Vertical agreements

Agreements between a supplier and a customer that might prevent, restrict, or distort competition are scrutinised under Article 101. Increasingly, competition authorities are using economics to evaluate the effects of commercial agreements on competition.

The European Commission's guidelines on the assessment of various types of vertical agreements are heavily reliant on economic effects, and many national competition authorities have followed suit. To minimise antitrust risks, companies with significant market presence must establish whether an agreement will benefit or hinder competition. Economic analysis is at the heart of such an assessment.

Vertical agreements between companies at different levels of the supply chain often have strong efficiency rationales and enhance competition. However, they may also have anti-competitive effects, unfairly eliminating rivals or making them less effective competitors, or reducing competition between buyers or sellers.

There is a large and growing economic literature that identifies the types of agreements that might be problematic. Competition authorities require a systematic economic assessment of whether pro-competitive or anti-competitive effects of a vertical agreement will dominate when these agreements involve companies with a significant market share.

CRA has provided such assessments in a variety of industries - from consumer goods to industrial products and luxury goods - and before numerous regulators (from DG Competition to the competition authorities of most Member States). We have also provided policy advice to various competition authorities on vertical issues.

DG Competition is in the process of reviewing the Vertical Restraints Guidelines and there is an ongoing lively discussion on the changes that should be made. There are, for instance, different views in relation to the lawfulness of the restrictions manufacturers might wish to impose on internet resellers to prevent free riding vis-à-vis the "bricks and mortar" retailers - an issue on which CRA has advised Chanel and LVMH.

In a number of cases DG Competition has also analysed the extent to which territorial restrictions imposed by manufacturers that help create separate national markets (and sustain different prices) within the EU might be unlawful under Article 101. These cases occurred in a number of industries including car manufacturing, pharmaceuticals and online music supply. Economic analysis has played a central role in these discussions.

The Leegin Judgment in the US has also re-opened the debate on whether resale price maintenance should be regarded as a per se violation of Article 101 or whether substantive economic analysis is required to ascertain whether resale price maintenance constitutes a potential violation of Article 101.

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