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 101(1) TFEU prohibits restrictive agreements between undertakings. The concept of an undertaking is purely economic and refers to an autonomous economic entity. According to the Court of Justice, agents are not in principle undertakings within the meaning of Article 101(1), unless their actions are fully independent . The operator of a service station who is autonomous of its supplier, is  …

Guidelines on Vertical Restraints

Article 101(1) TFEU prohibits restrictive agreements between undertakings. The concept of an undertaking is purely economic and refers to an autonomous economic entity. According to the Court of Justice, agents are not in principle undertakings within the meaning of Article 101(1), unless their actions are fully independent . The operator of a service station who is autonomous of its supplier, is an independent intermediary and is subject to the EU competition rules where it assumes a significant proportion of the financial and commercial risks of the sale of fuel , unlike a motor vehicle agent who, in principle, does not bear substantial risks .

In its Guidelines on Vertical Restraints , the Commission declares Article 101(1) inapplicable to agency agreements where the agent does not act as an independent economic operator, i.e. where he “does not bear any significant financial or commercial risk in relation to the contracts he concludes or negotiates on behalf of the principal”. Where, on the other hand, the agent assumes the commercial and financial risk associated with the activities for which the principal has appointed him, Article 101 is applicable . 

The guidelines list three types of financial or commercial risks that the agent does not have to bear or only has to bear to a negligible extent in order for its relationship with the principal to escape the application of Article 101(1) TFEU  : (i) contract-specific risks, which are directly related to the contracts concluded and/or negotiated by the agent on behalf of the principal, such as the financing of stocks; (ii) market-specific investment risks, i.e., the generally sunk investments necessary for the agent to conclude and/or negotiate a specific type of contract . (iii) risks related to other activities undertaken on the same product market, to the extent that the principal requires, as part of the agency relationship, the agent to undertake such activities not as an agent on behalf of the principal, but at the agent's own risk .

- acquire the property in the goods bought or sold under the agency agreement and does not itself supply the services bought or sold under the agency agreement;

- contribute to the costs relating to the supply or purchase of the contract goods or services, including the costs of transporting the goods;

- maintain at its own cost or risk stocks of the contract goods, including the cost of finaning the stock and the cost of lost stock. The agent should be able to return unsold goods to the principal without charge, unless the agent is at fault;

- to take responsibility for the customers' non-performance of the contract, with the exception of the loss of the agent's commission, unless the agent is at fault;

- to assume responsibility toward customers or other third parties for loss or damage resulting from the supply of the contract goods or services, unless the agent is at fault;

- be, directly or indirectly, obliged to invest in sales promotion, including through contributions to the advertising budget of the principal or to advertising or promotional activities specifically relating to the contract goods or services, unless such costs are fully reimbursed by the principal;

- make market-specific investments in equipment, premises, training of personnel or advertising, unless such costs are fully reimbursed by the principal;

- undertake other activities within the same product market required by the  principal under the agency relationship (for example the delivery of the goods), unless those activities are fully reimbursed by the principal .

The Commission authorizes the combination of the functions of agent and independent distributor on behalf of the same principal . In such a case, the agency agreement must, in order to escape Article 101(1) TFEU, meet four conditions:

- it must have been freely entered into by the independent distributor;

- the activity of independent distributor must not have been imposed directly or indirectly on the agent;

- the activities and risks covered by the agency agreement must be effectively distinguished;

- all relevant risks linked to the sale of the goods or services covered by the agency agreement, including market-specific investments, must be borne by the principal.

The guidelines point out the risk that the principal's price instructions under the agency agreement may jeopardize his independence of decision in his distribution activity and that the distinction of the costs of the investments incurred for these two activities proves to be complex, especially when the two activities are combined in the same market.

The guidelines list the criteria to be taken into account in determining whether the agent assumes financial or commercial risk .

Where the principal assumes the commercial and financial risks associated with the sale and purchase of the contract goods or services, the agent is deemed to be an integral part of the principal's business. Consequently, the agency contract will not be subject to the provisions of Article 101(1) TFEU . The principal may determine the limitations as to the territory into which or to the customers to whom the agent may sell the contract goods or services and the prices and conditions at which the agent must sell or purchase such goods or services.

