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

Under Article 101(3) TFEU, the provisions of paragraph 1 are not applicable in the case where any agreement contributes to “improving the production or distribution of goods or to promoting technical or economic progress”. Although not expressly mentioned, services are also covered by this provision . The contribution to economic progress that the Commission identifies to efficiency gains  may be  …

Contribution to economic progress/Efficiency gains

Under Article 101(3) TFEU, the provisions of paragraph 1 are not applicable in the case where any agreement contributes to “improving the production or distribution of goods or to promoting technical or economic progress”. Although not expressly mentioned, services are also covered by this provision . The contribution to economic progress that the Commission identifies to efficiency gains  may be localized in the area where production or distribution takes place and be of wider benefit to the economy in general.

In theory, vertical agreements (distribution agreements or exclusive purchase agreements, selective distribution, franchise) improve distribution by creating quantitative  or qualitative efficiency gains . Exclusive or selective distribution agreements lead to a better organization of the network, enable distributors to maintain larger stocks and encourage promotion drives. Often implementation by the distributor of an after-sales and warranty service  is conditional upon the existence of such agreements. An exclusive supply agreement leads to improved sales planning, reduces distribution costs  and facilitates product promotion and market penetration . Franchise agreements enable the franchisor to establish a network with limited investment  and the franchisee to access the market more easily. More generally, vertical restraints  may be helpful in avoiding free-riding under which an operator free-rides on the promotion efforts of another operator , make it easier to enter new markets  or to introduce new products , avoid the “hold-up problem”  or the double marginalization , are a way of making scale economies , avoiding capital market imperfections  and creating a brand image by imposing quality standardization . 

In assessing the contribution to economic progress, EU authorities do not merely take stock of the overall economic picture by exclusively reviewing the advantages of the agreement from the point of view of its immediate economic efficiency, such as cost reductions , but may sometimes take into account more general considerations such as the protection of small businesses , health , the environment  or jobs  or the capacity to innovate .

For application in the services sector: Commission Decisions No 85/44 of 10 December 1984, Grohe's distribution system, LawLex200500005321JBJ; No 88/604 of 14 November 1988, ServiceMaster, LawLex200500005332JBJ.

Commission Notice No 2004-C 101-08 of 27 April 2004, on the application of Article 81(3) of the Treaty, pts 48 et seq. See also Case T-168-01 GlaxoSmithKline Services Unlimited Judgment of 17 September 2006, LawLex200600001963JBJ. 

To persuade a distributor to make investments, it may be necessary to provide territorial protection to such distributor: Guidelines on Vertical Restraints, pt 16(c).

If a manufacturer of quality products cannot initially limit its sales to premium distributors, it runs the risk of being de-listed and the product introduction may fail: Guidelines on Vertical Restraints, pt 16(d).

A supplier may not commit client-specific investments before supply guarantees are made: Guidelines on Vertical Restraints, pt 16(e).

Double marginalization can be avoided by imposing a maximum resale price on the retailer: Guidelines on Vertical Restraints, pt 16(a).

By concentrating resale on a limited number of distributors, a manufacturer creates scale economies at the distribution level: Guidelines on Vertical Restraints, pt 16(g). 

The buyer or supplier may have better information on its contracting party's solvency and be able, through their exclusive relationship, to obtain extra security for its investment: Guidelines on Vertical Restraints, pt 16(i).

Guidelines on Vertical Restraints, pt 16(h).

Commission Decision No 89/536 of 15 September 1989, Film purchases by German television stations, LawLex200500004629JBJ.

Case 26/76 Metro v Commission [1977] 1875, LawLex200400002980JBJ.

Commission Decision No 75/73 of 13 December 1974, Bayerische Motoren Werke AG, LawLex200700001839JBJ.

Commission Decision No 89/536 of 15 September 1989, Film purchases by German television stations, LawLex200500004629JBJ: an agreement between public broadcasters and a film production company, the object of which being the right to broadcast films selected in its library, contributes to improving the distribution of products, where it allows the dissemination of a large number of films for the first time on television and provides “windows” during which broadcasting licenses can be granted to third parties.

Case T-168/01 GlaxoSmithKline Services v Commission [2006] ECR II-2969, LawLex200700000304JBJ.

See Regulation No 1983/83 of 22 June 1983 on the application of Article 81(3) EC to certain categories of exclusive distribution agreements, OJ L 173 of 30 June 1983, 1.

Commission Decision No 2001/837 of 19 September 2001, Hofmann, LawLex200500004674JBJ.

Commission Decision No 2003/778 of 23 July 2003, Joint selling of the commercial rights of the UEFA Champions League, LawLex200500004523JBJ: the selling of media rights in packages through a single point of sale facilitates access to the national market in terms of language, culture, communication and commercial transparency.

Guidelines on Vertical Restraints of 2022, pt 165.

Guidelines on Vertical Restraints, pts 12 et seq.

Exclusive distribution may be helpful in avoiding free-riding between distributors, or, free-riding between suppliers: Guidelines on Vertical Restraints, pt 16(b).

European Distribution Law

43. Contribution to economic progress/Efficiency gains

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

43. Contribution to economic progress/Efficiency gains

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise