Regulation of the distribution relationship

Competing products

Are restrictions on the distribution of competing products in distribution agreements enforceable, either during the term of the relationship or afterwards?

Restrictions are generally enforceable subject to being in compliance with the applicable competition laws, which according to the main rule provide that a competition prohibition as to competing goods or services must not, during the contract term, last for longer than five years or for one year after termination, except where by derogation permitted pursuant to the applicable competition rules (Commission Regulation (EU) No. 330/2010, article 5, paragraphs 2 and 3, on the application of article 101(3) of the Treaty on the Functioning of the European Union (TFEU) to categories of vertical agreements and concerted practices). It has to be remembered, however, that the above notwithstanding, the members of a selective distribution system must not be, whether directly or indirectly, imposed any obligation causing such members not to sell any brands of competing suppliers.

Prices

May a supplier control the prices at which its distribution partner resells its products? If not, how are these restrictions enforced?

No, the supplier is not even permitted to set maximum prices not to be exceeded by the distributor since such practice interferes with the distributor’s freedom to set his or her own prices. However, by means of price recommendations the supplier may influence resale pricing provided those recommendations do not amount to resale price maintenance or price fixing, which is strictly prohibited under domestic and EU law, whether directly or indirectly, such as by means of determining the distributor’s sales margin or maximum reductions to be granted to customers.

Resale price maintenance in vertical agreements is a hardcore restriction considered by the antitrust authorities as unlawful and not exemptable. Since, in most cases, the commercial agent is integrated in the principal’s sales network and also otherwise a genuine agent, the agent remains outside the scope of the competition rules concerning price maintenance.

May a supplier influence resale prices in other ways, such as suggesting resale prices, establishing a minimum advertised price policy, announcing it will not deal with customers who do not follow its pricing policy, or otherwise?

Resale price recommendations and suggestions are permitted, but establishing a minimum advertised price policy may, depending on its contents, be branded as anticompetitive. This, however, would not foreclose advertising recommended prices. Nevertheless, any defensive boycott in order to punish violations of agreements that restrain competition are prohibited types of discrimination. The same is true of any predatory boycotts.

May a distribution contract specify that the supplier’s price to the distributor will be no higher than its lowest price to other customers?

There are no restrictions on including a most-favoured-customer clause in the contract.

Are there restrictions on a seller’s ability to charge different prices to different customers, based on location, type of customer, quantities purchased, or otherwise?

There should be no obstacle to applying different prices to different types of customers, in different locations, granting different rates of discount to individual customers and so on, provided the criteria are not arbitrary and are applied consistently.

Geographic and customer restrictions

May a supplier restrict the geographic areas or categories of customers to which its distribution partner resells? Are exclusive territories permitted? May a supplier reserve certain customers to itself? If not, how are the limitations on such conduct enforced? Is there a distinction between active sales efforts and passive sales that are not actively solicited, and how are those terms defined?

The supplier may make the distributor refrain from actively selling to certain geographical areas or categories of customers, but not from selling passively, and only if these geographical areas or categories of customers are exclusively reserved for the distributor, agent or the principal him- or herself. However, in the event of a selective distribution system, the rule expressly authorising the restriction of sales by the members of a selective distribution system to unauthorised distributors within the territory reserved by the supplier to operate that system is applicable (Commission Regulation (EU) No. 330/2010, article 4b, section iii on the application of article 101(3) TFEU to categories of vertical agreements and concerted practices).

Exclusive territories are permitted, in principle, and are customary. A supplier may reserve certain customers to itself, as discussed above.

Online sales

May a supplier restrict or prohibit e-commerce sales by its distribution partners?

The general rule is that a supplier may not restrict or prohibit e-commerce sales by its distribution partners. However, the supplier may require certain qualitative criteria of the e-commerce. Neither can the supplier restrict or prohibit passive reselling outside the distribution partner’s assigned territory. However, restriction of active sales outside a distributor’s assigned territory is permitted.

Refusal to deal

Under what circumstances may a supplier refuse to deal with particular customers? May a supplier restrict its distributor’s ability to deal with particular customers?

Unless refusal to deal amounts to abuse of a dominant position or is deemed to be unfair business practice, such refusal is part of the freedom of contract.

Apart from making the distributor refrain from active sales in certain geographical areas or to certain categories of customer, within the frame of a selective distribution system the supplier may restrict its distributor’s ability to deal with unauthorised distributors outside the territory of the system (ie, non-members of the system).

Competition concerns

Under which circumstances might a distribution or agency agreement be deemed a reportable transaction under merger control rules and require clearance by the competition authority? What standards would be used to evaluate such a transaction?

At least in principle, under the merger control rules, a distribution contract may be deemed a reportable transaction if the supplier exploits market power in trading relationships with distributors to earn excessive profits or gain other advantages. The contract can also require clearance if it amounts to the supplier exerting exclusionary or predatory abuses, such as the imposition of unfair selling prices or conditions not falling within the sphere of the vertical restraints generally applied to distribution contracts. Such practices eventually result in concentrations increasingly deteriorating the conditions for competition which may be fateful in a small market, such as the Finnish market. Under the merger control rules, a distribution contract is a reportable transaction requiring clearance by the competition authorities where the combined turnover of the parties exceeds €350 million and the Finnish turnover of at least two of the parties exceeds €20 million each.

The standard used for evaluating the transaction, as to the calculation of the turnover, is the government decree on the calculation of turnover of parties to the concentration (1011/2011), and the standards and practices described in the Guidelines on Merger Control issued by the FCCA. If the concentration falls within the scope of Council Regulation (EEC) No. 139/2004 on the control of concentrations between undertakings, the acquisition shall be notified to the European Commission, which has the sole right to examine the concentrations having a Community dimension.

Unless it is about an untrue or non-genuine agency agreement, the agent as an auxiliary of his or her principal remains beyond the antitrust rules.

Do your jurisdiction’s antitrust or competition laws constrain the relationship between suppliers and their distribution partners in any other ways? How are any such laws enforced and by which agencies? Can private parties bring actions under antitrust or competition laws? What remedies are available?

Although single branding is frequently implemented by means of a non-competition clause, it can also occur otherwise and be objectionable without either a five-year or one-year period of grace (see question 13). This is the case if competitors are excluded from the market. Tying arrangements may affect both the markets for those manufacturing the relevant products as well as the price of the products. In addition to the prohibitions against anticompetitive agreements, there is the prohibition against abuse of dominance that constrains the relationship between suppliers and their distribution partners.

Suppliers and their distribution partners must comply with section 5 of the Competition Act (948/2011) and articles 101 and 102 TFEU. The competent agency to enforce such laws is the FCCA.

Private parties can bring actions under antitrust or competition laws. Liability in damages under section 20 of the Competition Act is due to anyone who has suffered damage or loss because of infringement of sections 5 or 7 of the Competition Act, or articles 101 or 102 TFEU.

The available remedies are damages for economic loss, whether direct or indirect, including but not limited to expenses, price difference and lost profit. Any losses because of price discrimination, excessive pricing due to a cartel or the refusal by a party in a dominant position to supply are deemed as direct losses to be compensated.