The head of the European Commission's digital single market task force yesterday said the EU antitrust enforcer takes a "permissive" approach to selective distribution agreements, and reiterated its support of Coty's stance at the European Court of Justice. Janith Aranze at GCR Live 6th Annual Telecoms, Media & Technology in Brussels
Speaking yesterday, Thomas Kramler said the commission has no issues with selective distribution agreements that fall under the 30% market share threshold under the EU's Vertical Agreement Block Exemption Regulation for "good reason". If such agreements do have restrictive effects, he said, these would likely be outweighed by distribution efficiencies that can be gained if market share is low.
The block exemption provides a safe harbour for agreements if certain conditions are satisfied, regardless of whether they have a positive or negative effect on competition. One of the conditions is that the market share held by both parties to agreements does not exceed 30% on any relevant market.
Kramler said EU case law over the years - such as Pierre Fabre - has been less permissive, and "relatively harsh".
"The Pierre Fabre judgment clearly spelled out that a restriction on a retailer to sell on the internet amounts to a hardcore restriction of competition," he said. The Coty case takes this debate one step further and asks whether restrictions on certain kinds of sales - in this case platform sales - can be a hardcore restriction, he said.
Kramler said that only restrictions that have the object of dividing the market qualify as hardcore restrictions. He said the agreements in the Coty case did not do this.
In March, the commission told the European Court of Justice that it did not see a problem with the distribution system used by Coty to restrict distributor Parfümerie Akzente from selling its products on third-party platforms.
Coty said the company had valid reasons for its restrictions, as forcing Parfümerie Akzente to ensure there is a visible connection to its physical store when making online sales reassures consumers that the sale can be traced to a single, responsible reseller.
German courts have diverged from the commission on the subject. Kramler yesterday said the law must be applied uniformly across the whole single market.
Kramler also said he doesn't see a need to review the vertical agreement block exemption for now as it "works OK," and provides legal certainty.
Kramler was joined on the panel by Kyriakos Fountoukakos at Herbert Smith Freehills and Gunnar Kallfass, a head of unit at Germany's Federal Cartel Office. Sidley Austin partner Stephen Kinsella moderated the panel.