EUROPEAN ANTITRUST “For slalom agreements between bans and exemptions”

Luca Davini
Lawyer in Milan and Turin


At the European level, antitrust matters are governed by the rules of the Treaty on the Functioning of the European Union (TFEU) and its implementing provisions.

The main rule on distribution contracts is Article 101 of the TFEU, paragraph 1 of which reads: “all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market shall be incompatible with the Common market and prohibited”.

Agreements which fall under the prohibition of Article 101 (1) are null and void and may result in the payment of substantial financial penalties for undertakings entering them.

Prohibitions and exemptions

Article 101, paragraph 3, provides for the further principle that any restrictive agreement falling under the prohibition of paragraph 1 shall be exempted from the prohibition, where “contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:

(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;

(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

In essence, if the parties concerned demonstrate that the agreement falls within the hypothesis of paragraph 3, it will be legitimate from the moment of its finalization, namely it will benefit from the so-called exemption.

As regards the distribution contract, Eu Regulation 330/2010 on antritrust rules was the first adopted on exemptions and applied to all vertical agreements relating to the purchase or sale of goods and services, defined in Article 1 (1), as “an agreement or concerted practice 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”.

New rules

This past May the 10th, the European Commission issued Eu Regulation 2022/720 (Vber) which replaces Regulation 330/2010 and entered into force, together with the new guidelines, on the 1st of June, providing for a transitional regime until the 31st of May 2023 for agreements already in force from the 31st of May 2022 that meet the exemption conditions of Eu Regulation 330/2010.

The elements introduced by the new antitrust discipline take into account market developments, in particular the growth of e-commerce and the role of online platforms, to facilitate the creation of a uniform European area in relation to restrictions related to online sales.

Less constraints online

One of the most interesting aspects contained in Eu Regulation 2022/720 concerns the greater significance attributed to “dual distribution” than in the past through offline and online channels, in particular through the introduction of an exception for non-reciprocal agreements, for example in cases where the supplier sells directly to online retail, in competition with the distributor who sells offline.

The Vber also intervenes on the discipline of “parity clauses”, considering as a restriction excluding the obligation given by a platform to a company using its online intermediation services not to offer, sell or resell goods or services to end users on more favourable terms on other competing platforms (wide retail parity obligation).

The Vber then intervenes in a substantial way on the restrictions of online sales which, in light of the growing development, no longer need special protection compared to offline sales channels. For example, in the new guidelines a different approach is adopted towards dual pricing (that is application to the distributor of different wholesale depending on whether the goods are intended to be resold online or offline) which is considered deserving of the block exemption as it can incentivise or renumerate an appropriate level of investment in online and offline channels.

With reference to the equivalence principle, which consists in the imposition of equivalent qualitative criteria for online and offline sales, the new guidelines recognize the possibility that the supplier may impose on its authorized distributors criteria for online sales that are not equivalent to those provided for sales in physical stores.

With regard to the restrictions on the use of the marketplace, the guidelines make it clear that, in principle, these provisions are covered by the block exemption, as they restrict only one of the online sales modalities usable by the distributor (which remains free to sell through its online store and other online channels and to use online advertising).

In general, it should be noted that, based on the rules of the new Vber, all the block exemptions identified above are liable to be considered restrictions on online sales only when, directly or indirectly, in isolation or in combination with other factors, they are intended to prevent the actual use of the internet by the buyer or its customers to sell the goods or contractual services.

Non-competitions obligations

As regards hardcore restrictions, already covered by the provisions contained in Regulation 330/2010 on antitrust rules, the resale price maintenance discipline has not been modified, which entails the prohibition of agreements with the object of setting a fixed or minimum resale price or a price level, as well as non-competition obligations of undetermined duration or exceeding five years, in relation to which the new guidelines introduce, however, an opening towards the benefit of the exemption, provided that there is an effective possibility for the distributor to renegotiate or terminate the agreement with reasonable notice and at a reasonable cost.

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Marcello

Dear Aurelia, the information you have provided are not sufficient for an answer which is subject to a professional engagement. In any case, we should study the provisions of the contract and identify governing law of the contract.If it does not provide anything on governing law then conflict law shall apply (in the most part of the countries likely the governing law will be the law of the country where the agent is domiciled). best regards Marcello Mantelli

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Aurelia

I signed a contract with a fashion agency but there were no termination clauses in the contract and decided to withdraw it before one week after signature so sent them an email but after 14 days they sent me an email and asserted that because i didnt withdraw in legal deadlines i have to perform the contract and pay whole money.Noboday told me about any deadlines and nothing was in the contract!! Why did they claim such a thing?

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