In a press release dated March 7, 2018, the French Competition Authority announced that the investigation opened against the farm tractor manufacturers John Deere and AGCO was closed following the measures taken by them during the investigation to reinforce competition and diversify the offer in favor of farmers.
Thus, this investigation, which had been opened ex officio by the French Competition Authority after the communication of indications by the DGCCRF, has not resulted in the publication of a decision; however, the press release published by the French Competition Authority has a strong educational purpose and serves as a reminder of the restrictions permitted when establishing an exclusive distribution network.
Under European competition law, it is theoretically not possible to restrict the clients to which the distributor resells or the resale territory inside the European Union. However, this principle has a certain number of exceptions, including the possibility to restrict the active sales of a distributor in a territory or to a clientele which the supplier has exclusively reserved for itself or which it has exclusively allocated to another buyer, when this restriction does not limit the sales made by the buyer’s clients. Clauses going beyond these permitted limitations are characterized as hardcore restrictions and withdraw the benefit of the block exemption for the agreement in question. The parties must then prove that their agreement can be exempted individually, but this exercise can be quite tricky in the presence of hardcore restrictions as there is then a risk of being characterized as an anticompetitive agreement.
In this particular case, the manufacturers John Deere and AGCO organize the distribution of their tractors through a network of dealers, most of which benefit from territorial exclusivity. In accordance with the aforementioned rules, the manufacturers should only be able to restrict their distributors’ active sales to territories and/or clients which have been exclusively allocated to other distributors or that the manufacturers have exclusively reserved for themselves. On the other hand, the dealers’ passive sales to these territories and/or clients cannot be limited in any way.
The ambiguous nature of certain clauses of the agreements concluded with the dealers might lead them to think that they were not authorized to respond to solicitations from clients located outside their own exclusive territory, which would be tantamount to limiting these distributors’ passive sales and thus constitutes a hardcore restriction within the meaning of the exemption regulation. Therefore, the manufacturers have had to modify their agreements and terms and conditions of sale to reaffirm their distributors’ commercial freedom in terms of their passive sales.