Vereniging voor Mededingingsrecht
Amsterdam, 24 June 2010
New EU Competition Rules for Purchase
and Distribution agreements
Luc Peeperkorn
Principal Expert in Antitrust Policy
“The views expressed are those of the speaker and do not necessarily reflect
those of DG Competition or the European Commission”
European Commission,
DG Competition, Directorate A
1
Outline of the Presentation
• Background
– Past experience of the Block Exemption Regulation (BER) and
Guidelines (GL), objectives and results of the review
– Effects based approach
• Clarifications and Changes to the Scope
– Agency agreements
– Vertical agreements between competitors
– Extension of the 30% market share threshold to buyers
• Clarifications of Hardcore Restrictions
– Framework of analysis
– Resale price maintenance (RPM)
– General rules on hardcore resale restrictions and hardcore online
resale restrictions
European Commission,
DG Competition, Directorate A
2
Background: the review
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Positive past experience of the BER/GL:
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Strong support in public consultation to keep framework of 1999
which introduced effects based approach
Principle of market share threshold well accepted
Meaningful enforcement: focus on foreclosure & softening of
competition + taking account of efficiencies
Since the 2004 decentralisation most enforcement done by NCAs
and courts; BER/GL ensure consistent application

Objective of review: to update/improve 1999 BER and GL

Result of review: Commission adopts BER 330/2010
of 23.4.2010) and GL (OJ C 130 of 19.05.2010)
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Comp website: http://ec.europa.eu/competition/antitrust/legislation/vertical.html
European Commission,
DG Competition, Directorate A
(OJ L 102
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Background: effects based approach
The effects based approach means:
 (a) Authority/plaintiff must show likely negative effects under Article 101(1)
 (b) Defendant must show likely efficiencies under Article 101(3) once likely
negative effects are established (“consumer welfare test”)
 (c) “Safe harbour” as long as market share does not exceed 30% = block
exemption => net positive balance presumed
Exception: hardcore restrictions
 (d) Guidelines provide interpretation of the BER + guidance on a case by case
assessment of negative and positive effects where the BER does not apply
(above 30% MS)
European Commission,
DG Competition, Directorate A
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Scope of the block exemption
 Agency agreements (GL § 12 – 21):
 No change of policy: intra-brand restrictions fall outside
Art 101(1) if no risk borne by agent in relation to activities
for which he is an agent
 Discussion on risks taken by the agent in other product
markets versus risks taken in the same product market
 Clarification: only risks taken by the agent in the same
product market are relevant => not possible to be
“genuine” agent for one product and independent
distributor for another product of the principal if these
products are in the same product market
European Commission,
DG Competition, Directorate A
5
Scope of the block exemption
Vertical agreements between competitors (Article 2(4)
BER):
 General rule remains: vertical agreements between
competitors not covered
 Scope limited: Agreements between competitors
where buyer has turnover below €100 mio no longer
covered
 Coverage by the block exemption limited to dual
distribution (for both goods and services)
European Commission,
DG Competition, Directorate A
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Scope of the block exemption
Market share threshold: benefit of BER depends on
both the supplier’s and buyer’s MS not > 30%
 Not only suppliers, but also distributors may have market
power (e.g. supermarkets) => coverage by the BER should
also depend on buyer’s market share
 For supplier: share on the market where supplier sells
contract products to the buyer
 For buyer: share on the market where buyer purchases the
contract products from the supplier
 Main reason for transitional period of 1 year (art. 9 BER)
European Commission,
DG Competition, Directorate A
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Hardcore Restrictions – General (1)
 Serious restrictions of competition (Art. 4 BER)
 Excludes block exemption for the whole
agreement
 In principal, no change to list of hardcore
restrictions:
 RPM remains a hardcore restriction
 No fundamental change to the hardcore list
of (re)sale restrictions
European Commission,
DG Competition, Directorate A
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Hardcore restrictions – General (2)
Clarifications on the assessment of hardcore restrictions (GL section III.3)
 hardcore = no block exemption + presumption of negative effects under
Article 101(1) + presumption it is unlikely that the conditions of Art 101(3)
are fulfilled (§47)
 but individual exemption is not excluded in case of convincing evidence of
likely efficiencies (§ 63-64 and 225)
 Effects based approach with reversed order of bringing forward evidence
and showing effects (cf. previous slide on effects based approach)
European Commission,
DG Competition, Directorate A
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Hardcore restrictions: RPM
