Vertical agreements and e-commerce in particular have recently been the focus of attention in the Netherlands and abroad. The Netherlands Authority for Consumers and Markets (“ACM”) published its position on vertical agreements on 20 April 2015. That publication was accompanied by an information card and a press release. Shortly before that time the European Commission had announced its intention to commence a sector inquiry into e‑commerce. These developments may have major consequences for producers and distributors. Such companies are therefore well advised to closely scrutinise their (Internet) distribution agreement.
ACM has not (yet) fined any companies in respect of e-commerce or e-tailing on the grounds of breach of competition law. As we previously explained in this blog and this blog, however, the competition authorities in other Member States are taking a different approach. At the end of last year, also in light of the increasing interest in Europe, ACM stated that it saw reason to clarify its position on distribution agreements in the digital world. ACM has now done so by publishing the ACM’s supervision of vertical agreements paper. ACM believes that it has thereby explained its strategy and priorities. Briefly summarised, ACM has now reported that:
- vertical agreements may have both positive and negative effects on consumer welfare, which may differ from one case to the next; and
- vertical agreements in general, and particularly in the absence of market power, benefit consumer welfare more often than not.
By publishing its paper ACM has somewhat clarified its views on vertical agreements. It should be noted that ACM’s prioritising of vertical agreements relates only to vertical agreements that do not benefit from the Block Exemption. This means that:
- ACM focuses on agreements between parties with a market share of more than 30% on the market in question and/or involving hardcore vertical restraints;
- in deciding to further investigate a vertical agreement, ACM’s main concern is the effect on consumer welfare.
ACM has identified a number of factors that it takes into account in determining the effect that vertical agreements are expected to have on consumer welfare in practice. Those factors are:
- the market power in the case of a vertical agreement within a single distribution chain;
- broad (or market wide) application of similar vertical agreements;
- vertical agreements enforced by retailers against the producer’s wishes; and
- possible efficiency improvements.
Other prioritising criteria also play a part in the decision to further investigate a vertical agreement. These criteria are the public interest and the efficiency and effectiveness of measures, if any, taken by ACM.
ACM’s paper is less far-reaching than e.g. the Commission’s guidelines and directives. It therefore does not give a decisive answer about what is or is not permitted in specific individual cases on the conclusion of vertical agreements between companies. It does, however, describe various hypothetical situations, which may give companies something to go by. In the absence of specific cases of ACM, it remains to be seen for the present how exactly ACM will handle e-commerce issues in the future. If it opts for a more economic approach, it will in any event not be alone in doing so. The Swedish Competition Authority, for instance,decided in December 2014 not to take action in a resale price maintenance case because it was unlikely that it would entail any serious consumer harm.
European Commission and competition authorities of other Member States
On the other hand, apart from the developments at ACM, companies may feel the consequences of the developments at the European Commission. On 2 March 2015 the European Commission stated that it would make a case for a single digital internal market. It will do so, for instance, by performing a sector inquiry. The aim of that inquiry is to encourage supervision of restrictions on online sales by the European Commission and the national competition authorities and to harmonise the approach. Euro Commissioner Margrethe Verstager reported in a speech on 26 March 2015 that a properly functioning digital market could increase the EU’s GDP by EUR 315 billion, thereby (partly) explaining the economic rationale for the sector inquiry. She stated that the first conclusions of the sector inquiry could be expected around mid-2016.
The question is what the sector inquiry is likely to reveal. The Commission has previously performed various sector inquiries. Although those inquiries related to a wide range of sectors, the Commission thereby displayed an ever increasing need for information. As part of an inquiry into the pharmaceutical sector, for instance, the Commission obligated companies to send it certain information, such as contracts. It is conceivable that the European Commission will also be inspired in this regard by the approach taken by theBundeskartellamt at the end of 2013.
The interest that the Commission is now demonstrating by conducting a sector inquiry was previously apparent in Germany already. In October 2013, for instance, the Bundeskartellamt organised a conference on Vertical Restraints in the Internet Economy. Shortly after that it published an extensive Paper. At the same time the German competition authority investigated whether the e-commerce policy of Adidas and Asics was consistent with competition law. The Bundeskartellamt thereby performed an extensive investigation by conducting (online) interviews at approximately 3,000 distributors that sold Adidas trainers in their brick-and-mortar shops and/or online shops. For Adidas the investigation ultimately ended with its commitment that it would amend its online sales conditions; it omitted two bans from its distribution conditions: the ban on online sales and the ban on authorised resellers using search terms for search engines related to the Adidas trademark. The Bundeskartellamt’s case against Asics has not yet been completed.
No action of ACM, but nevertheless consequences in the Netherlands?
It is remarkable that in the cases in which ACM itself does not actively take measures, measures taken by authorities elsewhere in Europe may nevertheless impact the commercial policy of companies in the Netherlands. The undertakings given by Booking.com to the competition authorities in France, Sweden and Italy (more on which in this blog) are a case in point. Booking.com will also implement those commitments in the Netherlands. ACM has stated that it applauds those undertakings and that it took part in the investigation into Booking.com by those other authorities. Another example, albeit in a different context, is the case of the French competition authority against Nespresso (in response to a complaint regarding abuse of a position of power, filed by DE Master Blenders in France). Nespresso adjusted its commercial policy in several Member States, including the Netherlands, after giving undertakings to the French competition authority. Measures taken by a competition authority in one Member State can therefore also lead to changes in the commercial policy in other Member States.
In sum, producers and wholesalers, particularly if they operate in several Member States, must therefore be (extra) vigilant to ensure that they do not make unlawful agreements with their distributors and retailers, e.g. on restriction of online sales and resale price maintenance. Clear internal guidelines and regular practical training of the commercial department(s) may prevent high fines (including personal fines).