Article 101(1) TFEU, however, may apply to certain clauses in the relationship between the agent and his principal. Indeed, single branding and non-compete clauses after the expiry of the agreement, which concern inter-brand competition, may restrict competition within the meaning of this text if, in isolation or through cumulative effects, they lead to a foreclosure effect on the relevant market on which the contractual goods or services are sold or purchased . However, even if the principal bears all the risks, the agency agreement includes a risk of collusion, in particular when a number of principals use the same agents and collectively exclude others from using those agents, or when they use the agents to collude on marketing strategy or to exchange sensitive market information .

Case 311/85 VVR v Social Dienst van de Plaatselijke en Gewestelijke Overheidsdiensten [1987] ECR 3801, LawLex200500003944JBJ: a travel agent having an autonomous service business is an independent intermediary to whom European competition law applies; Cases 40/73 Suiker Unie and others v Commission [1975] ECR 1663, LawLex200400002777JBJ: EU competition rules apply to an intermediary acting fully independently; Commission Decision No 73/109 of 2 January 1973, European sugar industry, LawLex200400002383JBJ, intermediaries described as commercial representatives or commission agents, when acting free of any exclusive links or independently, are still subject to the European competition rules.

Case C-217/05 Confederación Española de Empresarios de Estaciones de Servicio [2006] ECR I-11987 LawLex200700000372JBJ.

Guidelines on Vertical Restraints, pt 36.

Guidelines on Vertical Restraints, pts 37 and 38.

Commission decision No 88/84 ARG/Unipart, Judgment of 22 December 1987, LawLex200400003527JBJ: Article 101 TFEU is not applicable to an agency contract, where the latter does not assume the business risk.

Case C-279/06, Guidelines on Vertical Restraints, pt 43. For an application, see ECJ, CEPSA Estaciones de Servicio (SA) v LV Tobar e Hijos SL, Judgment of 11 September 2008, LawLex200900000073JBJ, in the hypothesis of a true agency relationship, only exclusivity and non-competition clauses concerning the relationship between the agent and the principal as independent economic operators are likely to fall within the scope of Article 101 TFEU, and not obligations concerning the sale of goods to third parties on behalf of the principal.

Guidelines on Vertical Restraints, pt 44.

Case T-325/01 Daimler Chrysler AG v Commission [2005] ECR II-3319, LawLex200700000257JBJ, annulling Commission Decision No 2002/758 of 10 October 2001, Mercedes-Benz, LawLex200400003553JBJ, on the grounds that the Commission exaggerated the extent of the risk borne by the agents.

Guidelines on Vertical Restraints 2022/C 248/01 of 28 June 2022, pt 30.

Case T-325/01 DaimlerChrysler AG v Commission, Judgment of 15 September 2005 LawLex200700000257JBJ, the car agent who does not bear the financial risk of the sale and who is not subject to any obligation to build up stocks forms an economic unit with the supplier, so that Article 101 TFEU is not applicable in their relationship; Case C-217/05 Confederación Española de Empresarios de Estaciones de Servicio v. Compañía Española de Petróleos (SA), Judgment of 14 December 2006, LawLex200700000372JBJ: an agreement only falls under Article 101 TFEU if it is concluded between two autonomous undertakings, which presupposes that the distributor assumes, in a non-negligible proportion, one or more financial and commercial risks related to the sale to third parties; Case C-279/06 CEPSA Estaciones de Servicio (SA) v LV Tobar e Hijos SL, Judgment of 11 September 2008, LawLex200900000073JBJ.

Guidelines on Vertical Restraints 2022/C 248/01 of 28 June 2022, pt 31.

Case C-279/06 CEPSA Estaciones de Servicio (SA) v LV Tobar e Hijos SL, Judgment of 11 September 2008, LawLex200900000073JBJ, a service station operator is presumed to bear the risks associated with the specific investments necessary to negotiate or conclude contracts with third parties, when he himself makes investments in premises or equipment, such as a fuel tank, or in promotional activities.

Case T-325/01 DaimlerChrysler AG v Commission, Judgment of 15 September 2005, LawLex200700000257JBJ, the classification under competition law, as regards the relevant market, of the relationship between the principal and its agents, who must be treated as non-independent employees, cannot be altered by the contractual obligations imposed on the agents (to set up a repair shop, to offer after-sales service, to acquire and store spare parts) and exercised in related markets, if it is not proven that they entail appreciable economic risks for the latter.

Guidelines on Vertical Restraints, pt 33.

The Commission states in pt 34 that this list is not exhaustive.

European Distribution Law

103. Guidelines on Vertical Restraints

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

103. Guidelines on Vertical Restraints

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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