket to the conditions of the general regulation No 330/2010 and to provisions specific to the motor vehicle industry . In other words, agreements relating to the aftermarket must, in order to benefit from a block exemption, fulfill the conditions described in Regulation (EU) No 330/2010 and not contain any of the hardcore restrictions listed in Article 5 of Regulation (EU) No 461/2010. According to the Commission, the existence of a separate market for the motor vehicle aftermarket, on which effective competition depends on the degree of interaction between authorized repairers which are dependent on a network and authorized independent operators, implies the provision of specific conditions of exemption, in particular to ensure the security of end-users and to guarantee repairers' access to essential inputs, such as spare parts and technical information (recital 13). These specific features make it necessary to provide for “stricter requirements concerning certain types of severe restrictions of competition that may limit the supply and use of spare parts in the motor vehicle aftermarket” (recital 15). As the expiry date of Regulation No 461/2010 approached, the Commission decided to extend it for a further five years , making no changes other than those relating to its duration, and amending the supplementary guidelines only marginally.

Regulation No 330/2010 having expired on 10 May 2022, the Commission adopted, on that date, Regulation No 2022/7209  which renews the exemption of vertical agreements and takes into account the most recent market developments, in particular the importance of online sales and the emergence of operators such as internet platforms, as revealed by its May 2017 e-commerce report as well as by the case law of the Court of Justice. The new regulation does not make major changes to the previous regime. The novelties introduced concern dual distribution, defined more precisely, a slight softening of the favor granted to internet distribution, the regime for hybrid platforms, exclusive distribution and the definition of active and passive sales. Like its predecessors, the regulation is supplemented by guidelines .

European Commission Notice N° 2022/C 248/01 of 28 June 2022, OJEU C 248 of 30 June 2022, 1.

Guidelines on Vertical Restraints No 2010/C 130/01, OJEU C 130 of 19 May 2010, 1.

Case T-691/14 Servier SAS, Judgment of 12 December 2018, LawLex201900001337JBJ.

The Guidelines on Vertical Restraints specify the rules of calculation of the market share. In-house production, that is, production of an intermediate product for own use, may be very important in a competition analysis as one of the competitive constraints or to accentuate the market position of an undertaking, but is not taken into account for the calculation of market share for intermediate goods and services. Where a producer of final goods also acts as a distributor on the market, the market definition and market share calculation need to include sales of their own goods made by the producers through their vertically integrated distributors and agents: pt 94 and 95.

That possibility offered to the network head to require the opening of one or more showrooms is only included in the English version of the new Guidelines No 2010/C 130/01 of 19 May 2010, at pt 54 “Under the block exemption the supplier may for instance require its distributors to have one or more brick and mortar shops or showrooms as a condition for becoming a member of its distribution system”.

In addition to the guidelines on vertical restraints, there are also guidelines for the automotive sector. In particular, for the after-sales sector, they lower from 100% to 30% the market share threshold to be granted the exemption for qualitative selective distribution (Commission Notice EU 2010/C 138/05 of 28 May 2010, Additional guidelines on vertical restraints in motor vehicle sales and repair and motor vehicle spare parts distribution agreements, pt 59). These guidelines were slightly amended on the occasion of the extension of Regulation No 461/2010 by the Commission Notice “Modification of the Commission Notice - Supplementary guidelines on vertical restraints in agreements for the  sale and repair of motor vehicles and for the distribution of spare  parts for motor vehicles” 2023/C 133 I/01 published on 27 April 2023 in the OJEU C 133 I.

Regulation No 2023/822 of 17 April 2023 amending Regulation No 461/2010 (UE) as regards its period of application, OJEU L 102 of 17 April 2023, 1.

38. "New generation" regulations