What are the legal sources that set out the antitrust law applicable to vertical restraints?
Section 4(1) of the Competition Act 2002 (as amended) (the Act) prohibits anticompetitive agreements between undertakings and is the Irish domestic law equivalent to article 101(1) of the Treaty on the Functioning of the European Union (TFEU). Section 4(2) of the Act provides that an agreement falling within either: section 4(5) of the Act (known as the ‘general efficiency conditions’); or section 4(3) of the Act (under a declaration made by the Competition and Consumer Protection Commission (the CCPC)) is not a prohibited agreement.
The general efficiency conditions are that an agreement must, having regard to all relevant market conditions, contribute to improving the production or distribution of goods or provision of services or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit and must not: impose on the undertakings concerned terms that are not indispensable to the attainment of those objectives; or afford undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question. The CCPC’s discretionary power under section 4(3) to make written declarations applies where the CCPC forms the opinion that certain categories of agreement meet the general efficiency conditions. This is the equivalent at national level of the European Commission’s block exemptions for categories of agreement that comply with the conditions set out in article 101(3) TFEU.
In 2010, the CCPC published both a notice and a declaration applicable to vertical restraints: the declaration in respect of vertical agreements and concerted practices (Decision No. D/10/001) (the Declaration); and the notice in respect of vertical agreements and concerted practices (Decision No. N/10/001) (the Notice). Both the Declaration and Notice expire on 1 December 2020.
The Notice is intended to provide practical guidance as to the application of the Act and the Declaration. The Notice expressly provides at paragraph 3 that reference may be made to the European Commission’s Guidelines on Vertical Restraints (the European Commission Guidelines) for guidance as to whether an agreement is likely to fall outside of section 4(1) of the Act. There are two exceptions to this:
- the EU Vertical Block Exemption Regulation (EUVBER) provides an exception in respect of vertical agreements entered into by retailer buyer pools where no individual member (together with its connected undertakings) has an annual turnover in excess of €50 million. The Declaration does not provide for this. However, in the CCPC’s notice on activities of trade associations and compliance with competition law, N/09/002, dated 9 November 2009, the CCPC cited the approach indicated by the European Commission in its Guidelines on Horizontal Cooperation Agreements (that group purchasing arrangements where the parties have a combined market share of less than 15 per cent in both the purchasing and selling markets are unlikely to raise competition concerns); and
- there is no equivalent to the De Minimis Notice under Irish law.
Previously, the CCPC has published declarations in respect of agreements concerning motor fuel (Motor Fuels Category Declaration, Decision No. D/08/001) and cylinder liquefied petroleum gas (the Cylinder LPG Declaration, Decision No. D/05/001). These declarations served a similar purpose to block exemptions. Upon their expiry in 2010 and 2015, respectively, the agreements that were once subject to these declarations became assessable under the Declaration.
Types of vertical restraint
List and describe the types of vertical restraints that are subject to antitrust law. Is the concept of vertical restraint defined in the antitrust law?
Article 1 of the Declaration defines ‘vertical agreements’ as agreements or concerted practices between undertakings ‘each of which operates, for the purposes of the agreement, 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’.
Examples of the types of vertical restraints that are subject to antitrust law in Ireland include:
- non-compete obligations: including any direct or indirect obligation causing the buyer: not to manufacture, purchase, sell, or resell goods or services that compete with the contract goods or services; or to purchase from the supplier, or from another undertaking designated by the supplier, more than 80 per cent of the buyer’s total purchases of the contract goods or services and their substitutes;
- selective distribution systems: whereby the supplier undertakes to sell the contract products or services, either directly or indirectly, only to distributors selected on the basis of specified criteria, and where these distributors undertake not to sell such goods or services to unauthorised distributors; and
- exclusivity provisions: including exclusive purchasing and supply obligations, and exclusive distribution agreements in respect of a given territory or customer group.
Is the only objective pursued by the law on vertical restraints economic, or does it also seek to promote or protect other interests?
Only economic objectives are pursued by Irish competition law. Within the scope of those economic objectives, the protection of consumer welfare is enshrined. Indeed, the Irish Supreme Court, in Competition Authority v O’Regan & Others  IESC 22, has described the key purpose of Irish competition law as follows: ‘…the entire aim and object of competition law is consumer welfare’.
Which authority is responsible for enforcing prohibitions on anticompetitive vertical restraints? Where there are multiple responsible authorities, how are cases allocated? Do governments or ministers have a role?
The CCPC (with the aid of the Irish courts) is responsible for enforcing prohibitions on anticompetitive vertical restraints. The Commission for Communications Regulations (ComReg) has competition powers in respect of vertical restraints in the area of telecommunications. The CCPC and the Director of Public Prosecutions are responsible for the criminal enforcement of Irish competition law before the Irish courts, prosecuting cases summarily and on indictment respectively.
