Vertical Agreements in Competition Law

In addition, vertical agreements seem to be more effective in business. One of the advantages of these restrictions is that, in the absence of market power, they can stimulate competition between brands (e.g. B, between a Canon printer and an HP printer), although intra-brand competition (between suppliers of the same Canon printer) could be reduced. The Chicago School of Economics generally considers these restrictions to be effective. However, their effectiveness is not always guaranteed. For example, if consumers do not benefit from the additional advertising costs because they already know the product, they may prefer to pay less and ignore the cost of advertising. A recent report by Oxera Consulting (2016) also suggests that vertical restraints can be used to limit the expansion of e-commerce. CCI has given considerable thought to the determination of the AAEC in its analysis of the two agreements. This meticulous exercise in determining the AAEC was not previously available in previous cases. Cci conducted an in-depth examination of the extent to which these two agreements led to a complete seizure in secondary markets and were not justified by the alleged efficiencies.

The second reason for a more comprehensive economic analysis with regard to the MPR is that the legal framework of Articles 3(4) and 19(3) does not give rise to a presumption of the negative effects of the MPR. In addition, there are no “per se” cases mentioned in the law. The ICC itself determined in another case that all vertical agreements in India must be analyzed against a common sense framework.76 Cci is required to assess enforcement under Article 19(3)(a-c). To this end, the factors referred to in point 111 of the GUIDELINES on EU Vertical Agreements should facilitate the assessment. These factors are: (a) type of agreement; (b) the position of the parties on the market; (c) the market position of competitors; (d) the market position of the purchasers of the contract products; (e) barriers to entry; (f) the maturity of the market; (g) the level of trade; (h) the nature of the product; (i) other factors. Subsequent EU case law has clarified the conditions under which different types of vertical restraints are legal. With regard to selective distribution, resellers are often selected on the basis of objective criteria that are genuinely related to the product and are not applied in a discriminatory manner (Metro I, 1966). A total ban on Internet sales in a selective distribution system is considered an object restriction (Pierre Fabre, 2011). However, it is legal to restrict online sales in order to maintain the luxury image of products, as long as the requirements are not applied in a discriminatory manner and are proportionate to the objectives pursued (Coty, 2017). Franchising agreements may contain restrictions to prevent the franchisor`s use of know-how and support for competitors and those necessary to maintain the identity and reputation of the brand (Pronuptia, 1986).

The ICC noted that for the purposes of the analysis of anti-competitive agreements under Article 3, there is no obligation to identify the relevant market and that the CCI is only required “to examine whether the agreement has anti-competitive effects in a market and whether that market may be the market for the product/service of a party entering into the agreement”.39 In future cases, CCI has corrected this consideration. Whether a vertical agreement actually restricts competition and, if so, whether the benefits outweigh the anti-competitive effects often depends on the structure of the market. The article began with a discussion of the regulatory regime of subsections 3(4) and 19(3) of the Indian Competition Act, which established the legal framework for the assessment of vertical agreements. The legislation is an improvement over the EU. Parliament did not divide cases into “purpose” and “effective”. Nor is there a bifurcation between the assessment of the restriction of competition and the defence of efficiency which could compensate for the damage. Thus, the Indian legislature has learned from the difficulties of interpreting Article 101 TFEU. Further examination of the legal and economic analysis of the cases revealed that the legislative “leap” does not coincide with the strength of the analysis that EU case law and non-mandatory law instruments have to offer. For example, a consumer electronics manufacturer could enter into a vertical agreement with a retailer under which the retailer would sell and promote the former`s products, possibly in exchange for lower prices. Such agreements could lead to the eviction of markets and/or the creation and maintenance of territorial restrictions.

Similar vertical restraints may be covered by the prohibition laid down in Article 4, unless they are covered by a block exemption or an individual exemption. An agreement that is neither horizontal nor vertical can pose a challenge in terms of the burden of proof. As already mentioned, Indian law raises a presumption of illegality with respect to horizontal agreements, while in the case of vertical agreements, the ICC uses the rule of reason analysis in its decision-making practice when assuming the initial burden of proof. In the case of an agreement which is neither horizontal nor vertical, but which nevertheless falls within the scope of Article 3(1), it is not clear who bears the initial burden of proof. Therefore, the appropriate way of concluding such agreements within the meaning of § 3 para. 1, a change in the law that could identify the initial burden of proof in relation to this category of agreements. However, it is striking that there is no mention of market shares on both upstream and downstream markets. With respect to both categories of agreements, the ICC has considered the grounds for justifying the exclusivity offered even in the absence of an enforcement conclusion.64 However, this may be justified in the specific context of the case. It`s easy to imagine that in the “spare parts market,” every OEM is a monopoly. In addition, that agreement deprived independent repairers of the possibility of competing with authorised dealers in the car repair market. In the EU, there is no rule per se, as all agreements have in principle the defence of effectiveness provided for in Article 101(3) TFEU.

Since the 1970s, the United States has seen a gradual shift from the per se rule to reason on vertical agreements. Now the latter is the norm and the former an exception. See, Herbert J Hovenkamp, “The Rule of Reason” (2018) 1778 Faculty Scholarship at Penn Law 159-64. Economic analysis is equally problematic. Although the ICC has recognised in principle that vertical agreements should only be prohibited if they have appreciable adverse effects on competition, the analysis itself did not do justice to this allegation. Instead of defining the relevant market and calculating market shares at both the supply and distribution levels, the CCI merely found that the counterparty was one of the many suppliers of hair oil on the market and therefore did not hold the position of starch in relation to other brands.53 Even though “other equivalent and better brands”54 were present, they may not have been in the same relevant market as the OR product. On November 8, 2021, the French competition authority adopted a decision n ° 21-J-26 1.4 million because for seven years, from 2012 to 2019, it had concluded two vertical agreements, the first of which imposed “recommended” prices on resellers and the second aimed at (…) A vertical agreement is a term used in competition law to refer to agreements between companies operating at different levels of the production/distribution chain (e.B. relationships between manufacturers and their customers/distributors). The EU`s basic rules are set out in the Block Exemption Regulation (GMOs) for vertical agreements, Regulation (EC) No 330/2010. Applicable, the market share of each of the parties to the agreement may not exceed 30 %. In addition, agreements must not contain hardcore restrictions, i.e. h.: minimum speed; territorial restrictions (although in certain circumstances it is possible to prohibit active sales outside the territories allocated by buyers and to prevent wholesalers from selling to final customers); restrictions on mutual supply in selective distribution systems; and restrictions on the sale of components (suppliers of such components should be allowed to sell to end-users, workshops and other service providers).

If a vertical agreement does not fulfil the conditions of the Block Exemption Regulation and falls within the scope of Article 101(1) TFEU, it must satisfy the requirements of the legal exception provided for in Article 101(3) TFEU in order to be lawful. The AAEC standard developed in Article 19(3) suggests an impact-based analysis, since foreclosure (Article 19(3)(a)-(c)) is not in itself anti-competitive if it can benefit consumers as a whole (Article 19(3)(d)-(f)). . . .

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