Vertical Restraints

• Author: Roger Van den Bergh
• DOI: 10.1177/0003603X15625122
• Published date: 01 March 2016
• Date: 01 March 2016

Article

Vertical Restraints: The European

Part of the Policy Failure

Roger Van den Bergh*

Abstract

This article advances several reasons why EU competition policy on vertical restraints has been a

failure. First, the distinction between price and nonprice restraints is inconsistent, since the economic

effects of both practices are similar. Second, EU competition law creates a number of inefficiencies that

cause a negative impact on social welfare; an example is the ban on absolute territorial protection that

does not allow a full protection from free-riding. Third, it is doubtful that the inefficiencies of EU

competition law can be justified by the market integration goal, since the rules may turn out to be

ineffective in reaching this objective. Fourth, EU competition law on vertical restraints has created

negative side effects: it has put an end to experimentation and innovation of competition rules at the

member-state level and induced private interests groups to spend a lot of effort in lobbying national

regulators. The example of resale price maintenance for books serves as an illustration of the latter

problem. Several of the above pitfalls have been indicated by Richard Markovits in his treatise on U.S.

antitrust law and EU competition law. These criticisms are supported in this paper and further

expanded by a discussion of additional errors that have made the EU competition rules on vertical

restraints a policy failure.

Keywords

EU competition law, vertical restraints, block exemption, black list, market integration, harmonization,

resale price maintenance

I. Introduction

Both U.S. antitrust law and EU competition law historically were understood as prohibitions to protect

equally intrabrand competit ion and interbrand competition . The former refers to the competi tion

between distributors offering a branded product of a given manufacturer within a given vertical

structure (production-wholesale-r etail). The latter involves rivalry betw een producers of different

brands: either competition between different vertical structures or in-store competition through multi-

branding. The dominant, even though controversial, story on the competitive effects of vertical

restraints—i.e., agreements between firms active at different levels of the distribution chain—is that

*Erasmus School of Law, Erasmus University

Corresponding Author:

Roger Van den Bergh, Erasmus School of Law, Erasmus University Rotterdam, Rotterdam, 3062 PA, Netherlands.

Email: r.vandenbergh@law.eur.nl

The Antitrust Bulletin

2016, Vol. 61(1) 167-185

ªThe Author(s) 2016

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DOI: 10.1177/0003603X15625122

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interbrand competition will mitigate any anticompetitive exercise of market power by the manufac-

turer imposing vertical restraints on its distributors. Nevertheless, at times antitrust law has been

hostile to restrictions of intrabrand competition (in particular, resale price maintenance), even in the

absence of anticompetitive effects on interbrand competition.

In spite of several policy shifts, particularly in recent decades, the rules on vertical restraints both in

U.S. antitrust law and EU competition law have not ceased to provoke criticisms from antitrust

practitioners and academic commentators alike. In his remarkable treatise on the economics and the

application and interpretation of both antitrust regimes, Richard Markovits censures U.S. antitrust law

on vertical restraints as a general error of U.S. courts. He advances both ‘‘ends’’ and ‘‘means’’ reasons

why restrictions of intrabrand competition should not be deemed to violate the Sherman Act. Accord-

ing to Markovits, U.S. antitrust law generally allows economic actors to convert the com petitive

advantages they were able to obtain through superior performance into seller surplus in ways that

do not manifest interbrand anticompetitive intent. Also, efforts to restrict the use of intrabrand

restraints will usually not ben efit consumers, as such rules c an be easily circumvented and may

ultimately deprive consumers from presales and postsales services that they desire.

1

Regarding EU

competition law, Markovits advances similar criticisms and asserts that a stricter attitude towards

intrabrand restraints cannot be justified by the goal of achieving market integration, which differenti-

ates EU competition law from U.S. antitrust law.

2

Markovits’s critical view of the EU competition

regime invites comments from European practitioners and scholars.

This article takes up the latter challenge and focuses on the European part of the vertical restraints

policy failure. At the outset, Markovits should be commended for having taken up the effort to discuss

the peculiarities of EU competition law. Sometimes, U.S. scholars seem to regard EU competition law

merely as a copy of U.S. antitrust law or a less interesting study object because of its shorter history. A

common opinion in the U.S. is that competition rules were introduced in Europe after the Second

World War in order to undo the cartelized industry structure of Nazi Germany, whereby the Sherman

Act served as an example. This vision of things neglects that there was a strong tradition of competition

policy in Germany since the 1930s, which originated from the close cooperation of economists and

lawyers at the University of Freiburg. The ensuing ideas of the so-called Ordoliberal School have

exerted a clear impact upon rule-making by the European Courts up until today.

3

For a correct

understanding of EU competition law, ordoliberalism is as important as Chicago economics is for a

proper comprehension of U.S. antitrust case law. Next to the ordoliberal ideas, the political goal of

creating a common (internal) market has shaped EU competition law in ways that differ from U.S.

antitrust law. Interestingly, in spite of their conceptual differences, both legal regimes have made the

mistakes that Markovits forcefully criticizes. Even though the rules have changed over time, a large

part of the antitrust story on both sides of the Atlantic shows persisting worries about restrictions of

intrabrand competition. This has consumed resources away from antitrust practitioners, courts,

enforcement authorities and academic scholars that likely cannot be justified from the perspective

of a welfare maximizing competition policy.

The structure of this article is as follows. After this introduc tion, the first section summarizes

current EU competition law on vertical restraints. The discussion of these rules is somewhat more

elaborate than the relevant chapter in Markovits’s book in order to include additional details that are

needed for a proper assessment of Mar kovits’s criticisms. The next secti ons elaborate the major

1. RICHARD MARKOVITS,ECONOMIC ANALYSIS AND THE INTERPRETATION AND APPLICATION OF U.S. AND E.U. ANTITRUST LAW 84-85

(2014).

2. RICHARD MARKOVITS,supra note 1, at 111.

3. ROGER VAN DEN BERGH &PETER D. CAMESASCA,EUROPEAN COMPETITION LAW AND ECONOMICS:ACOMPARATIVE PERSPECTIVE

(2006); Pierre Larouche & Maarten Pieter Schinkel, Continental Drift in the Treatment of Dominant Firms: Article 102

TFEU in Contrast to §2 Sherman Act (TILEC Discussion Paper, 2013-020).

168 The Antitrust Bulletin 61(1)