What is the test for determining whether a vertical restraint will be subject to antitrust law in your jurisdiction? Has the law in your jurisdiction regarding vertical restraints been applied extraterritorially? Has it been applied in a pure internet context and if so, what factors were deemed relevant when considering jurisdiction?
In determining whether a vertical restraint falls within the scope of Irish antitrust law, the test is whether the object or effect of the restraint in question is to prevent, restrict or distort competition in trade in any goods or services in Ireland (or any part of Ireland), irrespective of the location or domicile of the undertakings involved.
Vertical restraints have not been considered by the courts in an extraterritorial context.
To our knowledge, the CCPC, ComReg or the Irish courts have not as yet applied the rules on vertical restraints in a pure internet context. But we would assume an important factor in establishing jurisdiction in the Irish context would be the place where the goods or services are supplied to the customer.
Of relevance in this regard is the conclusion of an investigation by the CCPC in October 2015 pursuant to which Booking.com provided five-year commitments (see question 25).
Agreements concluded by public entities
To what extent does antitrust law apply to vertical restraints in agreements concluded by public entities?
Irish competition law applies to agreements concluded by ‘undertakings’, defined in the Act as ‘a person being an individual, a body corporate or an unincorporated body of persons engaged for gain in the production, supply or distribution of goods or the provision of a service and, where the context so admits, shall include an association of undertakings’.
The key factor is whether the entity charges for the product or service it is supplying; whether it provides the product or service ‘for gain’. In Island Ferries Teoranta v Minister for Communications, Marine & Natural Resources  IEHC 587, the court noted that ‘the fact the Minister as a public authority is not required to operate the harbour on a profit making basis … is irrelevant once the harbour facilities and services are provided for gain’.
Where a public entity comes within this definition, it is subject to Irish antitrust law in the same way that a private entity is. A public body may constitute an undertaking for the purposes of Irish antitrust law when it engages in certain activities (eg, pure administrative or official activities) but not when engaging in others (eg, providing services for gain). The Irish Health Service Executive (HSE) was an undertaking for the purposes of the Act in instances where vehicles from the HSE’s National Ambulance Service were used for the transfer of private patients (Medicall Ambulance Ltd v HSE (Irish High Court, 8 March 2011)) but not when using its ambulance fleet for emergency services and the transport of public patients (Lifeline Ambulance Services v HSE (High Court, 23 October 2012)).
Importantly, it has been found that even when performing a statutory function, state entities can be undertakings within the scope of the Act, where their services are provided for gain. In Island Ferries Teoranta, the court found that the Minister was an undertaking subject to competition law as the Minister ‘operated a facility … with commercial activities and purposes and does so by allowing a variety of operators provide commercial services … in return for various dues, tolls and other charges imposed’.
Do particular laws or regulations apply to the assessment of vertical restraints in specific sectors of industry (motor cars, insurance, etc)? Please identify the rules and the sectors they cover.
In general, no. Exception has been made, however, for the grocery sector (as discussed below).
The Consumer Protection Act 2007 (Grocery Goods Undertakings) Regulations 2016 came into force in April 2016. These regulations are intended to prohibit certain ‘unfair’ supply chain practices by grocery retailers and suppliers. The regulations are designed to curb abuses owing to buyer power held predominantly by retailers. The unfair practices covered in the Act relate to the form of contracts between suppliers and retailers, including how such contracts are varied, terminated or reviewed. However, the only quasi-vertical restraint that is dealt with by these regulations is a form of ‘third line forcing’, whereby large buyers are prohibited in certain circumstances from obliging their suppliers to source the supplier’s inputs from specified third parties.
Pursuant to section 4(3) of the Act, the CCPC has the power to issue sector-specific declarations, which operate in the same way as a block exemption issued by the European Commission. See question 1 for details.
Are there any general exceptions from antitrust law for certain types of agreement containing vertical restraints? If so, please describe.
Where a vertical restraint meets the general efficiency conditions (see question 1), it will be exempt from the section 4(1) prohibition. In particular, under section 4(3), agreements containing vertical restraints that comply with conditions of the CCPC’s Declaration are exempt from the general prohibition in section 4(1). Irish competition law does not provide for a de minimis exception similar to that under EU law.
Types of agreement
Is there a definition of ‘agreement’ - or its equivalent - in the antitrust law of your jurisdiction?
No definition of an ‘agreement’ is provided in the Act. However, the CCPC and the Irish courts have generally applied a broad definition to this concept.
In order to engage the antitrust law in relation to vertical restraints, is it necessary for there to be a formal written agreement or can the relevant rules be engaged by an informal or unwritten understanding?
Irish antitrust law covers ‘agreements’ and ‘concerted practices’. These concepts are interpreted broadly and are understood in terms of their function and effect rather than in formal terms. The phrases ‘agreement’ and ‘concerted practice’ do not impute any requirements of formality for an agreement or practice to come within the scope of the section 4(1) prohibition but rather serve to distinguish such coordination from unilateral conduct.
