EN    EN EN 
EN    EN  EUROPEAN COMMISSION 
Brussels, 10.5.2010 
SEC(2010) 411 final 
  
COMMISSION NOTICE 
Guidelines on Vertical Restraints 
EN 2   EN COMMISSION NOTICE 
Guidelines on Vertical Restraints 
(Text with EEA relevance) 
 
TABLE OF CONTENTS Paragraphs Page 
I. INTRODUCTION 1-7  
1. Purpose of the Guidelines 1-4  2. Applicability of Article 101 to  vertical agreements 5-7  
II. VERTICAL AGREEMENTS WHICH GENERALLY FALL 
OUTSIDE THE SCOPE OF ARTICLE 101(1) 8-22  
1. Agreements of minor im portance and SMEs 8-11  
2. Agency agreements 12-21  2.1 Definition of agency agreements 12-17  2.2 The application of Article 101(1)  to agency agreements 18-21  
3. Subcontracting agreements 22  III. APPLICATION OF THE BLOCK EXEMPTION 
REGULATION 23-73  
1. Safe harbour created by the Block Exemption Regulation 23  
2. Scope of the Block Exemption Regulation 24-46  2.1 Definition of vertical agreements 24-26  2.2 Vertical agreements between competitors 27-28  2.3 Associations of retailers 29-30  2.4 Vertical agreements contai ning provisions on intellectual 
property rights (IPRs) 31-45  
2.5 Relationship to other block exemption regulations 46  
3. Hardcore restrictions under th e Block Exemption Regulation 47-59  
4. Individual cases of hardcore sa les restrictions that may fall 
outside Article 101(1) or may fulfil the conditions of Article 101(3) 60-64  
EN 3   EN 5. Excluded restrictions under the Block Exemption Regulation 65-69  
6. Severability 70-71  7. Portfolio of products dist ributed through the same 
distribution system 72-73  
IV. WITHDRAWAL OF THE BLOCK EXEMPTION AND 
DISAPPLICATION OF THE BLOCK EXEMPTION REGULATION 74-85  
1. Withdrawal procedure 74-78  
2. Disapplication of the Block Exemption Regulation 79-85  V. MARKET DEFINITION AND MARKET SHARE 
CALCULATION 86-95  
1. Commission Notice on definition of the relevant market 86  
2. The relevant market for calculating the 30 % market share 
threshold under the Block Exemption Regulation 87-92  
3. Calculation of market shares under the Block Exemption 
Regulation 93-95  
VI. ENFORCEMENT POLICY IN INDIVIDUAL CASES 96-229  
1. The framework of analysis 96-127  1.1. Negative effects of vert ical restraints 100-105  
1.2. Positive effects of vertical restraints 106-109  1.3. Methodology of analysis 110-127  1.3.1. Relevant factors for the asse ssment under Article 101(1) 111-121  
1.3.2. Relevant factors for the asse ssment under Article 101(3) 122-127  
2. Analysis of specific ve rtical restraints 128-229  
2.1. Single branding 129-150  2.2. Exclusive distribution 151-167  
2.3. Exclusive customer allocation 168-173  
2.4. Selective distribution 174-188  2.5. Franchising 189-191  2.6. Exclusive supply 192-202  
EN 4   EN 2.7. Upfront access payments  203-208  
2.8. Category management agreements  209-213  2.9. Tying 214-222  2.10. Resale price restrictions 223-229  
EN 5   EN I. INTRODUCTION 
1. Purpose of the Guidelines 
(1) These Guidelines set out the principles for the assessment of vertical agreements 
under Article 101 of the Treaty on the F unctioning of the European Union* 
(hereinafter "Article 101")1. Article 1(1)(a) of Co mmission Regulation (EU) 
No 330/2010 of 20 April 2010 on the applicati on of Article 101(3) of the Treaty on 
the Functioning of the European Union to  categories of verti cal agreements and 
concerted practices2 (hereinafter referred to as th e "Block Exemption Regulation") 
(see paragraphs (24) to (46)) defines the te rm "vertical agreement". These Guidelines 
are without prejudice to  the possible parallel applicati on of Article 102 of the Treaty 
on the Functioning of the European Union (h ereinafter "Article 102") to vertical 
agreements. These Guidelines are structured in the following way: 
– Section II (paragraphs (8) to (22)) describes vertical agreements which 
generally fall outside Article 101(1); 
– Section III (paragraphs (23) to (73)) clar ifies the conditions for the application 
of the Block Exemption Regulation; 
– Section IV (paragraphs (74) to (85)) describes the principles concerning the 
withdrawal of the bloc k exemption and the disa pplication of the Block 
Exemption Regulation; 
– Section V (paragraphs (86) to (95)) provides guidance on how to define the 
relevant market and calculate market shares; 
–  Section VI (paragraphs (96) to (229 )) describes the general framework of 
analysis and the enforcement policy of the Commission in individual cases 
concerning vertical agreements. 
