Report

The European Distribution Law Day was a great success! With no less than 260 participants and 21 speakers from 15 EU Member States, the conference was a truly unique event.

The topic of the first panel was selective distribution.

 

  • Bregt Raus (contrast – Belgium) introduced the concept of selective distribution as a closed network of distributors selected on the basis of specified criteria in which the selective distributors are prohibited to sell to unauthorised distributors. He noted that these criteria do not need to fulfil any requirements, but that they can generally be categorised as either qualitative or quantitative. Lastly, he explained that selective distributors must be free to engage in intra-network cross-supplies. This entails that the selective distributors must be free to purchase goods from other selective distributors, independent of the level of trade at which they operate.

 

  • Gonçalo Anastácio (SRS Advogados – Portugal) tackled the issue of uniformity in the specified criteria. He stated that there generally is no obligation for a supplier to apply the same criteria for all of its selective distributors. Consequently, a supplier can use a wide variety of systems and criteria, taking into account the profile of the would-be distributor, the specific market circumstances and the supplier’s goals. He stressed that the supplier is under no obligation to justify the criteria it uses and the criteria must not necessarily be in writing. As a final remark, he noted that a supplier can grant a transitional period to certain selective distributors, giving them time to implement certain criteria in full.

 

  • Mario Krka (Divjak, Topić & Bahtijarević – Croatia) examined the possibility to impose territorial restrictions in a selective distribution network and found that there are three ways in which this can be done. First, certain territorial restrictions may fall completely outside the scope of Article 101(1) TFEU. This is the case when a new product is introduced, a new product is tested or an existing product is introduced in a new market. Second, location clauses can prevent distributors from changing their place of establishment and can restrict the area in which mobile outlets can operate. Third, selective distributors can be prevented from actively selling to territories in which an exclusive (as opposed to a selective) distributor has been appointed.  

 

  • Thomas Lamy (Grall & Associés – France) discussed the quantitative limitations in a selective distribution network. He mentioned the Auto 24 judgement which confirmed that the criteria used in a quantitative selective distribution system must not necessarily be objectively justified and non-discriminatory. Nevertheless, the precise nature of these quantitative criteria must be verifiable.

 

  • Oriol Armengol (Pérez-Llorca – Spain) considered the differences between franchising and selective distribution. He defined franchising as a vertical agreement whereby the franchisor grants the franchisee a license of certain intellectual property rights – often trademarks, signs and/or know-how – to be used in the use or sale of goods by the franchisee. He stressed that, for the purposes of the block exemption, the license of intellectual property rights must not be the primary object of the agreement. Case law also took an economic approach to franchising, allowing restrictions aimed at maintaining the common identity and reputation of the franchised network to fall outside the scope of Article 101(1) TFEU. Consequently, non-compete obligations in franchising agreements may not be subject to the general rule of successive periods of maximum five years under the VBER.

  

Key note speaker Lucas Peeperkorn (DG COMP – European Commission) addressed recent developments in the assessment of vertical agreements under article 101 TFEU and what to expect the coming years. The most notable findings were that, in assessing vertical cases, statistics show that national competition authorities tend to focus on loss of price competition by means of resale price maintenance, on the one hand, and resale restrictions (in particular online sales restrictions), on the other hand. Statistics further show that the risk for fines is considerably lower if an agreement does not contain a hardcore restriction (but even when an agreement does contain a hardcore restriction, there is no automatic fine). Mr. Peeperkorn concluded by stating that both the growing importance of online retail sales and the growing importance of online market places will affect future enforcement, as was further addressed in the afternoon session.

 

The second panel discussion concerned pricing in vertical relations.

 

  • Sarah Jaques (contrast – Belgium) set out the general principles governing resale price maintenance under the VBER. In short, both directly and indirectly enforcing fixed and/or minimum resale prices constitute a hardcore restriction under the VBER, whereas imposing maximum resale prices and communicating recommended resale prices can, in principle, enjoy the benefit of the VBER.

 

  • Morit Lorenz (Arnecke Sibeth – Germany) addressed the specific German/Austrian views on price recommendations. The German and Austrian competition authorities are extremely sensitive to any attempt to coordinate the pricing of retailers and are particularly vigilant as to the enforcement of price recommendations and the coordination of retail prices via hub-and-spoke communications between retailers. Further, Moritz Lorenz mentioned the Guidance note on the prohibition of vertical price fixing which, although it was published by the German national competition authority following investigations within the food retail sector, is of relevance to the distribution of any type of goods. Most notable under German competition law is the circumstance that a unilateral measure aimed at incentivizing third parties to engage in anticompetitive conduct can be sufficient to infringe competition law, even in the absence of an agreement.