Parent and company-related agreements
In what circumstances do the vertical restraints rules apply to agreements between a parent company and a related company (or between related companies of the same parent company)?
Vertical restraints rules apply to agreements concluded between independent undertakings. Therefore, the meaning of ‘undertaking’ discussed in question 6 is of relevance. For this purpose, an undertaking, broadly speaking, includes all entities under the control of the same person or persons. Entities under the control of different persons are independent undertakings and their relationships are subject to section 4 of the Act.
Case law has provided examples of where companies will be deemed to be related and therefore beyond the reach of Irish competition law. In AGF Life Holdings (decision dated 14 May 1992), it was established that companies that are wholly owned subsidiaries of the same holding company are not independent undertakings.
As per the decision in AGF-Irish Life/NEM Insurance (decision dated 9 June 1993), the test to be applied is whether parties are subsidiaries of a single parent (ie, are under the control of the same person or persons) and as a result of this relationship do not have real freedom to determine their own course of action on the market. There is also a helpful definition of ‘connected person’ in the CCPC’s Declaration.
In what circumstances does antitrust law on vertical restraints apply to agent-principal agreements in which an undertaking agrees to perform certain services on a supplier’s behalf for a sales-based commission payment?
Genuine agency agreements are outside the scope of section 4(1) of the Act. The CCPC follows the approach of the European Commission. As such, an agreement whereby a person (the agent) is vested with the power to negotiate or conclude contracts on behalf of another person (the principal), either in the agent’s own name or in the name of the principal, for the purchase of goods or services by the principal, or the sale of goods or services supplied by the principal, and where the agent bears no or only insignificant risk in relation to the contracts and in relation to market-specific investments for the field of activity will most likely fall outside the scope of section 4(1) of the Act (in accordance with paragraphs 12-21 of the European Commission Guidelines).
Where antitrust rules do not apply (or apply differently) to agent-principal relationships, is there guidance (or are there recent authority decisions) on what constitutes an agent-principal relationship for these purposes?
The Notice specifically refers parties to the European Commission Guidelines and, thus, assistance regarding what constitutes an agent-principal relationship (as per question 12). There have been no definitive CCPC or Irish court decisions dealing specifically with what constitutes an agent-principal relationship.
Intellectual property rights
Is antitrust law applied differently when the agreement containing the vertical restraint also contains provisions granting intellectual property rights (IPRs)?
No. The Declaration applies to agreements containing provisions granting IPRs provided that those provisions do not constitute the primary object of such agreements.
Analytical framework for assessment
Analytical framework for assessment
Explain the analytical framework that applies when assessing vertical restraints under antitrust law.
The initial assessment is a two-fold test to determine whether the restraint comes within the scope of the prohibition in section 4(1) of the Act:
- the parties to the agreement must be independent undertakings; and
- the restraint must have the object or effect of preventing, restricting or distorting competition in Ireland.
If the agreement comes within the parameters of the Act, it is then necessary to look at whether the restraint in question falls within the scope of the express exemptions in the Declaration.
Hardcore restrictions such as vertical price fixing and certain sales restrictions are per se offences, and the object or effect of such agreements will automatically be presumed to restrict competition, irrespective of market share.
In the event that the parties are not able to avail themselves of one of the specific exemptions from section 4(1) of the Act, the parties then need to consider whether the restraint otherwise satisfies the general efficiency conditions contained in section 4(5) of the Act.
If the restraint is subject to section 4(1) of the Act and does not benefit from the Declaration or satisfy the general efficiency conditions, the parties should consider whether they can sever the vertical restraint provisions from the rest of the agreement (see question 51).
To what extent are supplier market shares relevant when assessing the legality of individual restraints? Are the market positions and conduct of other suppliers relevant? Is it relevant whether certain types of restriction are widely used by suppliers in the market?
Supplier market shares are relevant in assessing the legality of individual restraints. In order to come within the scope of the Declaration, the market share of the supplier on the relevant market in which it sells the contract goods or services must not exceed 30 per cent in each case (as well as meeting the buyer criteria discussed in question 17). The market positions and conduct of other suppliers may be relevant insofar as it may be necessary to evaluate that information in assessing the market shares of the buyer and supplier in their respective markets. Under article 8 of the Declaration, the CCPC has the power to amend the Declaration to disapply it to specific categories of goods or services where, in its opinion, access or competition in the relevant market is significantly restricted by the cumulative effect of vertical restraints implemented by competing suppliers or buyers covering more than 50 per cent of a relevant market.
To what extent are buyer market shares relevant when assessing the legality of individual restraints? Are the market positions and conduct of other buyers relevant? Is it relevant whether certain types of restriction are widely used by buyers in the market?
In addition to the supplier market share criteria, to come within the scope of the Declaration, the market share of the buyer must not exceed 30 per cent of the market in which it purchases the contract goods or services. As noted in question 16, the CCPC can disapply the Declaration by amending it in certain circumstances.
