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

Prior to the adoption of the first general regulation, exclusive purchase agreements were governed by the BER 1984/83 of 22 June 1983 which applied for “agreements to which only two undertakings are party and whereby one party, the reseller, agrees with the other, the supplier, to purchase certain goods specified in the agreement for resale only from the supplier or from a connected undertaking or …

Prior to the adoption of the first general regulation, exclusive purchase agreements were governed by the BER 1984/83 of 22 June 1983 which applied for “agreements to which only two undertakings are party and whereby one party, the reseller, agrees with the other, the supplier, to purchase certain goods specified in the agreement for resale only from the supplier or from a connected undertaking or from another undertaking which the supplier has entrusted with the sale of his goods”. Exclusive purchase could only be exempted if it was limited to five years. Furthermore, the regulation contained special provisions in respect of service stations and beer supply contracts. For beer supply, the duration of the exclusivity would differ depending on the product that was the subject matter of the agreement (10 years for agreements for certain beers; five years for agreements relating to other beers and certain other types of beverage) . Exclusive purchase for service stations agreements could not exceed ten years. 

Regulation No 2790/1999 replaced by Regulation No 330/2010 and then by the current Regulation No 2022/720 and its guidelines, put an end to these particularities by covering all agreements between undertakings located at different levels of the production and distribution chain and whose object is the purchase, sale or resale of certain goods and services. 

Exclusive purchase arrangements are not specifically addressed in Regulation No 2022/720. They are covered by the non-compete obligations under Article 1(f), and defined as, “any direct or indirect obligation causing the buyer not to manufacture, purchase, sell or resell goods or services which compete with the contract goods or services, or any direct or indirect obligation on the buyer to purchase from the supplier or from another undertaking designated by the supplier more than 80% of the buyer's total purchases of the contract goods or services and their substitutes on the relevant market, calculated on the basis of the value or, where such is standard industry practice, the volume of its purchases in the preceding calendar year”.

Non-compete obligations can be direct or indirect. They can take the form of a prohibition on distributors from buying competing products or of an exclusive purchase obligation, or conversely, they can be in the form of a prohibition on the supplier from doing business with the distributor's competitors. They are limited to five years. Non-compete obligations that are of indefinite duration or exceeding five years are not covered by the BER . Under the previous guidelines, an obligation that was tacitly renewable beyond a period of five years or the expiry of which depended on an uncertain condition was considered an open-ended obligation . The 2022 Guidelines take a more measured position and now clarify that tacitly renewable non-compete obligations beyond a five-year period can be block exempted provided that the buyer can effectively renegotiate or terminate the vertical agreement containing the obligation with reasonable notice and at reasonable cost, and thus has an opportunity to effectively switch suppliers after the five-year period  expires. A limit on the duration is not required when, on the other hand, the buyer resells the goods or services from premises or land of which the supplier is the owner or tenant, provided that the duration of the clause does not exceed that of the occupation of the premises. Beer purchase contracts are in this category.

Regulation No 2790/99 had defined exclusive supply as “any direct or indirect obligation causing the supplier to sell the goods or services specified in the agreement only to one buyer inside the Union for the purposes of a specific use or for resale”. Article 3 of the regulation provided that, in such case, the buyer's market share should be taken into account in order to calculate the 30% threshold. Like its predecessor, Regulation No 2022/720, provides for a dual 30% market share threshold for both the buyer and the supplier and no longer mentions exclusive supply. Only the guidelines on vertical restraints lay down the criteria of assessment of an exclusive supply agreement where the 30% threshold has been exceeded. 

Exclusive supply can thus benefit from the block exemption where the market share of both the buyer and the supplier is below 30% even where the agreement also contains another vertical restriction such as a non-compete obligation provided that it does not fall under the hardcore restrictions within the meaning of Article 4 of Regulation No 2022/720 . Once the 30% threshold is exceeded, the higher the related market share and the longer the duration of the exclusive supply obligation, the more likely it is that the market will be foreclosed to a significant degree. Agreements in excess of five years are not considered necessary to achieve the claimed efficiencies and outweigh the foreclosure effect . 

