COMPETITION • FRENCH LAW • RESTRICTIVE AGREEMENTS
Vertical restrictions are restrictions of competition generally contained in vertical agreements, i.e. “agreements or concerted practices entered into between two or more undertakings each of which operates, for the purposes of the agreement or the concerted practice, at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services” (Regulation No 330/2010, Art. 1(1)(a). Competition authorities often show them a measure of indulgence since, unlike horizontal agreements, in theory they lead to an increase in inter-brand competition. In addition, while with horizontal ties, the market power of one undertaking may incite its competitors to engage in anticompetitive conduct, with vertical ties, market power is ostensibly neutralized.
Distribution agreements (exclusive purchase, exclusive distribution, selective distribution, automobile distribution and franchise agreements) between the supplier and the members of its distribution network, constitute, as such, agreements likely to affect competition by virtue of the clauses they contain or by virtue of the conditions under which they are implemented. However, in its report for 1987, the Competition Council [now the Competition Authority] emphasized that selective distribution systems are not necessarily contrary to the provisions of Article L. 420-1 of the Commercial Code. While selection has the effect of limiting the number of retailers able to market the product in question and may reduce the intensity of price competition, it is also a source of competition on the basis of quality. Over the years, the Competition Authority has adopted a flexible approach emphasizing the ambivalence of distribution agreements that reduce competition between network members (intra-brand competition), but in principle increase competition between networks (inter-brand competition). They must therefore be assessed taking account of the context in which they are implemented.
Regulation No 330/2010 of 20 April 2010 (Vertical Restraints BER), which has a very broad scope of application, covers virtually all vertical agreements, i.e. all agreements between undertakings located at different levels of the production and distribution chain and whose object is the purchase, sale or resale of certain goods and services. Only those agreements which are contrary to the provisions of Article 101(1) TFEU but which meet with sufficient certainty the conditions for the application of Article 101(3) are included in the category (Art. 2). The regulation establishes a presumption of legality for agreements that do not contain restrictions with serious anticompetitive effects when the supplier and the buyer each have a market share not exceeding 30% (Art. 3). As national competition authorities are authorized by Regulation No 1/2003 to withdraw the benefit of the application of a block exemption regulation on their territory (Art. 29), the Competition Authority is fully competent to apply Regulation No 330/2010 where an agreement falls within its scope of application. Where the conditions for application of the Regulation are not met, in particular where the restriction does not affect trade between Member States, the French Authority considers that the European rules can nevertheless be used as a guide for analysis in the context of the rule of reason.