Regulation 2790/99: The commission’s “new style” block exemption for vertical agreements

Common Market Law Review

Volumn 37, Issue 4, 2000, Pages 887-924

  Whish, Richard ^a  

^a KING'S COLLEGE LONDON   (United Kingdom)

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EID: 85102824551     PISSN: 01650750     EISSN: 18758320     Source Type: Journal    
DOI: 10.54648/272747     Document Type: Article

References (157)

1. 1. O.J. 1983, L 173/1.
2. 2. O.J. 1983, L 173/5.
3. 3. O.J. 1988, L 359/46; Regulation 1475/95 (O.J. 1995, L 145/25) on the distribution of motor cars is unaffected by Regulation 2790/99, and will be the subject of a separate review: it is due to expire on 30 Sept. 2002. For criticism of its operation in the UK, see the Competition Commission’s report, New Cars: A report on the supply of new motor cars within the UK (Cm 4660, (2000); see also Monti, Competition Commissioner, in a speech delivered on 11 May 2000 to the Forum Europe Conference, Brussels (http://europa.eu.int/comm/dg04/speech/index.htm).
4. 4. O.J. 1999, L 336/21, [2000] 4 CMLR 398.
5. 5. Regulation 417/85, O.J. 1985, L 53/1.
6. 6. Regulation 418/85, O.J. 1985, L 53/5; drafts of these two block exemptions, together with draft guidelines on the applicability of Art. 81(1) to horizontal cooperation agreements, entered into circulation early in 2000 and were published in O.J. 2000, C 118/3; it is intended that the new block exemptions will be adopted by the end of 2000.
7. 7. See page 894 below.
8. 8. Not yet published in O.J.; the text of the Regulation and the Guidelines can be found at http://europa.eu.int/comm/dg04/lawenten/en/entente3. htm.
9. 9. The position of agency agreements is discussed at pages 922–924 below.
10. 10. O.J. 1999, C 132/1, [1999] 5 CMLR 208; the issues in the White Paper are the subject of excellent analysis in House of Lords Select Committee on the European Union, Fourth Report: Reforming EC Competition Procedures (HL 33, 2000).
11. 11. Cases 56 and 58/64, [1966] ECR 299.
12. 12. Cases 56 and 58/64, Consten and Grundig, [1966] ECR 299 at 339; the approach taken by the Court in Consten and Grundig was confirmed in Case C-306/96, Javico v. Yves Saint Laurent, [1998] ECR I-1983 at para 11.
13. 13. Even absolute territorial protection may be countenanced in exceptional circumstances: see Case 262/81, Coditel II, [1982] ECR 3381.
14. 14. Recently e.g. Cases T-175/95 and T-176/95, BASF v. Commission, judgment of 19 May 1999, nyr, [2000] 4 CMLR 33.
15. 15. See esp. Case 56/65, Socie´te´ Technique Minie‘re v. Maschinenbau Ulm GmbH, [1966] ECR 235 at 249; Case 23/67, Brasserie de Haecht SA v. Wilkin, [1967] ECR 407 at 415; Case C-234/89, Delimitis v. Henninger Bra¨u, [1991] ECR I-935 at 984.
16. 16. See e.g. Davide Campari-Milano SPA, O.J. 1978, L 70/69, [1978] 2 CMLR.
17. 17. See e.g. Junghans, O.J. 1977, L 30/10, [1977] 1 CMLR D82.
18. 18. See e.g. Commission Notice on UIP O.J. 1988, C 286/4, [1989] 4 CMLR 109; final decision O.J. 1989, L 226/25, [1990] 4 CMLR 749.
19. 19. O.J. 1997, C 372/13, [1998] 4 CMLR 192. It is interesting to speculate how many agreements which are de minimis in the terms of the 1997 Notice would not be exempted under the Regulation, given that it exempts all vertical agreements where the supplier’s or buyer’s market share is below 30%: to put the point another way, will the 1997 Notice have much practical importance for vertical agreement in the future? It is possible that the Commission will revise the 1997 Notice in due course, in the light of the provisions of the new block exemption.
