Vertical Agreements and Competition Law Cases: Understanding the Rules

Competition law is essential to ensure that markets remain competitive and that consumers benefit from the best possible prices and services. In recent years, the European Commission has focused on vertical agreements as these types of agreements have the potential to distort competition in various ways.

In a vertical agreement, two or more parties agree to cooperate at different levels of the supply chain. For example, a manufacturer may agree with a distributor to sell its products exclusively through the distributor, or a supplier may agree with a retailer on the minimum resale price of a product. There are many other examples of vertical agreements, and each of them may affect competition differently.

The European Commission has identified four types of vertical agreements that may be problematic from a competition law perspective. These are:

1. Resale price maintenance: This type of agreement involves a supplier setting a minimum price at which a retailer can sell its products. It may limit intra-brand competition and affect inter-brand competition, as it may prevent retailers from offering discounts to consumers.

2. Exclusive distribution: In this type of agreement, the supplier agrees to sell its products exclusively through one or more selected distributors. This may limit intra-brand competition, as it may prevent other distributors from selling the same products.

3. Tying and bundling: This type of agreement involves a supplier requiring a customer to buy one product (the tying product) in order to purchase another product (the tied product). This may limit competition, as it may prevent customers from choosing different products from different suppliers.

4. Dual distribution: This type of agreement involves a supplier selling its products through its own distribution network and through independent distributors. This may limit inter-brand competition, as it may prevent independent distributors from competing with the supplier.

The European Commission takes vertical agreements seriously and has investigated many cases in recent years. One of the most prominent cases was the investigation of Google’s AdSense service, in which the European Commission found that Google had abused its dominant position by imposing anti-competitive clauses in its ad contracts with third-party websites.

Another well-known case was the investigation of Apple’s distribution agreements with its iPhone distributors. The European Commission found that Apple had imposed anti-competitive clauses in its agreements, which prevented its distributors from selling iPhones to customers outside their allocated territories. This limited competition and raised prices for consumers.

In conclusion, vertical agreements have the potential to affect competition in different ways, and competition law plays a crucial role in ensuring that markets remain competitive and consumers benefit from the best possible prices and services. As a professional, I recommend that businesses consult legal experts to ensure that their vertical agreements comply with competition law.