(2) Throughout these Guidelines, the analysis applies to both goods and services, 
although certain vertical rest raints are mainly used in the distribution of goods. 
Similarly, vertical agreements can be conc luded for intermediate and final goods and 
services. Unless otherwise stated, the analysis and arguments in these Guidelines apply to all types of goods and services and to all levels of trade. Thus, the term 
"products" includes both goods and services . The terms "supplier" and "buyer" are 
used for all levels of trade. The Block Ex emption Regulation and these Guidelines do 
                                                
 
* With effect from 1 December 2009, Articles 81 and 82 of the EC Treaty have become Articles 101 and, 
102, respectively, of the Treaty on the Functioning of the European Union ("TFEU"). The two sets of provisions are, in substance, identical. For the pur poses of these Guidelines, references to Articles 101 
and 102 of the TFEU should be understood as references to Articles 81 and 82, respectively, of the 
EC Treaty where appropriate. The TF EU also introduced certain changes in terminology, such as the 
replacement of "Community" by "Union" and "common market" by "internal ma rket". The terminology 
of the TFEU will be used throughout these Guidelines.  
1 These Guidelines replace the Commission Notice – Gu idelines on Vertical Restraints, OJ C 291, 
13.10.2000, p. 1. 
2 OJ L 102, 23.4.2010, p. 1.  
EN 6   EN not apply to agreements with final cons umers where the latter are not undertakings, 
since Article 101 only applies to agreements between undertakings. 
(3) By issuing these Guidelines, the Commission aims to help companies conduct their 
own assessment of vertical agreements under EU competition rules. The standards 
set forth in these Guidelines cannot be a pplied mechanically, but must be applied 
with due consideration for the specific ci rcumstances of each case. Each case must 
be evaluated in the li ght of its own facts. 
(4) These Guidelines are without prejudice to  the case-law of the General Court and the 
Court of Justice of the European Union c oncerning the application of Article 101 to 
vertical agreements. The Commission will c ontinue to monitor the operation of the 
Block Exemption Regulation and Guidelin es based on market information from 
stakeholders and national competition author ities and may revise this notice in the 
light of future developments and of evolving insight. 
2. Applicability of Article 101 to vertical agreements 
(5) Article 101 applies to vertical agreemen ts that may affect trade between Member 
States and that prevent, restrict or distort competition ("vertical restraints")3. 
Article 101 provides a legal framework for th e assessment of vertical restraints, 
which takes into consideration the di stinction between anti-competitive and 
pro-competitive effects. Article 101(1) prohi bits those agreements which appreciably 
restrict or distort competition, while Artic le 101(3) exempts those agreements which 
confer sufficient benefits to outweigh the anti-competitive effects4. 
(6) For most vertical restraints, competi tion concerns can only arise if there is 
insufficient competition at one or more levels of trade, that is, if there is some degree of market power at the leve l of the supplier or the buyer or at both levels. Vertical 
restraints are generally less harmful th an horizontal restraints and may provide 
substantial scope for efficiencies.  
(7) The objective of Article 101 is to ensure th at undertakings do not use agreements – in 
this context, vertical agreements – to restrict competition on the market to the 
detriment of consumers. Assessing vertical re straints is also important in the context 
of the wider objective of achieving an integr ated internal market. Market integration 
enhances competition in the European Un ion. Companies should not be allowed to 
re-establish private barriers between Member States where State barriers have been 
successfully abolished. 
                                                
 
3 See inter alia  judgments of the Court of Justice in Joined Cases 56/64 and 58/64 Grundig-Consten v 
Commission  [1966] ECR 299; Case 56/65 Technique Minière v Maschinenbau Ulm  [1966] ECR 235; 
and judgment of the Court of First Instance in Case T-77/92 Parker Pen v Commission  
[1994] ECR II-549. 