 

  • Fredrik Lindblom (Cederquist – Sweden) discussed whether vertical price fixing can ever be exempted on the basis of article 101(3) TFEU. Although such justification is theoretically possible, one must proceed very cautiously. The characterisation of vertical price fixing as a hardcore restriction within the meaning of the VBER implies a presumption that it does not satisfy the conditions of article 101(3) TFEU. This presumption is very hard to rebut. Even when one would succeed in justifying vertical price fixing on the basis of article 101(3) TFEU, the mere fact that it is a hardcore restriction in the VBER implies that the whole agreement loses the benefit of the VBER. Nevertheless, the attitude to RPM differs from jurisdiction to jurisdiction and one must always consider the local situation.

 

  • Agata Jurkowska-Gomulka (Modzelewska & Paśnik – Poland) focused on the question of whether there are differences in the enforcement of vertical price fixing throughout the EEA. Despite the fact that Member States share the same EU background, national approaches to vertical pricing still differ, for instance the importance attached to vertical price fixing when defining enforcement priorities or the availability of a leniency program for vertical agreements. It is useful to study these differences as examples from more liberal jurisdictions may be of help when being confronted with a more stringent approach in other jurisdictions.

 

  • Paul Buta (Mușat & Asociații – Romania) concluded the panel on vertical price fixing by addressing the relationship between vertical price fixing and hub-and-spoke cartels. When vertical price fixing is combined with an (indirect) exchange of sensitive information, it runs the risk of evolving into a hub-and-spoke cartel. In order to avoid being considered a spoke or a hub, one must therefore always be very cautious in sharing and/or receiving sensitive information within vertical relations.

 

The third panel continued with addressing some specific questions concerning differences in national distribution law.

 

  • Ivan Marinov (Delchev & Partners  Bulgaria) was the first to take the stage in this panel and addressed the scope for national differences between the protection of agents under the Commercial Agency Directive. Firstly, the scope of the Directive only concerns the agents dealing with the sale or the purchase of good and acting in the name and on behalf of a principle. However, as the Directive only provides for a minimum harmonisation of the national legislation, national legislation might have been broadened to include service agents as well as agents acting in their own name. Secondly, national differences might also arise in the areas that have been left optional for the Member States by the Directive, such as the payment of commission in instances where territories or client groups are assigned to the agent and dealings with others occur within that territories and with those groups, and also the form of the agreement and the minimum notice periods for termination of commercial agency agreement with an indefinite period of time. It is therefore always wise to seek local advice and check the local implementing legislation. Lastly, Ivan Marinov noted that it is of paramount importance to bear in mind that the concept of commercial agency is different from the concept of agency under EU competition law. Agents can have their own life under competition law, and can involve agents dealing with either the sale of goods or services or acting in their own name or in the name and on behalf of the principle. The main focus under competition law relates to the risk assumed by agents. If agents assume more than insignificant risks they will be considered as independent intermediaries and competition rules will apply similar to those applicable in relation to a supplier and distributor.

 

 

  • Sébastien Engelen (contrast – Belgium) discussed the differences in termination for distribution agreements across the EU. At the EU level, there has been no harmonisation of the termination regimes for distribution agreements, resulting in diverging rules in terms of notice to be given in advance of the termination and indemnities that can be claimed by the terminated dealers. In order to ensure consistency across their pan-European network suppliers will therefore often include a choice of law and forum clause into their distribution agreements. This will, however, also not guarantee an uniform approach in the termination of its European distributors on account of the Brussels Ibis Regulation, which foresees in the applicability of overriding mandatory laws. One cannot contract these out, thus preventing a uniform approach with regard to terminating distribution agreements across the EU.

 

 

  • Andreas Zellhofer (Eisenberger & Herzog – Austria) took the discussion on differences in national distribution law further by elaborating on which aspects the Austrian competition law goes beyond EU law in terms of protecting distributors. The Austrian law can be considered to go beyond EU law, in quite a number of aspects. Not only does the notion of ‘relative market power’ extend the scope of dominance held under EU competition law, local law also foresees in the applicability of the principles of fairness, non-discrimination and duty to deal, irrespective of a dominant position held by the supplier. Moreover, the Austrian law provides for several mandatory provisions under commercial law, which can be regarded as quite distributor-friendly. These include the right to receive compensation under the Agency Directive for all intermediaries integrated in a distribution system, the right to be reimbursed of costs for sunk investments, as well as the right to sell back the contract goods upon termination of the distribution agreement.

