EU Competition Law
Overview
The EU Treaty prohibits anti-competitive agreements and decisions which may affect trade between EU states which have as their object or effect, the restriction or distortion of competition within the EU common market. The effect must be appreciable.
Although an agreement may not have an appreciable effect on competition or trade between member states, it may be caught by EU competition law if one or more parallel networks or similar agreements cumulatively result in the closing of potential opportunities to actual or potential competitors.
Block Exemptions
Both the EU and Irish competition law have been reformed so that distributorship agreements raise fewer competition law issues than was once the case. Most distributorship agreements will be exempt under EU rules provided that the supplier’s market share is below 30%, and the agreement does not contain specified excluded restrictions.
Blacklist Clauses
The blacklisted or so-called hard-core restraints which are prohibited are set out in the Regulation. They are not capable of being exempted. The most significant types are resale price maintenance and territorial restrictions.
Competition Analysis
The Commission has published guidelines on vertical restraints. This assists in the interpretation of the Regulations and sets out the Commission’s policy in order to assist businesses to undertake a self-assessment of the agreements.
Scope of Exemption
The block exemption applies only if the market share of the supplier does not exceed 30 percent of the relevant market in which it sells its goods or services, and the market share of the buyer in the purchasing market does not exceed 30 percent.
Limits on Exemption
If the parties to the agreements are themselves, competitors, the exemption only applies if the arrangements are not reciprocal; e.g.
- the supplier is the manufacturer and the distributor of goods while the buyer is distributor and not a competing business at the manufacturer level
- the supplier is a service provider at several levels of the trade while the buyer buys goods and services at the retail level and does not compete at the level of trade at which it purchases these services.
Invalid Restrictions
The agreement loses the benefit of the exemption if it contains so-called “hardcore” restrictions.
Post-Termination
There are further conditions which are not permitted, even where the market share is not exceeded. These include the following:
- any direct or indirect “non-compete” obligation which last indefinitely or exceeds five years. A “non-compete” obligation is one which requires the buyer not to manufacture, purchase or sell competing goods;
- any direct or indirect obligation preventing the buyer from manufacturing, purchasing, selling or re-selling goods after termination of the agreement;
Other Justifications
The fact that the Block Exemption conditions are not met does not necessarily mean that there is an infringement of competition law. This depends on the nature of the restrictive clauses and their actual economic effect in practice. Provided that system is based on qualitative and objective criteria, the agreements may contain ancillary obligations, which are required for the purpose of the system.