4 See Communication from the Commission - Notice – Guid elines on the application of Article 81(3) of 
the Treaty, OJ C 101, 27.4.2004, p. 97 for the Commission’s general methodology and interpretation of 
the conditions for applying Article 101( 1) and in particular Article 101(3). 
EN 7   EN II. VERTICAL AGREEMENTS WHIC H GENERALLY FALL OUTSIDE THE 
SCOPE OF ARTICLE 101(1) 
1. Agreements of minor importance and SMEs 
(8) Agreements that are not capable of a ppreciably affecting trade between Member 
States or of appreciably restricting comp etition by object or effect do not fall within 
the scope of Article 101(1). The Bloc k Exemption Regulati on applies only to 
agreements falling within the scope of application of Article 101(1). These 
Guidelines are without prejudice to th e application of Co mmission Notice on 
agreements of minor importance which do not  appreciably restrict competition under 
Article 81(1) of the Treaty establishing the European Community (de minimis )5 or 
any future de minimis  notice. 
(9) Subject to the conditions set out in the de minimis  notice concerning hardcore 
restrictions and cumulative effect issues, vertical ag reements entered into by non-
competing undertakings whose individual ma rket share on the relevant market does 
not exceed 15 % are generally considered to fall outside the scope of Article 101(1)6. 
There is no presumption that vertical ag reements concluded by undertakings having 
more than 15 % market share automatical ly infringe Article 101(1). Agreements 
between undertakings whose market shar e exceeds the 15 % threshold may still not 
have an appreciable effect on trade between Member States or ma y not constitute an 
appreciable restriction of competition7. Such agreements need to be assessed in their 
legal and economic context. The criteria fo r the assessment of individual agreements 
are set out in paragraphs (96) to (229). 
(10) As regards hardcore restrictions referred to in the de minimis  notice, Article 101(1) 
may apply below the 15 % threshold, provided that there is an appreciable effect on 
trade between Member States and on comp etition. The applicable case-law of the 
Court of Justice and the General Court is relevant in this respect8. Reference is also 
made to the possible need to assess pos itive and negative effects of hardcore 
restrictions as described in  particular in paragraph (47) of these Guidelines.  
(11) In addition, the Commission considers that , subject to cumulative effect and hardcore 
restrictions, vertical agreements between  small and medium-sized undertakings as 
defined in the Annex to Commission R ecommendation of 6 May 2003 concerning 
the definition of micro, small and medium-sized enterprises9 are rarely capable of 
appreciably affecting trade between Member  States or of appreciably restricting 
competition within the meaning of Article 101(1), and therefore generally fall outside the scope of Article 101(1). In cases where such agreements nonetheless meet the conditions for th e application of Article 101(1), the Commission will 
normally refrain from opening proceedings fo r lack of sufficient interest for the 
                                                
 
5 OJ C 368, 22.12.2001, p. 13. 
6 For agreements between competing undertakings the de minimis  market share threshold is 10 % for 
their collective market share on each affected relevant market. 
7 See judgment of the Court of First Instance in Case T-7/93 Langnese-Iglo v Commission  [1995] 
ECR II-1533, paragraph 98. 
8 See judgments of the Court of Justice in Case 5/69 Völk v Vervaecke  [1969] ECR 295; 
Case 1/71 Cadillon v Höss  [1971] ECR 351 and Case C-306/96 Javico v Yves Saint Laurent  [1998] 
ECR I-1983, paragraphs 16 and 17. 
9 OJ L 124, 20.5.2003, p. 36. 
EN 8   EN European Union unless those undertakings  collectively or individually hold a 
dominant position in a substantia l part of the internal market. 
2. Agency agreements 
2.1 Definition of agency agreements (12) An agent is a legal or physical person vested with the power to negotiate and/or 
conclude contracts on behalf of another pers on (the principal), either in the agent's 
own name or in the name of  the principal, for the: 
– purchase of goods or servi ces by the principal, or 
– sale of goods or services supplied by the principal. 
(13) The determining factor in defining an  agency agreement for the application of 
Article 101(1) is the financial or commercial risk borne by the agen t in relation to the 
activities for which it has been appointed as an agent by the principal.
