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

Article 5 of the General Regulation on vertical restraints sets out a list of “red” clauses to which the exemption cannot apply if those clauses appear in vertical agreements but which do not give rise to loss of the exemption for the whole agreement.
1) Non-compete obligation.
The system of Regulation No 1400/2002 regarding non-compete obligations differed appreciably from that of the general Reg …

Red clauses

Article 5 of the General Regulation on vertical restraints sets out a list of “red” clauses to which the exemption cannot apply if those clauses appear in vertical agreements but which do not give rise to loss of the exemption for the whole agreement.

The system of Regulation No 1400/2002 regarding non-compete obligations differed appreciably from that of the general Regulation on Vertical Restraints. The non-compete obligation referred to “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 30% of the buyer's total purchases  of the contract goods”. Article 5(1)(a) thus withdrew the exemption from direct or indirect non-compete obligations to which exclusive purchase obligations in excess of the 30% threshold were assimilated, whereas vertical restraints regulation refuses to exempt only non-compete obligations that are of indeterminate or more than five years duration, and sets the unlawful exclusive purchase threshold at 80%. The manufacturer was allowed merely to require the distributor to sell motor vehicles from other suppliers in separate areas of the showroom, and if he wanted to have his vehicles sold by specialized staff, he had to pay all additional costs involved. 

Non-compete clauses after expiry of the agreement were prohibited outright , whereas the Vertical Restraints Regulation accepts the validity, for purposes of protecting the know-how transferred by the supplier to the distributor, of post-contract clauses limited to one year or even unlimited in time, where the protected know-how has not fallen within the public domain. 

Since 1 June 2013, a supplier and a distributor having a market share not exceeding 30% may agree that the distributor must obtain supplies only from the manufacturer, provided that the duration of that obligation is limited to five years or less. At the expiry of the five-year period, the renewal of the non-compete clause requires the explicit consent of both parties, and there should be no obstacles that hinder the distributor from terminating the non-compete obligation at the end of the five-year period . Moreover, in case of cumulative effects leading to the foreclosure of the market, the Commission reserves the right to withdraw the exemption .

The exemption does not apply to any direct or indirect obligation preventing the members of a distribution system from selling motor vehicles of particular competing suppliers. The prohibition is intended to prevent a brand from being eliminated from the market as a result of a collective boycott . The motor vehicle regulation thus transposes a traditional provision of the general law of selective distribution to the motor vehicle sector although that practice is unknown in that sector and it could easily be penalized on the basis of the provisions governing non-compete clauses. The Commission has indicated in its Motor Vehicle Guidelines that it will monitor “the manner in which single branding obligations are applied to existing multi-brand distributors, in order to ensure that the obligations in question do not form part of an overall strategy aimed at eliminating competition from one or more specific suppliers, and in particular from newcomers or weaker competitors” .

Regulation No 1400/2002 also contained two other red clauses that are not present in the Vertical Restraints Regulation. Network distributors were free to develop their own independent leasing services . An obligation imposed by a manufacturer on dealers to develop activities as agents for leasing transactions exclusively for the manufacturer could not be exempted under the Motor Vehicle Regulation . Since 1 June 2013, manufacturers can prevent their distributors from engaging in leasing since the clause does not appear in the general Vertical Restraints Regulation. The exemption did not apply to direct or indirect obligations imposed on members of selective distribution networks of passenger cars or light commercial vehicles which restricted their ability to establish additional outlets. The possibility to create spin-off undertakings concerned neither exclusive distributors nor authorized distributors of commercial medium duty and heavy trucks, buses and coaches. It covered both the establishment of sales outlets and additional delivery outlets. Since 1 June 2013, manufacturers can once again prohibit distributors from setting-up additional sales outlets without their express consent . 

Explanatory Brochure of Regulation No 1400/2002 of 31 July 2002 pt 5.3.1.2: “The Regulation does not cover obligations restricting a dealer's ability to sell leasing services. This includes leasing by the dealer himself, through a leasing company connected with the dealer, or as an agent of a leasing company of his choice”.

Case C-266/93, Bundeskartellamt v Volkswagen and VAG Leasing [1995] ECR I-3477, LawLex200400003551JBJ.

European Distribution Law

88. Red clauses

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

88. Red clauses

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