Block exemption and safe harbour
Is there a block exemption or safe harbour that provides certainty to companies as to the legality of vertical restraints under certain conditions? If so, please explain how this block exemption or safe harbour functions.
The CCPC’s Declaration (like any declaration under section 4(3) of the Act) is equivalent to a block exemption or safe harbour and, where relevant, is subject to specific market share thresholds (which are referred to in further detail in questions 16 and 17). Thus, the Declaration has the effect of providing certainty to companies as to the legality of their vertical restraints.
Types of restraint
Assessment of restrictions
How is restricting the buyer’s ability to determine its resale price assessed under antitrust law?
A restriction on a buyer’s ability to determine its resale price is a hardcore infringement of the Act, regardless of the parties’ market shares. The Declaration provides scope for suppliers to set recommended retail prices or maximum retail prices. However, agreements that involve fixed or minimum resale price maintenance cannot benefit from the Declaration.
Thus far, the CCPC has adopted a strict approach to resale price maintenance (RPM). The CCPC has set out its position on RPM in four enforcement decisions spanning 11 years: the Irish Times decision (Decision No. E/03/004); the Statoil decision (Decision No. E/03/002); the Independent Newspapers decision (Decision No. E/03/003); and the FitFlop decision (Decision No. E/13/01).
In the Irish Times and Independent Newspapers decisions, there was evidence that retailers were expected to sell the newspaper at ‘cover price’ (the price printed on the front page of the newspaper). The CCPC confirmed that the sending of circulars informing retailers of revised cover prices and reference to the retailers’ margins amounted to encouragement or instruction to set the cover price as the resale price. In these cases, both the Irish Times and Independent Newspapers agreed to amend their agreements to remove the RPM element.
The Statoil decision considered whether a price support agreement (PSA) between Statoil and motor fuel retailers, which provided for maximum resale prices, combined with a price-matching scheme and a price floor, constituted RPM. Statoil provided financial support to its retailers to enable them to match the price offered by competitors. Under the PSA, Statoil’s retailers were not allowed to exceed the recommended retail price and would cease to receive financial support from Statoil if they reduced their price below that of the selected competitor stations. Following the investigation, Statoil Ireland abandoned the PSA.
The FitFlop decision confirms that the CCPC maintains a strict approach to RPM. In its decision, the CCPC found that FitFlop’s distributor had enforced RPM in Ireland. Among other requirements, the CCPC found that FitFlop imposed minimum or fixed prices, a hardcore competition law infringement.
While RPM can be justified under the general efficiency conditions in section 4(5) of the Act, the above outlined decisions suggest that the CCPC is unlikely to take the view that RPM is permissible, save in exceptional circumstances.
Have the authorities considered in their decisions or guidelines resale price maintenance restrictions that apply for a limited period to the launch of a new product or brand, or to a specific promotion or sales campaign; or specifically to prevent a retailer using a brand as a ‘loss leader’?
Neither the CCPC nor the Irish courts have given specific consideration to RPM in these circumstances.
Have decisions or guidelines relating to resale price maintenance addressed the possible links between such conduct and other forms of restraint?
The CCPC noted the possible link between RPM and tacit price collusion between suppliers in the Statoil decision (outlined in question 19). As the financial support envisaged by the PSA was only receivable from Statoil when its retailers had not exceeded the maximum resale price or reduced their resale price below that of their competitors, the CCPC took the view that this form of price-matching scheme may facilitate tacit price collusion between suppliers. Following the investigation, Statoil Ireland abandoned the PSA.
Have decisions or guidelines relating to resale price maintenance addressed the efficiencies that can arguably arise out of such restrictions?
As noted above, the Commission Guidelines in respect of RPM are applicable in interpreting section 4 of the Act. However, although the Irish courts or the CCPC could analyse and find permissible an RPM agreement under section 4(5) of the Act, so far no such analysis has been carried out.
Explain how a buyer agreeing to set its retail price for supplier A’s products by reference to its retail price for supplier B’s equivalent products is assessed.
The issue of pricing relativity agreements has not been given specific consideration by the CCPC or the Irish courts. The CCPC has consistently shown reluctance to permit restrictions that affect the parties’ pricing incentives (see question 19). However, any decision will naturally depend on the specific circumstances of each case.
Explain how a supplier warranting to the buyer that it will supply the contract products on the terms applied to the supplier’s most-favoured customer, or that it will not supply the contract products on more favourable terms to other buyers, is assessed.
Wholesale most-favoured nation (MFN) clauses do not give rise to competition issues where each party to the agreement has a market share within the threshold in the Declaration. Where the parties have greater market shares and where the CCPC has amended the declaration to exclude certain categories of contracts, wholesale MFN clauses may give rise to competition concerns.
In the case of a dominant supplier or buyer, price discrimination or wholesale MFN clauses could constitute an abuse of dominance, in breach of section 5 of the Act.
Explain how a supplier agreeing to sell a product via internet platform A at the same price as it sells the product via internet platform B is assessed.