10 In this 
respect it is not material for the assessment whether the agent acts for one or several principals. Neither is material for this assessment the qualification given to their agreement by the parties or national legislation. 
(14) There are three types of financial or commercial risk that are material to the 
definition of an agency agreement for the application of Article 101(1). First, there 
are the contract-specific risks which are di rectly related to th e contracts concluded 
and/or negotiated by the agen t on behalf of the principal, such as financing of stocks. 
Secondly, there are the risks related to market-specific investments. These are 
investments specifically required for the type  of activity for which the agent has been 
appointed by the principal, that is, which ar e required to enable the agent to conclude 
and/or negotiate this  type of contract. Such inve stments are usually sunk, which 
means that upon leaving that particular fi eld of activity the investment cannot be 
used for other activities or sold other than  at a significant loss. Thirdly, there are the 
risks related to other activit ies undertaken on the same product market, to the extent 
that the principal requires th e agent to undertake such activities, but not as an agent 
on behalf of the principal but for its own risk. 
(15) For the purposes of appl ying Article 101(1), the agreemen t will be qualified as an 
agency agreement if the agent does not bear any, or bears only in significant, risks in 
relation to the contracts conc luded and/or negotiated on beha lf of the principal, in 
relation to market-specific investments for that field of activity, and in relation to 
other activities required by the principa l to be undertaken on the same product 
market. However, risks that are related to th e activity of providing agency services in 
general, such as the risk of  the agent's income being dependent upon its success as an 
agent or general investments in for instan ce premises or personnel, are not material 
to this assessment. 
                                                
 
10 See judgment of the Court of First Instance in Case T-325/01 Daimler Chrysler v Commission [2005] 
ECR II-3319; judgments of the Court of Justice in Case C-217/05 Confederación Espanola de 
Empresarios de Estaciones de Servicio v CEPSA  [2006] ECR I-11987; and Case C-279/06 CEPSA 
Estaciones de Servicio SA v LV Tobar e Hijos SL [2008] ECR I-6681. 
EN 9   EN (16) For the purpose of applying Article 101( 1), an agreement will thus generally be 
considered an agency agreement where prope rty in the contract goods bought or sold 
does not vest in the agent, or the agent doe s not himself supply the contract services 
and where the agent: 
(a) does not contribute to the costs relati ng to the supply/purchas e of the contract 
goods or services, including the costs of  transporting the goods. This does not 
preclude the agent from carrying out the transport service, provided that the 
costs are covered by the principal; 
(b) does not maintain at its own cost or risk stocks of  the contract goods, including 
the costs of financing the stocks and the costs of loss of stocks and can return 
unsold goods to the principal without charge, unless the ag ent is liable for fault 
(for example, by failing to comply with reasonable security measures to avoid 
loss of stocks); 
(c) does not undertake respons ibility towards third parties for damage caused by 
the product sold (product liability), unless, as agent, it is liable for fault in this 
respect; 
(d) does not take responsibility for custom ers' non-performance of the contract, 
with the exception of the loss of the agent's commission, unless the agent is 
liable for fault (for example, by failing to comply with reasonable security or anti-theft measures or failing to comp ly with reasonable measures to report 
theft to the principal or police or to communicate to the principal all necessary 
information available to him on the customer's financial reliability); 
(e) is not, directly or indi rectly, obliged to invest in  sales promotion, such as 
contributions to the advertis ing budgets of the principal; 
(f) does not make market-specific investme nts in equipment, premises or training 
of personnel, such as for example the petr ol storage tank in th e case of petrol 
retailing or specific software to sell insurance policies in case of insurance 
agents, unless these costs are fu lly reimbursed by the principal; 
(g) does not undertake other activities within th e same product market required by 
the principal, unless these activities are fully reimbursed by the principal. 
(17) This list is not exhaustive. However, wher e the agent incurs one or more of the risks 
or costs mentioned in paragraphs (14), (15) and (16), the agreement between agent and principal will not be qualif ied as an agency agreement.  The question of risk must 
be assessed on a case-by-case basis, and with  regard to the economic reality of the 
situation rather than the legal form. For pr actical reasons, the risk analysis may start 
with the assessment of the contract-specifi c risks. If contract-specific risks are 
incurred by the agent, it will be enough to conclude that the agent is an independent distributor. On the contrary, if the agent does not incur contract-specific risks, then it 
will be necessary to continue further the analysis by assessing the risks related to market-specific investments. Finally, if th e agent does not incur any contract-specific 
risks and risks related to market-specific investments, the risks related to other 
required activities w ithin the same product market may have to be considered. 
