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

An agreement which falls foul of Article 101(1) TFEU and to which a block exemption cannot apply, may still be exempted individually on the basis of Article 101(3) TFEU. For the purpose of assessing whether there is restriction of competition, the Commission uses in its guidelines  the “counter-factual test”, which leads to assess a situation in two phases. Firstly, the analysis determines whether …

Individual exemption

An agreement which falls foul of Article 101(1) TFEU and to which a block exemption cannot apply, may still be exempted individually on the basis of Article 101(3) TFEU. For the purpose of assessing whether there is restriction of competition, the Commission uses in its guidelines  the “counter-factual test”, which leads to assess a situation in two phases. Firstly, the analysis determines whether the agreement restricts the effective or potential competition which would have existed in the absence of agreement (inter-brand competition), while secondly, the analysis assesses whether the agreement restricts the effective or potential competition which would have existed in the absence of the contractual restriction (intra-brand competition) .

While it is for the Commission to prove the appreciable effect of the agreement, it is for undertakings, once that effect has been established, to show that there are efficiencies able to meet the conditions set out in Article 101(3) TFEU ".

When assessing efficiency gains achieved by an exclusive distribution agreement, the Commission takes into account the investments made to protect or build brand image, the reduction in logistics costs generated by the economies of scale relating to transport and distribution, and the effect on inter-brand competition of the weakening of intra-brand competition. The position held on the market by the supplier and his competitors is particularly important in this regard. If the competitors are strong, the weakening of intra-brand competition will be offset by the inter-brand competition . On the other hand, if competitors have a similar market share and are in low number on the market, there is a risk of collusion . The number of brands distributed for exclusive use by the dealer is decisive in that case: the higher the combined market share of distributed brands, the more inter-brand competition will be reduced. In addition, the reserved territory must not be so extensive that the final consumer is prevented from having freedom of choice. Certain combinations of restrictions are likely to prevent the exemption from applying. Thus, single-branding can only be combined with exclusive distribution if there is no significant effect of market foreclosure. The combination of exclusive distribution and exclusive purchasing is unlikely to be exempted, unless offset by proportional efficiencies such as lower prices to all final consumers .

Agreements containing provisions qualified as hardcore restrictions by the EU authorities  have little chance of being individually exempted. This applies to agreements prohibiting passive sales  or obstructing parallel imports . Similarly, exclusivity for wholesalers that only supply particular retailers and exclude ordinary retailers and department stores for the distribution of products with no specific characteristics cannot be exempted . The combination of territorial exclusivity, restriction on active and passive sales and selective distribution within a network could not be regarded as indispensable to the improved distribution of construction and earthmoving equipment, among which the network promoter held 45% of the European market . Likewise, limiting supplies to orders intended for the dealer's territory, refusing to grant bonus payments for exports sales to final consumers or customers based abroad, as well as putting pressure on dealers to stop exporting, constitute practices of market partitioning which cannot be exempted . Lastly, exemption was refused to a distribution agreement which prevented distributors from engaging in passive sales outside their exclusive area or which fixed a defined level of resale price . Resale price maintenance may however, now, benefit from individual exemption where it leads to efficiencies, in particular when a manufacturer introduces a new product, in order to take account of the manufacturer's interest, who is a new entrant or to better place the new product on the market . The Guidelines on Vertical Restraints however indicate that the efficiency gains must fully offset the negative effects of an agreement on prices .

Guidelines on Vertical Restraints of 2022, pt 295.

Commission Decision No 2002/190 of 21 December 2000, JCB, LawLex200500004731JBJ; confirming the decision: Case T-67/01 JCB Service v Commission [2004] ECR II-49, LawLex200500004797JBJ; Case C-167/04 P JCB Service v Commission [2006] ECR I-8935, LawLex200700000303JBJ. 

Commission Decision No 2001/146 of 20 September 2000, Opel, LawLex200500004721JBJ; decision confirmed by Case T-368/00 General Motors Nederland and Opel Nederland v Commission [2003] ECR II-4491, LawLex200500004833JBJ; Case C-551/03 P General Motors [2006] ECR I-3173, LawLex200600001229JBJ.

Commission Decision No 2001/135 of 5 July 2000, Nathan-Bricolux, LawLex200400003581JBJ.

Guidelines on Vertical Restraints, pt 197: “[...] resale price maintenance may also lead to efficiencies, in particular where it is supplier driven. When a manufacturer introduces a new product, RPM may be an efficient means to induce distributors to better take into account the manufacturer's interest in promoting that product. Article 101(3) of the Treaty also requires that there are no realistic and less restrictive alternative means of incentivising the distributors to promote the product. To meet that requirement, suppliers may, for example, demonstrate that it is not feasible in practice to impose on all buyers effective promotion obligations by contract. In such circumstances, the imposition of fixed or minimum retail prices for a limited period of time in order to facilitate the introduction of the new product may be considered on balance pro-competitive.”

Guidelines on Vertical Restraints, pt 294.

Guidelines on Vertical Restraints, pt 295: Undertakings invoking the benefit of Article 101(3) of the Treaty are not required to consider hypothetical and theoritical alternartives. They must, however, explain and demonstrate why seemingly realistic and significantly less restrictive alternatives would not produce the same efficiencies. If the application of what appears to be a commercially realistic and less restrictive alternative would lead to a significant loss of efficiencies, the restriction in question is treated as indispensable. 

Guidelines on Vertical Restraints, pt 126.

Guidelines on Vertical Restraints, pt 129.

Commission Decision No 88/86 of 18 December 1987, Fisher-Price/Quaker Oats Ltd - Toyco, LawLex200400002447JBJ, Export ban imposed on a wholesaler by a supplier to protect the exclusive distributor in the country where the orders originated. 

Case 25/75 Van Vliet Kwastenfabriek v Dalle Grode [1975] ECR 1103, LawLex200400002773JBJ, exclusivity agreement providing for absolute territorial protection for one distributor; Commission Decisions No 80/1333 of 11 December 1980, Hennessy-Henkell, LawLex200500004077JBJ, non-compete and exclusive purchasing clauses together with an undertaking by the supplier to protect its distributor against parallel imports; No 88/86 of 18 December 1987, Fisher-Price/Quaker Oats Ltd - Toyco, LawLex200400002447JBJ, Export ban imposed on a wholesaler by a supplier to protect the exclusive distributor in the country where the orders originated; No 97/123 of 4 December 1996, Novalliance/Systemform, LawLex200500004768JBJ, ban on distributors selling to customers located in the area of exclusivity but likely to export the products in question.

Commission Decisions No 85/44 of 10 December 1984, Grohe's distribution system, LawLex200500005321JBJ; No 85/45 of 10 December 1984, Ideal-Standard's distribution system, LawLex200500005322JBJ.

European Distribution Law

67. Individual exemption

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

67. Individual exemption

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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