COMPETITION • EUROPEAN LAW • RESTRICTIVE AGREEMENTS
Absolute territorial protection is the protection granted to a distributor against any form of competition in its territory. It is guaranteed by various prohibitions or mechanisms, such as the prohibition of active sales, which prevents other members of the network from prospecting, on their own initiative, on the territory of a distributor, the prohibition of passive sales, which prohibits a distributor from responding to solicitations from consumers established outside its territory, combating parallel imports of contractual products from other Member States through export bans, or geo-blocking, which consists of blocking online transactions from consumers established in other Member States. Competition authorities are hostile to absolute territorial protection, which reduces intra-brand competition and partitions markets.
Article 4 of the Vertical Restraints Regulation No 330/2010 qualifies as hardcore restrictions stipulations limiting the territory into which, or the customers to whom, a buyer party to the agreement may sell the contract goods or services. Four exception are nevertheless provided to that rule: i) the restriction of active sales into the exclusive territory or to an exclusive customer group reserved to the supplier or allocated by the supplier to another buyer, where such a restriction does not limit sales by the customers of the buyer, ii) the restriction of sales to end users by a buyer operating at the wholesale level of trade, iii) the restriction of sales by the members of a selective distribution system to unauthorized distributors within the territory reserved by the supplier to operate that system, and iv) the restriction of the buyer’s ability to sell components, supplied for the purposes of incorporation, to customers who would use them to manufacture the same type of goods as those produced by the supplier. Article 4 also prohibits clauses restricting active or passive sales to end users by members of a selective distribution system operating at the retail level of trade.
The EU Court has held exclusivity agreements to be anticompetitive when they have the effect of partitioning the market, especially when combined with a national legislation which considers a third party engaging in parallel imports to be an act of unfair competition. Similarly, the clause by which the supplier grants its manufacturer’s guarantee only for products acquired by customers of its exclusive dealers, thereby excluding products marketed through parallel import channels, is restrictive of competition.
Nevertheless, a clause by which an exclusive distributor undertook, in the event of a sale outside the allocated territory, to pay to the distributor responsible for that territory a service support fee the amount of which was to be agreed between the two distributors, and in default of agreement the manufacturer was to determine the amount, having regard to objective criteria corresponding to a realistic assessment of the cost of the service does not fall within the scope of Article 101 TFEU.
Regulators take a goal-oriented approach, focusing more on the effect of the contractual clause than on its purpose, which allows them to catch indirect restrictions as well. For example, an exclusive distribution agreement that does not include a prohibition on re-exports may constitute an anti-competitive agreement where the parties collude to restrict parallel imports to an unauthorized reseller. In automobile distribution, measures such as quotas on estimated deliveries to the dealer’s territory, a bonus policy that disadvantages export sales to final consumers or dealers located abroad, or pressure on dealers to stop exporting, are deemed to be serious breaches of competition law.