EN 10   EN 2.2 The application of Article 101(1) to agency agreements 
(18) In the case of agency agreements as de fined in section 2.1, the selling or purchasing 
function of the agent forms part of the prin cipal's activities. Since the principal bears 
the commercial and financial risks relate d to the selling a nd purchasing of the 
contract goods and services all obligations imposed on th e agent in relation to the 
contracts concluded and/or negotiated on  behalf of the principal fall outside 
Article 101(1). The following obligations on th e agent's part will be considered to 
form an inherent part of an agency agreemen t, as each of them rela tes to the ability of 
the principal to fix the scope of activity of  the agent in relation to the contract goods 
or services, which is essential if the principa l is to take the risks and therefore to be 
in a position to determine the commercial strategy: 
(a) limitations on the territory in which the agent may sell these goods or services; 
(b) limitations on the customers to wh om the agent may sell these goods 
or services; 
(c) the prices and conditions at which the agent must sell or purchase these goods 
or services. 
(19) In addition to governing the conditions of  sale or purchase of the contract goods or 
services by the agent on beha lf of the principal, agency agreements often contain 
provisions which concern the relationship be tween the agent and the principal. In 
particular, they may contain a provision preventing the princi pal from appointing 
other agents in respect of a given type of transaction, customer or territory (exclusive 
agency provisions) and/or a provision preven ting the agent from acting as an agent or 
distributor of undertakings which compete with the principal (single branding 
provisions). Since the agent is a separate  undertaking from the principal, the 
provisions which concern the relationship between the agent and the principal may 
infringe Article 101(1). Exclusive agency pr ovisions will in gene ral not lead to anti-
competitive effects. However, single branding provisions and post-term non-compete 
provisions, which concern inter-brand comp etition, may infringe Article 101(1) if 
they lead to or contribute to a (cumulative) foreclosure effect on the relevant market 
where the contract goods or services ar e sold or purchased (see in particular 
Section VI.2.1). Such provisions may bene fit from the Block Exemption Regulation, 
in particular when the conditions provided in Article 5 of that Regulation are fulfilled. They can also be individually ju stified by efficiencies under Article 101(3) 
as for instance described in paragraphs (144) to (148). 
(20) An agency agreement may also fall with in the scope of Articl e 101(1), even if the 
principal bears all the relevant financial and commercial risks, where it facilitates collusion. That could, for instance, be the case when a number of principals use the 
same agents while collectively excluding others from using these agents, or when they use the agents to collude on marketi ng strategy or to exchange sensitive market 
information between the principals. 
(21) Where the agent bears one or more of the relevant risks as described in 
paragraph (16), the agreement between ag ent and principal does not constitute an 
agency agreement for the purpose of appl ying Article 101(1). In  that situation,
 the 
EN 11   EN agent will be treated as an independent undertaking and the agre ement between agent 
and principal will be subject to Article 101(1) as any other vertical agreement. 
3. Subcontracting agreements 
(22) Subcontracting concerns a contractor  providing technology or equipment to a 
subcontractor that undertakes to produce certain products on the basis thereof (exclusively) for the contractor. Subcontra cting is covered by Commission notice of 
18 December 1978 concerning the assessment of  certain subcontracting agreements 
in relation to Article 85(1) of the EEC Treaty
11 (hereinafter "subcontracting notice"). 
According to that notice, which remain s applicable, subcontracting agreements 
whereby the subcontractor undertakes to pr oduce certain products exclusively for the 
contractor generally fall outside the scope  of Article 101(1) provided that the 
technology or equipment is necessary to enable the subcontractor to produce the 
products. However, other restrictions im posed on the subcontractor such as the 
obligation not to conduct or exploit its ow n research and development or not to 
produce for third parties in general may fall within the scope of Article 10112. 