20. 20. 1997 Notice, para 9.
21. 21. Ibid.
22. 22. The case is on appeal to the CFI: Case T-25/99, Roberts v. Commission, pending. The Commission found the agreements of larger brewers than Greene King to be within Art. 81(1), but granted individual exemption: see e.g. Bass plc, O.J. 1999, L 186/1, [1999] 5 CMLR 782.
23. 23. This follows the judgment of the CFI in Case T-7/93, Langnese-Iglo v. Commission, [1995] ECR II-1533, para 8.
24. 24. The Commission’s White Paper on Modernization, supra note 10, is predominantly concerned with the “problem” of notifications for individual exemption.
25. 25. “System Failure: Vertical Restraints and EC Competition Law”, 32 CML Rev., 973–989.
26. 26. COM(96) 721 final, [1997] 4 CMLR 519.
27. 27. 26 Nov. 1998, O.J. 1998, C 365/3, [1999] 4 CMLR 281.
28. 28. COM(1998) 546 final, 30 Sept. 1998; see below.
29. 29. O.J. 1999, C 270/7, [1999] 5 CMLR 1167.
30. 30. O.J. 1999, C 270/12, [1999] 5 CMLR 1176.
31. 31. O.J. 1999, L 336/21, [2000] 4 CMLR 398.
32. 32. See also the Commission’s Press Release accompanying the Guidelines, IP/00/520, 24 May 2000.
33. 33. Ibid.
34. 34. Council Regulation (EC) No 1215/1999 amending Regulation No. 19/65/EEC on the application of Article 81(3) of the Treaty to certain categories of agreements and concerted practices O.J. 1999, L 148/1.
35. 35. Council Regulation (EC) No 1216/1999 amending Regulation No. 17: first Regulation implementing Articles 81 and 82 of the Treaty, O.J. 1999, L 148/5.
36. 36. JO 1965, 533, O.J. Sp Ed 1965–66, 35.
37. 37. JO 1962, 204/62, 1962 O.J. Sp Ed 87.
38. 38. See Art. 8 of the new Regulation: pages 920–921 below.
39. 39. See Art. 7 of the new Regulation: page 920 below.
40. 40. See Hartley, The Foundations of European Community Law, 4th ed. (Oxford, 1998), pp. 143–5.
41. 41. See supra note 10.
42. 42. O.J. 1999, L 336/21, [2000] 4 CMLR 398.
43. 43. Regulation 2790/99, Art. 13.
44. 44. Art. 13, proviso to the second indent.
45. 45. See Recital 16; on the relationship between Art. 81(3) exemption and Art. 82 abuse, see Case T-51/89, Tetra Pak Rausing SA v. Commission, [1990] ECR II-309.
46. 46. See pages 917–918 below.
47. 47. A literal interpretation would mean that an obligation to purchase 80% of the buyer’s total purchases would not amount to a non-compete obligation, but that an obligation to purchase 81% would since only the latter applies to “more than 80%”.
48. 48. See pages 907–910 below.
49. 49. The term “buyer” is itself defined in Art. 1(g) to include an undertaking which, under an agreement falling within Art. 81(1), sells goods or services on behalf of another undertaking.
50. 50. Guidelines, paras. 23–25
51. 51. The UK has adopted a definition of “vertical agreements” closely modelled on Arts. 2(1) and 2(3) of the new Regulation in The Competition Act 1998 (Land and Vertical Restraints Exclusion) Order 2000 (SI 2000/310), which excludes most vertical agreements from the Chapter I prohibition of the Competition Act 1998: see Butterworths Competition Law (Eds. Freeman and Whish), Div. I paras. [637]-[664].
52. 52. See pages 888–890 above; see also Sections II and VI of the Commission’s Guidelines on the application of Article 81(1) to vertical agreements.
53. 53. See supra note 10.
54. 54. Case 26/76 [1977] ECR 1875; for the Commission’s analysis of selective distribution systems, see paras. 184–198 of the Guidelines.
