ECJ Adviser: Distributors Can't be Stopped from Selling Online in EU
An advocate general (adviser) to the EU's highest court (European Court of
Justice (ECJ)) said that an absolute ban on Internet sales by a distributor will
usually be an automatic infringement of EU competition law, on March 3, 2011. It
would require very exceptional circumstances for this not to be the case, and
the products considered in the opinion (cosmetics manufactured by Pierre-Fabre)
did not justify such a limitation.
Pierre-Fabre's agreements were selective distribution agreements, under which
distributors are chosen based on specific criteria. However, the same principle
would apply to such a restriction included in other types of "vertical"
(supplier/purchaser) agreements, such as exclusive distribution agreements. This
finding, consistent with the European Commission's (EC) view, means a
distribution or other agreement containing such a clause will not satisfy the
Vertical Restraints Block Exemption. This EU legislation automatically exempts
certain vertical agreements which may otherwise be seen as anticompetitive (due
to the inclusion of clauses such as exclusivity provisions) from the ban on
anticompetitive agreements contained in EU competition law. The ECJ normally,
but not always, follows the opinion of its advocates general.
ECJ Adviser: Distributors Can't be Required to Stop Satellite Decoder Cards
from being used Outside Licensed Territory in EU
An advocate general (AG) to the ECJ gave his opinion in a case which has been
described by a senior EC official as of "fundamental importance", on Feb. 3,
2011. The case concerns the broadcasting of English Premier League football, but
is of general application.
The broadcast rights for the "Premiership" are licensed to foreign
broadcasters for transmission in their various territories. The AG said that an
obligation requiring the foreign broadcasters to prevent their satellite decoder
cards, which enable reception of the licensed programme content, from being used
outside the licensed territory infringes EU competition law. Such an obligation
is intended to prevent any competition between broadcasters through a reciprocal
compartmentalisation of licensed territories, and there is therefore no reason
to treat such agreements any differently from other types of agreements intended
to prevent cross border trade in the EU. It remains to be seen whether the ECJ
will follow this opinion, but if it does, this will lead to a "revolution in
[the treatment of broadcast and similar] rights in the EU," according to the EC
EC Considers Most Favoured Customer Clauses
The EC closed an investigation into contracts between the major Hollywood
film studios and so-called "integrators" (which obtain financing and pay upfront
for digital equipment to be installed in cinemas, so as to enable a switchover
to digital technology) on March 4, 2011. Many of these contracts gave the film
studio the right to benefit from the most favourable terms, including lower
payments, that had been agreed between a given integrator and other film studios
or distributors (most favoured customer clauses).
The EC concluded that these clauses could hinder integrators from signing
contracts with distributors of independent/art house films (who presumably would
not be able to pay the same prices as the Hollywood studios), since the
integrators would have to offer the Hollywood studios the same terms as those
offered to smaller distributors. The provisions have been revised by "several"
of the studios, but the new format has not been revealed by the EC. This
investigation will be of interest to any company using or the subject of such
clauses in the EU, particularly where the practice is industry-wide or the
company imposing the requirement has a strong market position.
OFT Looks at Abuse of Dominance through Exclusive Agreements
The UK Office of Fair Trading (OFT) issued a statement of objections
(preliminary statement of its case, to which the recipient can reply) on Feb.
25, 2011, alleging that CH Jones abused a dominant position in the UK market for
the provision of bunker fuel card services to direct bunkering customers,
typically heavy goods vehicle (HGV) fleet operators. The OFT also alleges that
CH Jones used its dominant position in that market to anticompetitive effect in
the UK market for the provision of pay-as-you-go (PAYG) fuel card services to
customers with HGV fleets.
The case is interesting because: alleged infringements of competition law
took place as a result of the use of exclusive agreements; the OFT rarely
proceeds in abuse of dominance cases, so the cases are important for precedent
reasons when they do; and the case relates to two markets, on only one of which
is CH Jones allegedly dominant.
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