III. APPLICATION  OF THE  BLOCK  EXEMPTION  REGULATION 
1. Safe harbour created by the Block Exemption Regulation 
(23) For most vertical restraints, compet ition concerns can onl y arise if there is 
insufficient competition at one or more levels of trade, that is, if there is some degree of market power at the leve l of the supplier or the buyer or at both levels. Provided 
that they do not contain hardcore restrictio ns of competition, which are restrictions of 
competition by object, the Block Exemption Regulation creates a presumption of legality for vertical agreem ents depending on the market sh are of the supplier and the 
buyer. Pursuant to Article 3 of the Block Exemption Regulation, it is the supplier's market share on the market where it sells the contract goods or services and the 
buyer's market share on the market where it purchases the contract  goods or services 
which determine the applicability of the block exemption. In order for the block 
exemption to apply, the supplier’s and the buyer’s market share must each be 30 % 
or less. Section V of these Guidelines  provides guidance on how to define the 
relevant market and calculate the market sh ares. Above the market share threshold of 
30 %, there is no presumption that vertical agreements fall within the scope of Article 101(1) or fail to satisfy the conditions  of Article 101(3) but there is also no 
presumption that vertical agreements falli ng within the scope of  Article 101(1) will 
usually satisfy the conditions of Article 101(3). 
2. Scope of the Block Exemption Regulation 
2.1 Definition of vertical agreements (24) Article 1(1)(a) of the Block Exemption Regulation defines a "vertical agreement" as 
"an agreement or concerted practice entere d into between two or  more undertakings 
each of which operates, for the purposes of the agreement or the concerted practice, 
                                                
 
11 OJ C 1, 3.1.1979, p. 2. 
12 See paragraph 3 of the subcontracting notice. 
EN 12   EN at a different level of the production or  distribution chain, and relating to the 
conditions under which the parties may pur chase, sell or resell certain goods 
or services". 
(25) The definition of "vertical agreement" re ferred to in paragraph (24) has four main 
elements: 
(a) The Block Exemption Regulation a pplies to agreements and concerted 
practices. The Block Exemption Regul ation does not apply to unilateral 
conduct of the undertakings concerned. Su ch unilateral conduc t can fall within 
the scope of Article 102 which prohibits  abuses of a domin ant position. For 
there to be an agreement within the mean ing of Article 101 it is sufficient that 
the parties have expresse d their joint intention to conduct themselves on the 
market in a specific way. The form in which that intention is expressed is 
irrelevant as long as it constitutes a faith ful expression of the parties' intention. 
In case there is no explicit agreement e xpressing the concurrence of wills, the 
Commission will have to prove that the unilateral policy of one party receives the acquiescence of the other party. For ve rtical agreements, there are two ways 
in which acquiescence with a particular unilateral policy can be established. 
First, the acquiescence can be deduced  from the powers conferred upon the 
parties in a general agreement drawn up in advance. If th e clauses of the 
agreement drawn up in advance provide for or authorise a party to adopt subsequently a specific unilateral policy which will be binding on the other party, the acquiescence of th at policy by the other party can be established on 
the basis thereof
13. Secondly, in the absence of such an explicit acquiescence, 
the Commission can show the existence of tacit acquiescence. For that it is necessary to show first that one party requires explicitly or implicitly the 
cooperation of the other party for the implementation of it s unilateral policy 
and second that the other party complied with that requirement by 
implementing that unilateral policy in practice
14. For instance, if after a 
supplier's announcement of a unilateral reduction of supplies in order to 
prevent parallel trade, di stributors reduce immediatel y their orders  and stop 
engaging in parallel trade, then those distributors tacitly acquiesce to the 
supplier's unilateral policy. This can however not be concluded if the 
distributors continue to engage in para llel trade or try to find new ways to 
engage in parallel trade. Similarly, fo r vertical agreements, tacit acquiescence 
may be deduced from the level of coer cion exerted by a party to impose its 
unilateral policy on the other party or parties to the agreement in combination 
with the number of distributors that are actually implementing in practice the unilateral policy of the supplier. For instance, a system of monitoring and penalties, set up by a supplie r to penalise those distribut ors that do not comply 
with its unilateral policy, points to t acit acquiescence with the supplier's 
unilateral policy if this system allows the supplier to implement in practice its 
policy. The two ways of establishing ac quiescence described in this paragraph 
can be used jointly; 
                                                
 
13 Judgment of the Court of Justice in Case C-74/04 P Commission v Volkswagen AG [2006] ECR I-6585 . 
14 Judgment of the Court of First Instance in Case T-41/96 Bayer AG v Commission [2000] ECR II-3383 . 
EN 13   EN (b) The agreement or concerted practice is between two or more undertakings. 