55. 55. See e.g. Grohe O.J. 1985, L 19/17, [1988] 4 CMLR 612; note that, where it is necessary to apply the Regulation to a selective distribution system, the definition of this term in Art. 1(d) does not bring into account the nature of the product. This consideration is relevant only to the question of whether the system falls outside Art. 81(1) altogether.
56. 56. See e.g. Grundig O.J. 1985, L 233/1, [1988] 4 CMLR 865.
57. 57. In the Guidelines, the Commission uses the expression “single branding” rather than the term “exclusive purchasing”, since the latter term could apply both to the sourcing of the supplier’s brands and the brands of competitors; for the Commission’s analysis of single branding agreements, see paras. 138–160 of the Guidelines.
58. 58. See note 15 supra.
59. 59. Regulation 1983/83, Art. 1.
60. 60. Para 47 of the Guidelines suggests that an obligation on the buyer to apply a most favoured customer clause, could amount to direct or indirect price fixing, but the example given in the text above entails an obligation on the supplier, not the buyer.
61. 61. See pages 918–919 below.
62. 62. O.J. 1996, L 31/2.
63. 63. Guidelines, para 93.
64. 64. Guidelines, para 24; however, the supplier would be an undertaking, and would infringe Art. 82 if it acted in an abusive manner and if the other terms of that provision were satisfied.
65. 65. Guidelines, para 25.
66. 66. Guidelines, para 20.
67. 67. See pages 922–924 below.
68. 68. On Art. 4 generally, see infra.
69. 69. On Art. 5 generally, see infra.
70. 70. Guidelines, paras. 28 and 29.
71. 71. In the case of an agreement between an association and its members, it is the association’s market share that is relevant for the purpose of Art. 3(1): Guidelines, para 89.
72. 72. Arts. 10 and 11 deal with the calculation of turnover and with connected undertakings.
73. 73. The final sentence of para 28 of the Guidelines states that where only a limited number of the members of the association have a turnover not significantly exceeding EUR 50 million, “this will not normally change the assessment under Article 81”. The meaning of this is opaque: if this is intended to mean that the block exemption would still be applicable, it does not provide any legal justification for this view.
74. 74. It presumably follows that if the association purchases for its own use, as e.g. a group of National Health hospitals in the UK, Art. 2(2) would not be applicable since the group does not purchase in order to sell to final consumers.
75. 75. On such agreements, see Case C-250/92, Gøttrup-Klim Grovvareforeninger v. Dansk Landbrugs Grovvareselskab, [1994] ECR I-5641; the Commission’s draft guidelines on the applicability of Art. 81 to horizontal cooperation (see supra note 6) deal with joint purchasing at paras. 109–133; inter alia they suggest that where the parties’ market share in the purchasing and selling markets is below 15% it is unlikely that Art. 81(1) would apply.
76. 76. Guidelines, paras. 30–44.
77. 77. Intellectual property rights are defined in Art. 1(e) to include “industrial property rights, copyright and neighbouring rights”.
78. 78. Although the term “ancillary” does not feature in Art. 2(3) itself, recital 3 states that the Regulation “includes vertical agreements containing ancillary provisions on the assignment of intellectual property rights”.
79. 79. See supra note 62.
80. 80. Guidelines, para 33.
81. 81. See the Commission’s Notice on Subcontracting Agreements, O.J. 1979, C 1/2.
82. 82. Guidelines, para 33.
83. 83. Guidelines, para 34.
84. 84. Guidelines, para 38.
85. 85. Guidelines, para 40; this would cover the sale of software subject to a “shrink-wrap” licence, the conditions in which the end user accepts by opening the package.
86. 86. O.J. 1988, L 359/46.
87. 87. The Commission notes the difference between industrial franchise and non-industrial franchise agreements at para 42 of the Guidelines.
88. 88. See pages 907–910 below on the market share cap in Art. 3.
89. 89. Guidelines, para 95.