The basic approach to the issue of retail MFN clauses in the online environment has been one of proportionality. In this regard, the CCPC has sought to limit the scope of MFN clauses to narrow MFN clauses that the parties can justify as necessary. The investigation into Booking.com is illustrative of this principle.
In 2015, the CCPC concluded an investigation into alleged anticompetitive practices by Booking.com. Booking.com is a large online travel agent (OTA) that provides a platform for use by both hotels and customers. Booking.com had required hotels that were listed on its website to agree to offer the Booking.com ‘price parity’. This meant that a hotel could not offer lower prices elsewhere, through its own channels or by third-party channels, whether offline or online. The CCPC considered this to be a wide MFN clause capable of restricting competition.
Following the investigation, the CCPC obtained an agreement and undertakings from Booking.com that it would alter the terms of its contracts. It now implements a ‘narrow MFN’ under which the only restriction is that a hotel will, in general, not be able to offer a price on its own website that is lower than the Booking.com price. The CCPC took the view that this was a proportionate restriction on hotels and it prevented a scenario whereby a hotel could use an OTA to attract custom only to bypass it by offering a discounted price.
Explain how a supplier preventing a buyer from advertising its products for sale below a certain price (but allowing that buyer subsequently to offer discounts to its customers) is assessed.
The CCPC has not considered restrictions such as minimum advertised price policies or internet minimum advertised price clauses. However, see question 25 for a particular form of internet minimum advertised price clause that the CCPC accepted in specific circumstances. As noted above, RPM is generally considered to be a per se breach of Irish competition law. As indicated by its views in the Irish Times and Independent Newspapers cases (see question 19), the CCPC is likely to scrutinise closely restrictions (including advertised prices) that affect the parties pricing incentives.
Explain how a buyer’s warranting to the supplier that it will purchase the contract products on terms applied to the buyer’s most-favoured supplier, or that it will not purchase the contract products on more favourable terms from other suppliers, is assessed.
In much the same way as the MFN clauses discussed above, favoured supplier clauses may potentially give rise to competition issues where either party to the agreement has a market share above the 30 per cent threshold in the Declaration.
Restrictions on territory
How is restricting the territory into which a buyer may resell contract products assessed? In what circumstances may a supplier require a buyer of its products not to resell the products in certain territories?
Article 4(2)(b) of the Declaration permits, in much the same way as the EUVBER, the restriction of active sales into certain territories in the context of an exclusive distribution network within the terms of the Declaration. However, a retailer cannot be restricted in their ability to make passive sales or to meet unsolicited orders. In the FitFlop case, the suppliers gave commitments, which were subsequently made a binding order of the court, not to restrict its retailers’ freedom to make passive sales regardless of a customer’s location.
In attempting to draw a distinction between passive and active sales, the High Court decision in SRI Apparel Limited v Revolution Workwear Limited and Others is instructive. Here, the court held that sales by an Irish company through a third-party site that facilitated the sale constituted active sales within the meaning of the Declaration and, as such, could be lawfully restricted in a distribution agreement.
Have decisions or guidance on vertical restraints dealt in any way with restrictions on the territory into which a buyer selling via the internet may resell contract products?
The CCPC or Irish courts have not yet considered the concept of ‘geo-blocking’. Geo-blocking is a mechanism whereby online sellers can either deny service to users in other EU member states or redirect users to a local website located in the customer’s member state or another territory. The prices, services and offers may therefore vary in each member state. We assume that developments at the EU level are likely to influence Irish decision-making practice if and when such a matter comes before the Irish courts or the CCPC decides to issue guidance on the issue.
Restrictions on customers
Explain how restricting the customers to whom a buyer may resell contract products is assessed. In what circumstances may a supplier require a buyer not to resell products to certain resellers or end-consumers?
A restriction on the buyer’s ability to sell contract products to certain customers falls within the scope of section 4(1) of the Act. There are certain circumstances under the Declaration where a supplier may restrict the customers to whom the buyer may resell products, assuming the relevant market share thresholds are also met. These include:
- certain restrictions on active sales by the buyer outside a buyer’s reserved area or customers;
- restrictions on sales by the buyer to end-customers where the buyer is a wholesaler;
- scenarios that arise in the context of a permissible selective distribution network (see question 34); and
- restrictions on the buyer’s ability to sell component parts to customers for use in the manufacture of products that compete with the supplier’s products (article 4(2)(b) of the Declaration).
A supplier cannot restrict the buyer from making passive sales.
Restrictions on use
How is restricting the uses to which a buyer puts the contract products assessed?
Restrictions imposed by the seller on the use to which a buyer may put a contract product may be prohibited under section 4(1) of the Act. Under article 4(2)(b) of the Declaration, restrictions on the buyer’s ability to sell component parts to customers for use in the manufacture of products that compete with the supplier’s products may be permissible where the market share relevant thresholds are met.
Restrictions on online sales
How is restricting the buyer’s ability to generate or effect sales via the internet assessed?
