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

Selection can be based on qualitative or quantitative criteria. Little doubt is cast on the lawfulness of a distribution system when selection is qualitative. However, quantitative selection can fall within the scope of Article 101(1) TFEU, as it directly limits the number of resellers. The theoretical line between the two systems of selection seems clearly drawn, but in practice things are not so simple. A quantitative criterion may prove to be qualitative, whereas on the contrary qualitative criteria can lead to indirect quantitative selection. In the Vichy case, the General Court found that a criterion that appeared to be qualitative could, as a result of national rules, become quantitative . The Commission has, in its vertical restraints guidelines, endeavored to clear up the distinction between qualitative and quantitative criteria with the principle that the qualitative criteria limits “the number of distributors indirectly by imposing conditions that cannot be met by all distributors”, whereas quantitative selective distribution “directly limits the number of distributors, for example by imposing a fixed number of distributors ” . 

Before the entry into force of the new generation of regulations, the EU authorities simply penalized direct quantitative selection . They considered, moreover, that a quantitative criterion such as the obligation to achieve a minimum turnover was caught by the Article 101(1) prohibition, if it exceeded the strict requirements of the qualitative criteria inherent in a selective distribution system by, inter alia, imposing obligations relating to minimum supplies . Agreements providing for quantitative selection could, however, benefit from an individual exemption if they fulfilled the conditions set out in Article 101(3) TFEU . The fixing of a maximum quota of resellers per town or region according to the potential buying capacity of the local customer base has thus been held to be essential to ensuring the favorable effects of the agreement . Exemption was also granted to a system that imposed supply volumes, minimum turnover and the keeping of an appropriate stock of the full range of the contract products. 

Now, quantitative distribution, like qualitative distribution, qualifies for block exemption. The Court of Justice has confirmed the lawfulness of quantitative selective distribution systems with regard to motor vehicle Regulation No 1400/2002  but this also applies to Regulation No 2022/720. The Court ruled that the specified criteria required to gain access to the network only need be “criteria the precise content of which may be verified” without it being “necessary for such a system to be based on criteria that are objectively justified and applied in a uniform and non-differentiated manner in respect of all applicants for authorization”. This interpretation, which is in accordance with competition law and economic efficiency, should put an end to divergences in the case law and provide a safety net for selective distribution systems in all sectors of the economy.

Case T-19/91 Société d'Hygiène Dermatologique de Vichy (SNC), Judgment of 27 February 1992, LawLex200500004903JBJ.

Guidelines on Vertical Restraints, pt 144, and pt 156 which specifies that more indirect forms of quantitative selective distribution may result from a combination of purely qualitative selection criteria and an obligation imposed on resellers to make a minimum level of purchases annually.

Commission Decision 82/367 Hasselblad, Judgment of 2 December 1981, LawLex200500005317JBJ: refusal of approval by a camera manufacturer when the territory is saturated with retailers; Case 243/83 Binon & Cie (SA), Judgment of 3 July 1985, LawLex200500004001JBJ: limitation of the number of sales outlets according to the number of inhabitants; Case T-19/91 Société d'Hygiène Dermatologique de Vichy (SNC), Judgment of 27 February 1992, LawLex200500004903JBJ, excluding the exemption of the system subordinating the entry into the network to pharmacists.

Case 26/76 Metro SB-Grossmarkete GmbH & Co, Judgment of 25 October 1977, LawLex200400002802JBJ; Case 31/80 L'Oréal (NV), Judgment of 11 December 1980, LawLex200400002967JBJ.

Commission Decision No 82/267 of 6 January 1982, Piquaud v SACM, LawLex200500004107JBJ.

Commission Decision No 70/488 of 28 October 1970, Omega, LawLex not available in English: while, in the context of a selective distribution network, the fixing of a maximum quota of resellers per town or region according to the potential purchasing capacity of the local clientele is in principle contrary to Article 101(1) TFEU, this obligation may be exempted under paragraph 3 where, in the case of durable products manufactured in small quantities, it is indispensable for the favorable effects of the agreement in the field of distribution to be achieved.

Commission Decision No 76/159 of 15 December 1975, SABA, LawLex200400002389JBJ.

Case C-158/11 Auto 24 SARL, Judgment of 14 June 2012, LawLex201200000961JBJ.

Quantitative selection

71. Quantitative selection