90. 90. Art. 4(2) of Council Regulation 17/62.
91. 91. Guidelines, para 36.
92. 92. Guidelines, paras. 26 and 27.
93. 93. The Commission also refers in the Guidelines to its paras. 20–24 of its Notice on Market Definition (O.J. 1997, C 372/5), to point 55 of its 13th Report on Competition Policy and to its decision in Elopak/Metal Box-Odin (O.J. 1990, L 209/15).
94. 94. Under the old Regulations, the derogation would apply whether the supplier or the buyer was below this threshold.
95. 95. Arts. 10 and 11 apply on the calculation of turnover and on connected undertakings.
96. 96. At para 27 of the Guidelines, the Commission states that an “own-brand” retailer would not be treated as a manufacturer for this purpose.
97. 97. Guidelines, para 45.
98. 98. O.J. 1995, L 145/25.
99. 99. Supra note 62.
100. 100. O.J. 1985, L 53/1.
101. 101. O.J. 1985, L 53/5.
102. 102. The Commission specifically says this in para 45 of the Guidelines.
103. 103. Section V of the Guidelines deals with market definition and market share calculation issues
104. 104. O.J. 1997, C 372/5.
105. 105. It is of course true, as the CFI held in Cases T-125/97 & T-127/97, Coca-Cola v. Commission, judgment of 22 March 2000, nyr, that each case must turn on the conditions in the market at the time the competition law issue in question falls to be assessed, but nevertheless prior decisions of the Commission do provide helpful insight into its thinking.
106. 106. See page 909 below on the relevance of the buyer’s market share.
107. 107. See supra note 51.
108. 108. Guidelines, para 82, following e.g. the Commission’s decision under the ECMR in Case No. IV/M.1221 Rewe/Meinl, O.J. 1999, L 274/1.
109. 109. See pages 918–919 below.
110. 110. See pages 899–900 above.
111. 111. See Guidelines, paras. 46–56
112. 112. Case 5/69, Vo¨lk v. Vervaecke, [1969] ECR 295; Case C-306/96, Javico v. Yves Saint Laurent, [1998] ECR I-1983.
113. 113. See supra note 19.
114. 114. See below.
115. 115. See Guidelines, paras. 47 and 48
116. 116. The ECJ has never ruled on the imposition of maximum prices; for the position in the US, see Khan v. State Oil 118 U.S. 275 (1997).
117. 117. The ECJ held in Case 161/84, Pronuptia de Paris v. Pronuptia de Paris Irmgard Schillgalis, [1986] ECR 353 that the recommendation of prices would not, in itself, infringe Art. 81(1); in the UK, see the reports of the Monopolies and Mergers Commission on Electrical Goods Cm 3675 and Cm 3676 (1997) which led to The Restriction on Agreements and Conduct (Specified Domestic Electrical Goods) Order 1998 (SI 1998/1271); see also the report of the Competition Commission on Cars Cm 4660 (2000), which was also critical of the recommendation of resale prices.
118. 118. See the point made at page 896 above in relation to such clauses.
119. 119. See pages 922–924 below.
120. 120. See Case 311/85, Vereniging van Vlaamse Reisbureaus v. Sociale Dienst van de Plaatselijke en Gewestelijke Overheidsdiensten, [1987] ECR 3801; in the UK, see the report of the Monopolies and Mergers Commission on Foreign Packaged Holidays Cm 3813 (1997), which found that this practice operated against the public interest and which led to The Foreign Package Holidays (Tour Operators and Travel Agents) Order 1998 (SI 1998/1945).
121. 121. Guidelines, paras. 49–52
122. 122. See e.g. Butterworths Competition Law (Eds. Freeman and Whish) Division IV, paras. [347]-[448]; Bellamy and Child, Common Market Law of Competition, 4th ed. (Sweet & Maxwell, 1993), paras. [7-011]-[7-047].
123. 123. See e.g. Kathon/Biocide O.J. 1984, C 59/6, [1984] 1 CMLR 476.