Pursuant to the terms of the CCPC’s Notice, those sections of the European Commission Guidelines that are relevant to internet sales are also applicable to the interpretation of section 4 of the Act. The FitFlop decision was the first time that the CCPC took action against a supplier for an alleged internet selling restriction (the allegation being that the relevant distributor had infringed section 4 of the Act by requiring retailers not to make sales of products through mail order, internet or other electronic media without prior written consent). The decision of the High Court in SRI Apparel Limited v Revolution Workwear, which is discussed in question 33, considered the distinction between active and passive sales via the internet.
Have decisions or guidelines on vertical restraints dealt in any way with the differential treatment of different types of internet sales channel? In particular, have there been any developments in relation to ‘platform bans’?
The High Court case of SRI Apparel Limited v Revolution Workwear appeared to distinguish between use of a retailer’s own website and third-party or ‘platform’ internet sales channel. A ‘platform ban’ was considered a ban on active sales only and therefore permissible. As noted above, the seller’s ability to restrict the territories into which the buyer may resell goods can hinge on this distinction between an active and a passive sale. A seller cannot restrict a buyer’s ability to make passive sales in any circumstances.
Selective distribution systems
Briefly explain how agreements establishing ‘selective’ distribution systems are assessed. Must the criteria for selection be published?
Selective distribution systems within the market share thresholds set out in questions 16 and 17 benefit from the Declaration. Suppliers can restrict buyers from supplying unauthorised distributors outside the network. The supplier may not prohibit its distributors from making cross-supplies to one another, including distributors operating at different trade levels within the network (for example, to avoid parallel imports or to maintain differential pricing or RPM) (article 4(2)(d) of the Declaration). Irish law generally follows EU law regarding permissible qualitative and quantitative criteria for establishing a selective distribution network (as recognised in the Irish High Court judgment pertaining to Pat O’Leary v Volkswagen Group Ireland Limited  IEHC 773, in which it was acknowledged that there is an ‘entitlement of a supplier in a quantitative selective distribution system to decide for itself the number of dealers, the location of those dealers and the configuration of its network generally’ in accordance with EU law principles).
Are selective distribution systems more likely to be lawful where they relate to certain types of product? If so, which types of product and why?
The safe harbour under the Declaration is not limited in respect of the types of products to which it applies. In assessing selective distribution systems exceeding the Declaration’s safe harbour thresholds, it is likely that the CCPC would take into account the European Commission Guidelines, which suggest that, in order to fall outside of the scope of the prohibition, the nature of the product should necessitate a selective distribution system.
In selective distribution systems, what kinds of restrictions on internet sales by approved distributors are permitted and in what circumstances? To what extent must internet sales criteria mirror offline sales criteria?
As per the Notice, sections of the European Commission Guidelines relevant to internet sales will be applicable to the interpretation of section 4 of the Act. The issue otherwise remains untested in the Irish courts.
Has the authority taken any decisions in relation to actions by suppliers to enforce the terms of selective distribution agreements where such actions are aimed at preventing sales by unauthorised buyers or sales by authorised buyers in an unauthorised manner?
No relevant decision has been published by the Irish courts in relation to the enforcement of selective distribution agreements. In circumstances where the restrictions in such agreements come within the scope of the Declaration, Irish courts would likely find them enforceable against an authorised reseller.
Does the relevant authority take into account the possible cumulative restrictive effects of multiple selective distribution systems operating in the same market?
As mentioned in question 16, the CCPC can amend the Declaration where, in its opinion, access to the relevant market or competition therein is significantly restricted by the cumulative effect of parallel networks of similar vertical restraints implemented by competing suppliers or buyers covering more than 50 per cent of a relevant market (article 8). The CCPC has not, thus far, amended the Declaration.
Has the authority taken decisions (or is there guidance) concerning distribution arrangements that combine selective distribution with restrictions on the territory into which approved buyers may resell the contract products?
There are no specific decisions of the CCPC or Irish courts regarding selective distribution agreements combined with restrictions on the territory into which approved buyers may resell the contract products. It seems likely, however, that the CCPC would follow paragraph 152 of the European Commission Guidelines prohibiting the combination of selective distribution systems with restrictions on active sales into other territories.
How is restricting the buyer’s ability to obtain the supplier’s products from alternative sources assessed?
Exclusive purchasing obligations may fall within the Declaration where the buyer and supplier market shares do not exceed 30 per cent, the duration of the obligation does not exceed five years and the other conditions of the Declaration are met. The CCPC is likely to follow the provisions of the European Commission Guidelines, which prohibit the use of exclusive purchase obligations in selective distribution systems.
How is restricting the buyer’s ability to sell non-competing products that the supplier deems ‘inappropriate’ assessed?
Neither the CCPC nor the Irish courts have taken any decision in respect of restrictions on a buyer’s ability to sell products considered ‘inappropriate’. They would be likely to consider whether the restriction in question was justifiable, taking account of the nature of both the contract products and the products deemed by the supplier to be ‘inappropriate’.
