EU law of product distribution

A. Introduction
Distribution agreements under European Union (EU) law are assessed
under Articles 101 and 102 of the Treaty on the Functioning of the
European Union (TFEU).1 Article 101 TFEU applies to all distribution
agreements entered into by two or more entities (“undertakings”) carrying
out economic activity, provided that the agreements under review are
capable of appreciably affecting competition and trade between EU
Member States. Article 102 TFEU applies to distribution agreements
entered into by a firm that holds a dominant position in a relevant market,
generally the market on which the products are sold or, less frequently, a
market vertically related or adjacent to it. In order for Article 102 TFEU
to apply, the dominant position must exist within the EU internal market
or in a substantial part of it, and the conduct must be such that it may affect
trade between the EU Member States. This chapter will examine the
application of both Articles 101 and 102 TFEU to product distribution.
While both Articles 101 and 102 TFEU may be applied to the same
agreement, it appears to be the practice of the European Commission to
investigate agreements under Article 102 TFEU rather than under Article
101 TFEU whenever both provisions would apply.
This chapter is structured as follows: Section B focuses on the key
elements of the legal framework applicable to all distribution agreements
(e.g., the scope of application of Articles 101 and 102 TFEU in relation to
product distribution agreements). Section B also discusses Commission
Regulation (EU) No. 330/2010 of April 20, 2010 on the application of
Article 101(3) of the TFEU to categories of vertical agreements and
concerted practices2 in general and its application to the most common
1. Treaty on the Functioning of the European Union, Dec. 13, 2007, 2008 O.J.
(C 115) 47 [hereinafter TFEU].
2. Commission Regulation (EU) No 330/2010, of April 20, 2010 on the
application of Article 101(3) of the Treaty on the Functioning of the
European Union to categories of vertical agreements and concerted
344 Antitrust Law and Economics of Product Distribution
forms of product distribution. Section C deals with resale price
maintenance, Section D with customer and territorial restraints, Section E
with exclusive dealing, Section F with conditional rebates,. Section G with
tying practices, Section H with price discrimination, and Section I with
distributor termination and refusal to deal. Finally, Section J deals with
most favored nation (MFN) clauses.
B. Key Elements of the Legal Framework
1. Article 101 TFEU
a. The General Framework of Article 101 TFEU
Article 101 TFEU consists of three paragraphs. Article 101(1)
prohibits agreements, concerted practices, and decisions of associations of
undertakings (together “agreements” unless the context requires
otherwise) that have as their object or effect the restriction, prevention, or
distortion of competition within the internal market (meaning the
European Economic Area) and have an effect on trade between EU
Member States. Article 101(2) provides that agreements prohibited under
Article 101(1) are void. Article 101(3) sets out exemption criteria for
agreements that fall within Article 101(1) but nevertheless create
efficiencies. 3 Such agreements are not prohibited provided that four
cumulative conditions are met:
(1) the agreement contributes to improving the production or
distribution of products or services, or to promoting technical or
economic progress, i.e., the agreement generates efficiencies;
(2) consumers are allowed a fair share of the resulting benefits, which
is construed as meaning that the net effect of the agreement must
be neutral or positive for consumers;
practices, 2010 O.J. (L 102) 1 (explaining the application of Article 101(3)
of the Treaty on the Functioning of the European Union to categories of
vertical agreements and concerted practices) [hereinafter VBER].
3. For the European Commission’s approach to Article 101 in general and
Article 101(3) in particular, see Guidelines on the Application of Article
81(3) of the Treaty, 2004 O.J. (C 101) 97 [hereinafter Guidelines on Article
81(3) Application]. The approach is analytically similar to the ancillary
restraints doctrine in the United States.
EU Law of Product Distribution 345
(3) the agreement does not impose restrictions beyond those that are
necessary for the attainment of the efficiencies; and
(4) the agreement does not give rise to the possibility of eliminating
competition with respect to the products or services in question.
Agreements, decisions and practices which do not have the object or
effect of restricting competition do not fall under Article 101 TFEU. For
example, certain aspects of agency and subcontracting agreements are
considered to be outside of the scope of Article 101 TFEU.4 In certain
cases, restrictions objectively necessary for the existence of an agreement
or for the protection of a legitimate commercial or noncommercial purpose
also fall outside Article 101(1) TFEU.5
b. Tests of “Object” or “Effect”
Article 101(1) TFEU sets out two tests for determining whether an
agreement is anticompetitive: an “object” test and an “effect” test. An
agreement is restrictive by object when it tends, by its very nature, to
restrict competition so that proof of anticompetitive effects is not
necessary.6 This is similar to, but not the same as, per se anticompetitive
cases in the United States. The similarity is that, for the prohibition to
apply, both in EU object violations and in U.S. per se violations the
authority or plaintiff does not have to prove that the arrangement or
conduct has anticompetitive effects. The difference is that per se violations
in the United States can never be justified because of countervailing
economic benefits, whereas in EU law any restriction of competition
within the meaning of Article 101(1) TFEU, including restrictions by
object, can be justified if it meets the conditions set out in Article 101(3)
TFEU. However, in practice, it is unlikely that restrictions by object,
4. See Guidelines on Vertical Restraints, 2010 O.J. (C 130) 1, ¶¶ 8-22
[hereinafter Vertical Restraints Guidelines].
5. See e.g., id. ¶¶ 60-64; see also Guidelines on Restrictions of Competition
“By Object” for the Purpose of Defining Which Agreements may Benefit
from the De Minimis Notice, §§ 3.1-3.4, SWD (2014) 198 final (June 25,
2014) [hereinafter Guidance on Restrictions].
6. Id. § 1; see also Case C-67/13 P, Groupement des cartes bancaires (CB) v.
Comm’n, 2014 E.C.L.I. 2204,49 (Eur. Ct. Justice) (stating that certain
“types of coordination between undertakings [which] reveal a sufficient
degree of harm to competition that it may be found that there is no need to
examine their effects”).

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