 

  • Nataša Pipan Nahtigal (Odvetniki Šelih & partnerji – Slovenia) concluded the third panel by exploring the consequences under national contract law of infringements of the EU competition rules. In this regard, she tackled the key issue of nullity under EU competition law and emphasized that when selecting an applicable law regard should be held to the procedural rules of nullity and the national jurisprudence. For the reason that even though under EU law automatic nullity of incompatible contractual provisions is provided, the consequences for other parts of the agreement and for related agreements will depend on applicable national rules. Although most, if not all, Member states have recognised the concept of severability, the practical outcome still differs from jurisdiction to jurisdiction, depending on legislation and national jurisprudence depending on, inter alia, the competence of the national court to modify an invalid contractual clause. Also with regard to conversion clauses and procedural conditions upon which third parties can claim nullity national rules and jurisprudence seem to vary substantially across the EU. In this respect, it should be noted that it therefore might be saver to opt for negotiated than automatic conversion. Lastly, she noted that it remains highly recommended to recheck existing agreements periodically after a market change due to a merger or market exit of an important competitor to ensure that the agreement remains valid under the relevant market circumstances under the governing national law, given that also the temporal applicability of nullity can differ across the EU.

 

Key note speaker Lucas Peeperkorn (DG COMP – European Commission) emphasized the growing importance of online market places, which causes new types of restrictions such as MFN and price parity clauses to emerge. An MFN clause entails an undertaking by the supplier to offer a price that is at least as favorable as the price offered via his own sales channels (narrow MFN) or via any alternative sales channels (wide MFN). Mr. Peeperkorn examined the possible negative effects of MFN clauses (reduced competition between platforms, foreclosure effect vis-à-vis other platforms and distribution models, elimination of intra-brand competition, reduced inter-brand competition), and elaborated on how national competition authorities asses MFNs. Finally, he confirmed that the European Commission believes that the CJEU in the Coty judgment established that a marketplace ban does not constitute a hardcore restriction, and that this is valid for all product categories (luxury and other) and all distribution systems.

  

The fourth and final panel discussed e-commerce.

 

  • Filip Tuytschaever (contrast – Belgium) laid the groundwork for this panel’s discussion regarding e-commerce. He explained that online sales are presumed to be passive sales under the EU competition law and that, as a general rule, online sales must be treated no less favorably than passive offline sales. As such, online sales are effectively protected under the EU competition rules. A supplier cannot impose an online sales ban on its distributors but can require that they have a brick and mortar shop or showroom (thus banning pure online players from his distribution system). A supplier is also entitled to treat online sales more favorably that offline sales.  

 

  • Anastasia Dritsa (Kyriakides Georgopoulos – Greece) explained how the hotel booking cases impacted the assessment of MFN clauses under competition law. After reviewing case law on both national and European level as well as the European Commission’s e-commerce report, she concluded that both narrow and wide MFN clauses are permissible if the VBER is applicable. If the VBER does not apply, Ms. Dritsa advised to only use narrow MFN clauses, which produce more efficiencies and have a more limited effect on competition. One should however always be mindful of possible national legislation prohibiting wide MFNs (e.g. France, Italy).

 

  • Robert Neruda (Havel & Partners – Czech Republic) discussed how the equivalence requirement is applied in practice. He stressed that one must be very careful when establishing differences between online and offline sales by distributors, because an infringement of the equivalence requirement is considered a hardcore restriction. He underlined the importance of the nature of the product in this respect. Lastly, he emphasized that the equivalence requirement is a one-directional test: no equivalent protection is granted to offline sales (i.e. online sales can be treated more favorably than offline sales).

 

  • Minos van Joolingen (Banning – The Netherlands) examined how online platforms can be integrated in, or excluded from, a producer’s distribution network following the Coty judgment of the CJEU. In short, a producer can prevent its distributors from selling contract goods via online marketplaces by imposing quality conditions on the distributors’ online sales. Since a prohibition to sell goods via online marketplaces does not constitute a hardcore restriction (distributors are still able to sell online via their own website), the VBER is applicable. Moreover, if the quality conditions are imposed to preserve the luxury image of the contract goods, this can amount to purely qualitative selective distribution falling outside the prohibition of article 101(1) TFEU.

 

  • Andreas Christensen (Horten – Denmark) considered which EU developments outside EU competition law are also relevant for e-commerce. He demonstrated that the European Commission’s Digital Single Market strategy strongly influences e-commerce within the EU, by briefly discussing two recent EU regulations in this field: Regulation 2018/302, which bans unjustified geo-blocking, and Regulation 2017/1128, which facilitates the portability of online content services such as Netflix and Sky Sports.

 

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