Explain how restricting the buyer’s ability to stock products competing with those supplied by the supplier under the agreement is assessed.
Any direct or indirect obligation on the buyer to purchase from the supplier or from another undertaking designated by the supplier more than 80 per cent of the buyer’s total purchases of the contract goods or services and their substitutes is covered by the Declaration, provided that the other conditions of the Declaration are met (eg, duration not exceeding five years, market shares, etc). Where the duration of the non-compete obligation is in excess of five years, the obligation will not automatically breach section 4, but may need to be justified by the parties. See also severability under question 51.
How is requiring the buyer to purchase from the supplier a certain amount or minimum percentage of the contract products or a full range of the supplier’s products assessed?
Under the Declaration, a restriction may be imposed on a buyer requiring them to purchase 80 per cent or more of its required stock of contract products or services from the supplier where:
- the market share of the supplier and the market share of the buyer on the relevant market or markets do not exceed 30 per cent; and
- the duration of the obligation is for a maximum period of five years.
Other less severe obligations can be justified under general efficiency conditions of section 4(5) of the Act. When looking at cases in this area, the CCPC pays particular attention to the level of commitment required including the duration and the buyer’s level of demand. Obligations to buy a full range of products may cause concern where the supplier is dominant on any relevant market.
Explain how restricting the supplier’s ability to supply to other buyers is assessed.
As under the EUVBER, exclusive supply obligations are not listed under the Declaration as either hardcore or excluded restrictions and are therefore generally permitted where the market shares of both the supplier and the buyer do not exceed 30 per cent. Further, we would expect the CCPC to follow the approach of the European Commission under the European Commission Guidelines in respect of this issue.
Explain how restricting the supplier’s ability to sell directly to end-consumers is assessed.
The Declaration is mainly focused on restrictions that are imposed by the supplier on the buyer and is therefore more permissive in respect of restrictions imposed on the supplier. On that basis, the supplier may be restricted from selling to end users at or below the 30 per cent market share threshold. By way of exception, the Declaration lists as a hardcore restriction a restriction on a supplier’s ability to sell the components as spare parts to end users (or to third-party repairers or other service providers not approved by the buyer) where it is a supplier of components and the buyer incorporates those components.
Have guidelines or agency decisions in your jurisdiction dealt with the antitrust assessment of restrictions on suppliers other than those covered above? If so, what were the restrictions in question and how were they assessed?
No decisions of the CCPC or Irish courts deal with restrictions on suppliers other than those already considered above.
Outline any formal procedure for notifying agreements containing vertical restraints to the authority responsible for antitrust enforcement.
Since 2002, it has not been possible to notify individual agreements to the CCPC for clearance. Parties must determine for themselves whether the agreement in question falls within the scope of section 4(1) of the Act and, if so, whether the ‘general efficiency conditions’ or the Declaration apply.
If there is no formal procedure for notification, is it possible to obtain guidance from the authority responsible for antitrust enforcement or a declaratory judgment from a court as to the assessment of a particular agreement in certain circumstances?
The Declaration and Notice issued by the CCPC provide the primary sources in assisting undertakings to assess whether their particular agreement will breach section 4(1) of the Act. The CCPC has been prepared to discuss particular cases in limited circumstances but it is not obliged to do so. The CCPC has emphasised that it will not be able to give comfort to undertakings in this regard.
Complaints procedure for private parties
Is there a procedure whereby private parties can complain to the authority responsible for antitrust enforcement about alleged unlawful vertical restraints?
The CCPC takes competition complaints by phone, fax, post and email. The complainant can make the complaint in confidence and with anonymity. The CCPC will consider the matter and, following a preliminary screening, may subsequently carry out a formal investigation, including the possibility of a dawn raid or of a witness summons being issued. The time frame for investigations varies according to the complexity of the issues concerned.
How frequently is antitrust law applied to vertical restraints by the authority responsible for antitrust enforcement? What are the main enforcement priorities regarding vertical restraints?
Since the commencement of the Act, vertical restraints have been at the centre of a relatively small number of published cases. The majority of these cases involved alleged RPM.
What are the consequences of an infringement of antitrust law for the validity or enforceability of a contract containing prohibited vertical restraints?
An agreement that breaches section 4(1) of the Act will be void and unenforceable in its entirety. In certain instances, however, it may be possible to disregard only the offending provisions. In this scenario, the remainder of the agreement would continue in full force and effect. This is the application of an Irish law principle called severance.
May the authority responsible for antitrust enforcement directly impose penalties or must it petition another entity? What sanctions and remedies can the authorities impose? What notable sanctions or remedies have been imposed? Can any trends be identified in this regard?
The CCPC does not have the power to impose penalties; such powers lie solely with the Irish courts. The courts have the power to impose civil or criminal sanctions having regard to the severity of the offence.
