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

Since the end of the 1970s, and in particular following the Metro judgment  EU law has, for selective distribution, developed an approach to assessment that is extremely favorable to certain restrictions on competition and this has become known as the rule of reason, after the American rule of reason doctrine. Identical in its principle, the scope of the rule of reason is very different to its American counterpart, since it is not of general application but is limited to certain specific cases.

The rule of reason grants preferential treatment to some anticompetitive practices by only assessing their effects within the context of Article 101(1) TFEU, and thereby removing the need to first subject practice to the rule before being able to obtain an exemption on the basis of Article 101(3) TFEU . This shortcut is however only possible where it is very clear that the harm to competition found is offset by the beneficial effects of the agreement and also on the condition that the agreement contains no obvious restrictions such as price-fixing, market-sharing or the control of outlets .

The General Court appeared to be putting the brakes on any development of the rule of reason when it asserted that, “the existence of such a rule has not, as such, been confirmed by the EU courts” . According to the Court, recognition of the rule of reason would call into question the rules prescribed by Article 101 TFEU and the provision in paragraph 3 would lose much of its effectiveness. It has also ruled that the examination of the objective necessity of a restriction of competition cannot be interpreted as implying a need to weigh the pro and anti-competitive effects of an agreement, as such an analysis can take place only in the specific framework of Article 101(3) TFEU . From then on, the rule of reason, which appears to have been applied in the case law, has been more commonly relied on for the actual assessment of agreements, which implies going further than an analysis of the clauses and taking account of the actual context in which the agreements would produce their effects . The so-called rule of reason is thus reduced to a consideration of economic and legal context . The position of the General Court , which was ultimately upheld by the Court of Justice  does not reflect the reality of the matter. Apart from the fact that a contextual appraisal of the restriction may in itself already be seen as a manifestation of the rule of reason, there is no doubt that such a rule has been consecrated by the EU authorities who have had no hesitation in justifying restrictions on competition on the basis of the rule of reason.

In the field of vertical agreements, EU authorities sometimes carry out a real economic evaluation to assess the positive or pro-competitive effects which would justify the practice . The Court of Justice has thus held that all the restrictive clauses included in a franchise agreement to ensure the protection of communicated know-how or the preservation of the identity and the reputation of the network, do not constitute restrictions of competition within the meaning of Article 101(1) TFEU . The principal area for application of the rule of reason is selective distribution. In that area it has a specific application: selective distribution does not contribute to increased competition on the market, but to the improvement of the service to consumers through the selection of distributors by the supplier . With regard in particular to luxury goods, the Court of Justice has again recently stated that a selective distribution system which aims primarily to preserve the luxury image of products is in accordance with Article 101(1) TFEU, provided that resellers are chosen on the basis of objective criteria of a qualitative nature, laid down uniformly for all potential resellers and not applied in a discriminatory fashion, that the characteristics of the product in question necessitate such a network in order to preserve its quality and ensure its proper use and that the criteria laid down do not go beyond what is necessary . 

In its more recent form, the “European” rule of reason has come to take on a very different interpretation to its American counterpart, with the criteria used intended more to ensure the objectivity of the selection of distributors than as a measure of the impact of the restriction of competition. The adoption of the block exemption regulations on the application of Article 101(3) TFEU to vertical agreements  should not, in theory, affect the rule of reason: a regulation does not annul case law. It remains nevertheless that there will presumably be less opportunity to apply the rule of reason after the adoption of the regulations on vertical restraints, especially for cases falling below the threshold of 30% of market share, the category in which block exemptions apply.

Case 26/76 Metro v Commission [1977] ECR 1875, LawLex200400002802JBJ.

A judge-made rule, the rule of reason has often been challenged by the Commission, which has resorted to the block exemption regulations to reach the same result by the statutory route; See, e.g., the assimilation of the rule of reason in the Pronuptia judgment (Case 161/84 Pronuptia [1986] ECR 353, LawLex200500004110JBJ).

See Case 161/84 Pronuptia [1986] ECR 353, LawLex200500004110JBJ.

See Case 26/76 Metro v Commission [1977] ECR 1875, LawLex200400002980JBJ; Commission Decisions No 92/33 of 16 December 1991, Yves Saint Laurent Parfums, LawLex200500005352JBJ; No 92/528 of 24 July 1992, Givenchy, LawLex200500004686JBJ; Case T-19/92 Leclerc v Commission [1996] ECR II-1851, LawLex200500003930JBJ.

Case C-230/16 Coty Germany GmbH, Judgment of 6 December 2017, LawLex201800000317JBJ: In application of those principles, it found that the prohibition imposed by a supplier on its authorized distributors, of the use by the latter, in a discernible manner, of third-party undertakings for internet sales of its luxury goods was appropriate to ensure that the goods were exclusively associated with the authorized distributors in the minds of consumers. Such a prohibition is also an appropriate means for the supplier to ensure that its products will be sold online in an environment which corresponds to the qualitative conditions which it has set, in the absence of any contractual relationship with the platforms allowing it to require them to comply with them. Lastly, it does not go beyond what is necessary to achieve the objective of preserving a luxury image insofar as the supplier does not impose an absolute prohibition of the sale of the contract goods online, but only prohibits recourse to third-party platforms  which operate in a discernible manner towards consumers.

The latest of which is Regulation No 2022/720 of 10 May 2022, OJ L 134 of 11 May 2022, 4.

Case T-374/94 European Night Services and others v Commission [1998] ECR II-3141, LawLex200400002947JBJ.

See Case T-112/99 M6 and others v Commission [2001] ECR II-2459, LawLex200500003906JBJ.

Case T-111/08, MasterCard Inc., Judgment of 24 May 2012, LawLex201200001497JBJ.

See Case 56/65 Société Technique Minière v Maschinenbau Ulm [1966] ECR 337, LawLex200400002665JBJ; Case T-112/99 M6 and others v Commission [2001] ECR II-2459, LawLex200500003906JBJ.

See Case T-374/94 European Night Services and others v Commission [1998] ECR II-3141, LawLex200400002947JBJ. See also, Case 56/64 and 58/64 Consten v Commission EEC [1966] ECR 556, LawLex200400002598JBJ; Case 5/69 Völk v Vervaecke [1969] ECR 295, LawLex200400002764JBJ; Commission Decision No 98/531 of 11 March 1998, Van den Bergh Foods Limited, LawLex200400002932JBJ.

Case T-328/03, O2 (Germany) GmbH & Co., Judgment of 2 May 2006? LawLex200600002434JBJ. Case T-491/07, Groupement des cartes bancaires “CB”, Judgment of 29 November 2012, LawLex202000001988JBJ.

Case C-307/18 Generics (UK) Ltd, Judgment of 30 January 2020 LawLex202000000131JBJ.

Commission Decision No 2004/208 of 16 October 2003, ARA - ARGEV, ARO, LawLex200500004535JBJ: a provision forbidding all competition between collection companies in an exclusive sector does not eliminate competition where a competitive call for tender will be launched at the latest after expiry of a five-year contractual period.

48. Development and challenges