Scenario:
European Anti-competitive practices
Mr Green has a contract with White Water Ltd (providers of spring water and fruit juices). He entered into the contract 4 years ago and the contract is for a period of 8 years. White Water Ltd holds 42% of the market share for the supply/retail of spring water and fruit juice in the UK. The contract states that; (a) all water and fruit juices must be exclusively purchased from White Water Ltd (other drinks products could be purchased from other companies), and (b) if he failed to buy a minimum amount of water and juice each year, White Water Ltd could charge him an additional premium As part of the contract, White Water Ltd provides fridges at the store to keep their products chilled. Mr Green is aware that White Water Ltd has other similar contracts with retailers across the UK. Mr Green has had a tough few years and has had to pay the large ‘premium’ each year for the last three years. Is this exclusive supply contract likely to be in contravention of any EU competition law?
Working through with Westlaw UK We need to find out about the legality of such exclusive supply agreements. Let’s go to Westlaw and enter our key terms in a search. We’ll search for “exclusive supply” europe! competition Putting the ! on the end of word searches for any ending so that the above will search for both Europe and European. The first couple of cases don’t seem to be very relevant but EU law can be quite complex to understand particularly with recent changes and consolidations to the Treaties, so lets start with secondary sources. Click the link to access your Journal results. The first article entitled “Significant changes to the block exemption on vertical restraints” would seem relevant so let’s read that one. The important points from this article are: • Our case is an example of Vertical Agreement - agreements for the sale of goods or services entered into by two or more undertakings operating at different levels of the production or distribution chain. • Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits vertical agreements where they restrict competition. • These agreements restrict competition where they contain restraints. • Under the new rules if the buyer or seller has a market share of more than 30% the agreement is not automatically exempted. Having read the Article we can link through to the relevant Regulation No 330/2010 to read through the Primary law to check that we haven’t missed anything and ensure and that our parties fall within the definition of ‘undertakings’, ‘buyer’ and ‘supplier’ When you read through the Regulation you’ll also find that the exemption for Vertical Agreements does not apply if the term for the agreement is more than 5 years (Article 5(1)a). You should also check the Analysis document to ensure that there have been no amendments or modifications since 2010 (EU legislation is not consolidated). We should now check Article 101(3) for the actual prohibition. Go into the EU section on Westlaw UK and open the Advanced search. Tick to just search Treaties, and search by Title “Article 101” and the Subject of competition.
You should end up with two results – the first is just references so click to access the second result. Read through the Article. We now know that Article 101 prohibits agreements which fix trading conditions resulting in a negative effect or restriction on competition. It provides an exemption if the agreement improves distribution or the production of goods. Furthermore, Regulation 330/2010 provides an additional exemption from Article 101 for Vertical Agreements but in our case this does not apply as the market share of the seller exceeds 30% and also the agreement is for more than 5 years. It would seem that our agreement would fall under the scope of Article 101. Let’s now see if we can find some cases to support our findings. Go into the Cases Advanced search. We’ve seen the practice referred to as “exclusive supply”, “exclusive purchasing” and “exclusive distribution” but we also know that it’s officially referred to as a “vertical agreement”. So we’ll search in the free text box for exclusive “vertical agreement”. We’ll ensure we only get relevant cases by specifying that the subject are of the case should be Europe and competition law by entering competition europe! You should get 14 results. Look at the Parties and Keywords to quickly identify relevant results. Ideally we want a case as similar to our own cases facts’ as possible so let’s ignore those relating to video games, petrol, service stations, cars, etc. Link into result number 8 which is about ‘foods’ . This would seem to be a very similar, relevant case which succeeded so it would appear we have a very good chance of success in our case. This case also links to a number of other cases which have cited it and secondary sources discussing it. NB: The EU has constantly renumbered Articles in the Treaties. Although this case is talking about the principles contained in Article 101, it refers to and cites Article 81 and 82 because the case is from 2004. Now you have found a relevant case, it may be worth setting up a Case Alert to track your case so you will immediately be notified if another case cites it, it gets appealed, or if a journal discusses it. Before you finish, it is worth just running quick searches in Current Awareness and News to check that nothing related to your area of law has happened in the last few days.
Principle of Law: Article 101 (TFEU) prohibits agreements which fix trading conditions resulting in a negative effect or restriction on competition. It provides an exemption if the agreement improves distribution or the production of goods. Regulation 330/2010 provides an additional exemption from Article 101 for Vertical Agreements but in our case this does not apply as the market share of the seller exceeds 30% and also the agreement is for more than 5 years. Furthermore case law has held that “providing retailers with freezer cabinets at nil or nominal charge on the proviso that they were used exclusively for the manufacturer's ice cream products was anti competitive and an abuse of dominant position in that it restricted the retailers' ability to offer for sale the products of competitors.” It is extremely likely the same principle could be applied to the fridges in our facts.
Remember: EU information is not consolidated – always check the References or Analysis for details of any modifications or amendments. The EU has renumbered the relevant Treaty articles over the last 20 years so when searching for related legislation, cases and journals articles try to do so by phrases such as “vertical agreement” or “agreement between undertakings” rather than Article number. Use the status icons, Subject/Keyword fields terms in context and the case digests to quickly scan materials to see if they are relevant or not. Read the cited/citing material – you may find cases which are even more pertinent to your facts. Check the most current material (in News & Current Awareness) as something may have happened today or yesterday which could affect your case. Once you have found relevant materials you intend to use, set up alerts to ensure that if anything does happen, you’ll get emailed straight away.