The CCPC does have the power to issue non-binding enforcement decisions declaring that, in its opinion, a restraint contravenes section 4(1) of the Act. The CCPC also has the power, under the Competition (Amendment) Act 2012, to accept commitments from an undertaking not to engage in anticompetitive behaviour. The CCPC may apply to the High Court to make such commitments binding and thereafter, any breach of those commitments would amount to contempt of court.
The civil sanctions that may be imposed by the court include a declaration that the conduct in question amounts to a breach of the Act and an injunction to prevent the undertaking from continuing to engage in such conduct.
The criminal sanctions available to the court for breach of the Act will, generally, only be pursued in cases of ‘hardcore infringements’. An undertaking or individual found guilty of breaching section 4 of the Act will be liable:
- on summary conviction of a fine of up to €5,000; and
- on indictment of €5 million or 10 per cent of the turnover of the undertaking or individual for the financial year ending 12 months prior to the conviction (whichever is highest).
The court may impose fines of €300 per day on summary conviction and €50,000 per day on indictment for each day that the contravention continues.
The Act also provides for custodial sentences: imprisonment of up to 10 years for competition offences.
Criminal sanctions were imposed in the context of RPM in the Estuary Fuels case. However, the four more recent decisions outlined in question 19 show a move away from this approach. Modern Irish Competition Law’s authors note that the CCPC indicated in a 2011 paper that the ‘[Estuary] case would probably not reflect current Competition Authority enforcement policy’.
Investigative powers of the authority
What investigative powers does the authority responsible for antitrust enforcement have when enforcing the prohibition of vertical restraints?
The CCPC has statutory powers to carry out investigations of alleged breaches of competition law. The CCPC’s investigative powers are formidable. In particular, the CCPC can enter business premises and private dwellings to search and seize evidence discovered; and summon witnesses to answer questions under oath or provide documentary evidence to the CCPC on pain of criminal sanction.
Before the CCPC exercises its powers of search and seizure (dawn raids) to search premises, it must obtain a warrant from the District Court. The judge will need to be satisfied that there is no other reasonable way of obtaining the information in question; that there is evidence or a reasonable suspicion that a criminal offence has been committed; and that the constitutional rights of the individuals involved will be protected.
The Competition and Consumer Protection Act 2014 provides an even wider scope for these powers. The CCPC may enter and search ‘any place occupied by a director, manager, or member of staff’ where there are ‘reasonable grounds’ to believe that records relating to the business are being kept there.
It is a criminal offence to fail to attend before the CCPC in response to a witness summons or to obstruct the CCPC from exercising its search and seizure powers. These offences are punishable on summary conviction, with a fine of up to €3,000 or imprisonment for up to six months, or both.
To what extent is private enforcement possible? Can non-parties to agreements containing vertical restraints obtain declaratory judgments or injunctions and bring damages claims? Can the parties to agreements themselves bring damages claims? What remedies are available? How long should a company expect a private enforcement action to take?
Section 14(1) of the Act provides a right to any person who is aggrieved in consequence of any agreement, decision, concerted practice or abuse that is prohibited under section 4 or 5 to seek relief against either or both the undertaking or ‘any director, manager or other officer of such an undertaking’. An action may be brought in the Irish Circuit Court or the High Court. Under section 14(5), the court may grant the applicant ‘(a) relief by way of injunction or declaration; (b) damages, including exemplary damages’.
In addition, the EU’s ‘Damages Directive’ was implemented in Ireland in 2017 by way of Statutory Instrument No. 43/2017, the European Union (Actions for Damages for Infringements of Competition Law) Regulations 2017, and should further assist parties seeking private enforcement.
The successful party will normally be able to recover legal costs in accordance with court rules.
Is there any unique point relating to the assessment of vertical restraints in your jurisdiction that is not covered above?
Update and trends
What were the most significant two or three decisions or developments in this area in the last twelve months?
There were no reported court rulings or publicised regulatory actions taken in respect of vertical agreements in Ireland in 2018. However, recent developments at the European level are highly likely to influence the interpretation of vertical agreements in a regulatory context in Ireland. This is particularly the case owing to the significant similarities between the CCPC’s regime in respect of vertical agreements as set out in the Declaration and accompanying Notice and the EUVBER. Thus, recent decisions, such as case C-230/16 (Coty Germany GmbH v Parfümerie Akzente GmbH), would be highly influential in an Irish context should similar circumstances arise in practice.
The European Commission’s recent publication of a ‘Roadmap’ to evaluate the effectiveness of the current EUVBER, which expires in May 2022, is relevant. Future changes to the EUVBER regime will likely have a direct impact on the Irish Declaration and Notice. Given the existing similarities between the EUVBER and the domestic Irish regime, practitioners expect the Declaration and Notice to be updated by the CCPC to broadly mirror relevant changes that occur at the EU level. The European Commission’s process will, however, take a significant amount of time to complete and thus, changes to the Irish regime are not expected imminently.