New horizons in distribution antitrust law?

Sales and distribution contracts between suppliers and purchasers (but also unilateral conduct in the context of sales and distribution, such as dictating terms and conditions) are also subject to restrictions under antitrust and competition law. These are sales and distribution-related antitrust and competition law issues that should always be taken into consideration when establishing or revamping distribution systems.

A major role in this is played by the Block Exemption Regulation on Vertical Agreements (VBER), which was updated in May of 2022, along with the associated guidelines of the European Commission (more details can be found in our Competition Outlook 2023). Vertical agreements between companies at different stages of the production or distribution chain are exempted from the prohibition of cartels found in Article 101(1) TFEU under the conditions of the Vertical Block Exemption Regulation (safe harbour).

The VBER exemption does not apply if a distribution agreement contains “hardcore restrictions”. These are in particular agreements whose object is to achieve resale price maintenance, restrictions on customers or territories and, as explicitly emphasised since May 2022, restriction of the effective use of the internet.

In this context, the ECJ’s “Super Bock Bebidas decision” dated 29 June 2023 (ECJ, judgment dated 29 June 2023 – C-211/22 – Super Bock Bebidas) is to be highlighted. The case concerned the question of whether a supplier fixing a minimum price for resale by its buyers should always be regarded as a restriction of competition by object. Such price fixing is a “hardcore restriction” within the meaning of the VBER, and therefore such an agreement is excluded from the safe harbour of the block exemption. The ECJ has now clarified that the category of “hardcore restriction” cannot simply be equated with the category of “restriction of competition by object” according to Article 101(1) of the TFEU. The ECJ emphasises in this context the principle that if there has not even been a restriction of competition within the meaning of Article 101(1) TFEU, an exemption according to Article 101(3) TFEU is irrelevant. Consequently, the burden of proof has increased for the authorities because they must investigate each breach of Article 101(1) TFEU in more depth. However, this decision is by no means an open invitation to engage in vertical price fixing.

The VBER brings with it in particular innovations in online sales and distribution, online trading platforms and hybrid platforms. Specific requirements have also been included as to when exchange of information relevant to competition between suppliers and buyers in dual distribution systems is exempted and when it is not (“vertical exchange of information”). These must always be taken into consideration when a supplier distributes or is considering distributing goods or services not only directly, e.g. via its own premises or online, but also indirectly via independent buyers such as dealers.

In other distribution systems, for example those that involve companies manufacturing their own contractual products, there is also often a legitimate interest in cooperating with other companies. Those other companies can include competitors, with the result that competition law is an important component of due diligence. Thus, it is to be emphasised that the European Commission’s new block exemption regulations on specialisation agreements (Specialisation Block Exemption Regulation) and research and development agreements (R&D Regulation) have been in effect since 1 July 2023. They apply until 30 June 2035. The regulations constitute a safe harbour for certain agreements between companies covering specialised or joint production and joint research and development, including use of the results.

Agreements and any contact with (future) competitors are subject to strict restrictions, primarily with regard to the exchange of information as covered by antitrust law. It is advisable to note the European Commission’s new guidelines, likewise published in summer 2023, on horizontal co-operation agreements (Horizontal Guidelines), which include broad clarifications that take into account more recent legal precedents. These comprise a newly structured and expanded chapter on the exchange of information that now explains the concept of commercially sensitive information and describes how to avoid a breach of competition law in more depth.

Moreover, there are completely new explanations on “sustainability agreements” that can create room for manoeuvre in collaborations to pursue sustainability goals.

It is also to be emphasised that the ECJ set out more precisely its practices when identifying exclusivity clauses by companies with a dominant market position last year (ECJ, judgment dated 19 January 2023 – C-680/20 – Unilever). A consequence of the decision is that competition authorities will have to work harder to prove that a company has used an exclusivity clause to abuse its dominant position if that company can defend itself. In everyday practice, this means that even exclusivity clauses imposed in distribution agreements are not abusive per se and thus not necessarily inadmissible, although it goes without saying that they continue to be risky.

It can be important here whether the exclusivity clause excludes equally efficient competitors (“as efficient competitor” (AEC) test). The ECJ had previously increased the requirements to be met by competition authorities in regard to exclusivity rebates in a similar way.

It is also particularly interesting for vehicle manufacturers that the period of application of the Motor Vehicle Block Exemption Regulation on vertical agreements and concerted practices in the motor vehicle sector in its current version has been extended to 31 May 2028. This means that the previous legal situation regarding aftersales distribution agreements will remain largely the same. There have been changes to the European Commission’s supplementary guidelines regarding motor vehicles (Motor Vehicle Guidelines, EUR-Lex - 52010XC0528(01) - EN - EUR-Lex (europa.eu)).

These include additional guidelines regarding vehicle repair and maintenance information (RMI) to be observed by vehicle manufacturers, for example when distributing or marketing such RMI or other vehicle data and include the warning that unilaterally withholding vehicle-generated data may constitute abuse under Article 102 of the TFEU. The legislative context here is fraught with legal uncertainty because under laws such as the Type Approval Regulation (EU) 2018/858 vehicle manufacturers must provide “independent operators” access to RMI, on-board diagnostics (OBD) and other information and services. The ECJ repeatedly dealt with this topic in 2022 and 2023 in cases in which we have been able to ensure that our clients are permitted to continue to derive profit from this RMI (ECJ, judgment dated 27 October 2022 – C-390/21) and are not obliged to provide an automated RMI databank interface (ECJ, judgment dated 9 November 2023 – C-319/22).

 

This article is part of the "Update Commercial 2024". All insights and the entire report as a PDF can be found here.