Article 4(a) of Regulation No 2022/720 classifies as a hardcore restriction for which the exemption does not apply, “the restriction of the buyer's ability to determine its sale price, without prejudice to the possibility of the supplier to impose a maximum sale price or recommend a sale price”. Thus, an agreement enabling the supplier to fix retail prices by indirect or concealed means such as the fixing of the margin of the service-station operator, threats, intimidation, warnings, penalties or incentives, cannot benefit from the exemption . In order to be eligible for exemption, the agreement may only impose a maximum or recommended sale price and it must be genuinely possible for the reseller to determine the retail price .

Resale price maintenance can in certain circumstances benefit from individual exemption where it leads to efficiencies, most notably where a manufacturer introduces a new product or in case of experience or complex products .

The block exemption derived from Regulation No 1984/83 did not apply to a beer supply contract which provided for a specification of the purchase obligation by type of beer and thus allowed the brewer to unilaterally extend the scope of application of the exclusive purchasing obligation: Commission Decision No 1999/230 of 24 February 1999, Whitbread, LawLex200500004733JBJ; Decision No 1999-473 of 16 June1999, Bass, LawLex200500005273JBJ; No 1999-474 Scottish and Newcastle of 16 June 1999, LawLex200400002630JBJ; Case T-131/99 Shaw and Falla, Judgment of 21 March 2002,  LawLex200500004881JBJ; Case T-231/99 Joynson v Commission [2002] ECR II 2085, LawLex200500004954JBJ.

Case C-39/92  Petroleos de Portugal (SA) v Correia, Simoes & Companhia Limitada, Judgment of 10 November 1993, LawLex200500004928JBJ.

Regulation No 2022/720, Art. (5)(1)(a) and Guidelines on Vertical Restraints 2022, pt 248. Commission Decision 79-934 of 5 September 1979, BP Kemi - DDSF, LawLex200400002404JBJ: an exclusive supply agreement of six years' duration is all the more restrictive of competition as it is concluded by the main supplier and the main buyer in a market on which competition appears structurally weak; Decision No 93-406 of 23 December 1992, Langnese-Iglo GmbH, LawLex200500004811JBJ; Case C-39/92  Petroleos de Portugal (SA) v Correia, Simoes & Companhia Limitada, Judgment of 10 November 1993, LawLex200500004928JBJ: an open-ended  service station agreement or of a duration of more then 10 years qualifies for the exemption under Regulation No 1984/93 (replaced by Reg. No 2790/1999) where the agreement was signed prior to the date of accession of the Member States concerned and is was corrected before the expiry of the regulation.

Guidelines on Vertical Restraints of 2010, pt 66. See also Commission Decision 93-405 Schöller Lebensmittel GmbH Co KG of 23 December 1992, LawLex200500004818JBJ; Case T-7/93 Langnese-Iglo GmbH, Judgment of 8 June 1995,  LawLex200400003648JBJ; Case T-9/93 Schöller Lebensmittel GmbH & Co (KG), Judgment of 8 June 1995,  LawLex200400003649JBJ.

2022 Guidelines on Vertical Restraint , pt 248.

Guidelines on Vertical Restraints, pt 322.

Guidelines on Vertical Restraints, pt 324.

Case C-279/06 CEPSA Estaciones de Servicio (SA) v LV Tobar e Hijos SL, Judgment of 11 September 2008, LawLex200900000073JBJ.

Case  C-260/07 Pedro IV Servicios SL v Total España SA, Judgment of 2 April 2009, LawLex200900001662JBJ.

Guidelines on Vertical Restraints, pt 197.

European Distribution Law

53. Block exemption

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au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

53. Block exemption

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