Resale Price Maintenance (GL section VI.2.10):
 Possible negative effects:
 facilitation of collusion (both up- and down-stream), in particular if
interlocking relations
 elimination of intra-brand price competition: direct effect is price increase
 loss of pressure on the supplier’s margin
 foreclosure of smaller suppliers
 loss of dynamism and innovation in distribution (from discounters)
 Possible positive effects:
 Launching a new product
 Support short term low price advertisement campaigns (2 – 6 weeks)
 Prevent free riding on pre-sales services between distributors
European Commission,
DG Competition, Directorate A
10
Hardcore Sale Restrictions (1)
• Hardcore (re)sale restriction: market partitioning by territory
or customer group
• No fundamental change to the hardcore list of sale
restrictions
– Passive sale restrictions are hardcore (main exception selective
distribution)
– Active sale restrictions are hardcore except to protect areas where
there is exclusive distribution
• Change and Clarification – all distribution systems
– Restrictions on the buyer’s place of establishment are not hardcore
(Art. 4(b) + GL § 50)
– Possible to restrict a wholesaler from selling to end users (in general),
while allowing it to sell to certain (e.g. bigger) end-users (Art. 4(b) + GL
§ 55)
European Commission,
DG Competition, Directorate A
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Hardcore sale restrictions (2)
• Change and Clarification - exclusive distribution
– Restrictions of active sales by a buyer party to the agreement are not
hardcore, i.e., possibility to restrict active sales at more than one level
of trade (Art 4(b))
– Exclusivity requires protection against active sales of all other
distributors but not of the supplier, i.e., possibility to share exclusive
territory with the supplier (§ 51)
• Change and clarification - selective distribution
– Restrictions of sales to unauthorised distributors is not hardcore in the
territory reserved to operate selective distribution, i.e. possibility to
reserve territory for future expansion of distribution network (Art
4(b)(iii) and § 55)
European Commission,
DG Competition, Directorate A
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Hardcore Online Sale Restrictions (1)
• General rules on (re)sale restrictions apply to offline
and online sales
• Distinction between active and passive sales only
relevant for exclusive distribution. GL further clarify
how the distinction applies to online sales
• Difficult balance: to allow consumers to benefit from
the internet while allowing suppliers to choose
distributors/distribution format and prevent possible
free riding between them
European Commission,
DG Competition, Directorate A
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Hardcore Online Sale Restrictions (2)
On the one hand: Distributors should be free to have a website
and engage in internet sales . . .
• Restrictions on the distributors’ use of the internet are
generally considered as hardcore restrictions of passive sales
• Examples (§ 52):
– Obligation to automatically reroute customers located outside the
distributor’s territory or terminate their transactions
– Obligation to limit the proportion of sales a distributor can make over
the internet
– Requiring a distributor to pay a higher purchase price for units to be
resold online than offline (dual pricing)
European Commission,
DG Competition, Directorate A
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Hardcore Online Sale Restrictions (3)
On the other hand: Suppliers should be free to choose
distributors/distribution format and prevent possible free
riding between them
• Exclusive distribution:
– Possibility to restrict active sales to protect exclusive distribution
– Active selling: any efforts to be found specifically in a certain
territory/by a certain customer group, e.g., unsolicited e-mails,
targeted (online) advertisement (§ 53)
– Cf. passive selling: having a website, responding to customer demand
without soliciting them, different language options (§ 52)
European Commission,
DG Competition, Directorate A
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Hardcore Online Sale Restrictions (4)
On the other hand . . . (cont.) :
• To preserve quality of distribution and prevent free riding, GL
clarify that the BER covers obligations to:
– have one or more “brick and mortar” shops (but not to punish successful
online sales) (§ 54)
– impose a minimum amount of sales offline (also possible for the supplier to
offer a fixed fee to support the distributor’s offline efforts) (§ 52(c))
– require quality and service conditions to be fulfilled for online sales that are
overall equivalent to those applicable to offline sales (§ 56)
– use third party platforms only in accordance with standards and conditions
agreed between the parties (§ 54)
European Commission,
DG Competition, Directorate A
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Conclusion
New BER and GL:
– are an evolution and adaptation of the effectsbased approach
– give more attention to buyer power and online
resale restrictions in light of recent market
developments
– do not impose or favour certain distribution
formats but leave it to the consumers to “pick the
winners”
European Commission,
DG Competition, Directorate A
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