124. 124. This is presumably based on Pronuptia, supra note 117.
125. 125. Art. 1 of Regulation 1983/83 exempted only agreements conferring exclusive territories, not customer groups.
126. 126. Art. 10(12) of Regulation 240/96 defined the “territory of the licensor” as “territories in which the licensor has not granted any licences…”, a negative formulation; the new Regulation requires a reservation or allocation.
127. 127. Guidelines, paras. 53–54
128. 128. On this point, see para 54 of the Guidelines.
129. 129. O.J. 1983, L 173/1.
130. 130. 130. O.J. 1983, L 173/5.
131. 131. See pages 897–898 above.
132. 132. Guidelines, para 55
133. 133. Ibid.
134. 134. Guidelines, para 56
135. 135. Ibid.
136. 136. Guidelines, paras. 57–61
137. 137. Whether a contract is “severable” for the purpose of Art. 81(2) is a matter for the applicable law of the contract: see Case 127/73, BRT v. SABAM, [1974] ECR 51 and Case 319/82, Socie´te´ de Vente de Ciments et Be´tons de l’Est v. Kerpen and Kerpen GmbH [1983] ECR 4173; it may be that the same approach should be adopted in relation to “severability” under Art. 5 of the new Regulation.
138. 138. Guidelines, paras. 58–59
139. 139. See pages 895–896 above.
140. 140. Guidelines, para 60
141. 141. Guidelines, para 61
142. 142. Guidelines, paras. 71–75
143. 143. See Langnese O.J. 1993, L 183/19 where the Commission withdrew the benefit of Regulation 1984/83 from exclusive purchasing agreements in the German market for impulse ice-cream; the Commission’s decision was upheld on appeal in Case T-7/93, Langnese-Iglo, supra note 23. This is understood to be the only occasion on which the Commission has withdrawn the benefit of a block exemption.
144. 144. Responsibility for such an effect can be attributed only to those undertakings which make an appreciable contribution to it: Guidelines, para 63, applying the ECJ’s judgment in Delimitis, supra note 15.
145. 145. Guidelines, paras. 76–79
146. 146. See pages 892–894 above.
147. 147. The wording is modelled upon Art. 9(2) of the EC Merger Regulation, O.J. 1990, L 257/13, as amended by Regulation 1310/97, O.J. 1998, L 3/16.
148. 148. The words “under the same conditions” are opaque, and would perhaps be better understood as “in the same circumstances set out in Article 6”.
149. 149. There is no specific power in UK law enabling, for example, the Office of Fair Trading to withdraw the benefit of a block exemption. Withdrawal of a “parallel exemption” under section 10 of the Competition Act 1998 would not in itself withdraw the benefit of the EC block exemption; nor would an Order under Schedule 8 of the Fair Trading Act 1973 following a monopoly or merger investigation allow the withdrawal of the EC exemption.
150. 150. Case 14/68, Walt Wilhelm v. Bundeskartellamt, [1969] ECR 1, para 4; Delimitis, supra note 15; also Recital 14 of the Regulation and para 78 of the Guidelines.
151. 151. Guidelines, paras. 80–87
152. 152. Under the EC Merger Regulation, turnover is calculated, according to Art. 5(1), by reference to the “preceding financial year”; there is no explanation of why the new Regulation proceeds on the basis of a calendar year rather than a financial year.
153. 153. See page 894 above.
154. 154. Notice on exclusive dealing contracts with commercial agents of 1962, O.J. 139, 24.12.1962, p. 2921.
155. 155. Cases 40/73 etc. [1975] ECR 1663.
156. 156. Case 311/85, supra note 120.
157. 157. See Whish and Sufrin “Community Competition Law: Notification and Individual Exemption – Goodbye to all that” in Hayton (Ed.) Law’s Future(s) (Hart Publishing, 2000); Ehlermann, “The modernization of EC antitrust policy: A legal and cultural revolution”, 37 CML Rev., 537–590; Mo¨schel, “Guest Editorial”, 37 CML Rev., 495–499.