Vertical agreements with final consum ers not operating as an undertaking are 
not covered by the Block Exemption Re gulation. More generally, agreements 
with final consumers do not fall under Ar ticle 101(1), as that article applies 
only to agreements between undertaki ngs, decisions by associations of 
undertakings and concerted practices of undertakings. This is without prejudice 
to the possible application of Article 102; 
(c) The agreement or concerted practice is  between undertakings  each operating, 
for the purposes of the agreement, at a different level of  the production or 
distribution chain. This means for inst ance that one undertak ing produces a raw 
material which the other undertaking uses as an input, or that the first is a 
manufacturer, the second a wholesaler a nd the third a retailer. This does not 
preclude an undertakin g from being active at more than one level of the 
production or distribution chain; 
(d) The agreements or concerted practices  relate to the conditions under which the 
parties to the agreement, the supplier and the buyer,  "may purchase, sell or 
resell certain goods or services". This  reflects the purpo se of the Block 
Exemption Regulation to cover purchas e and distribution agreements. These 
are agreements which concern the conditions for the purchase, sale or resale of the goods or services supplied by the supplier and/or which concern the conditions for the sale by the buyer of the goods or services which incorporate 
these goods or services. Both the goods or  services supplied by the supplier and 
the resulting goods or services are considered to be contract goods or services under the Block Exemption Regulation. Vertic al agreements rela ting to all final 
and intermediate goods a nd services are covered.  The only exception is the 
automobile sector, as long as this s ector remains covered by a specific block 
exemption such as that granted by Commission Regulation (EC) No 1400/2002 
of 31 July 2002 on the applic ation of Article 81(3) of  the Treaty to categories 
of vertical agreements and concerted practices in the motor vehicle sector
15 or 
its successor. The goods or services provi ded by the supplier may be resold by 
the buyer or may be used as an input by the buyer to produce its own goods or 
services. 
(26) The Block Exemption Regulation also applies to goods sold and purchased for 
renting to third parties. Howe ver, rent and lease agreements  as such are not covered, 
as no good or service is sold  by the supplier to the buyer.  More generally, the Block 
Exemption Regulation does not co ver restrictions or obligati ons that do not relate to 
the conditions of purch ase, sale and resale, such as an obligation preventing parties 
from carrying out independent research and development which the parties may have included in an otherwise vertical agreement.  In addition, Article 2(2) to (5) of the 
Block Exemption Regulation directly or indirectly excludes certain vertical 
agreements from the applic ation of that Regulation. 
                                                
 
15 OJ L 203, 1.8.2002, p. 30. 
EN 14   EN 2.2 Vertical agreements between competitors 
(27) Article 2(4) of the Block Exemption Regulation explicitly excludes "vertical 
agreements entered into be tween competing undertaki ngs" from its application. 
Vertical agreements between competitors are dealt with, as regards possible collusion effects, in the Commission Guidelines on the applicability of Article 81 of the 
EC Treaty to horizontal cooperation agreements
16. However, the vertical aspects of 
such agreements need to be assessed under these Guidelines. Article 1(1)(c) of the 
Block Exemption Regulation defines a co mpeting undertaking as "an actual or 
potential competitor". Two companies are treat ed as actual competitors if they are 
active on the same relevant market. A company is treated as a potential competitor of another company if, absent the agreement, in case of a small but permanent increase 
in relative prices it is like ly that this first company, within a short period of time 
normally not longer than one year, w ould undertake the necessary additional 
investments or other necessary switching co sts to enter the relevant market on which 
the other company is active. That assessm ent must be based on realistic grounds; the 
mere theoretical possibility of en tering a market is not sufficient.
17 A distributor that 
provides specifications to a manufacturer  to produce particular goods under the 
distributor's brand name is not to be cons idered a manufacturer  of such own-brand 
goods. 
(28) Article 2(4) of the Block Exemption Regulation contains two exceptions to the 
general exclusion of verti cal agreements between competitors. These exceptions 
concern non-reciprocal agreements. Non-reciprocal agreements between competitors are covered by the Block Exemption Re gulation where (a) the supplier is a 
manufacturer and distributor of goods, while  the buyer is only a distributor and not 
also a competing undertaking at the manufact uring level, or (b ) the supplier is a 
provider of services operating at several le vels of trade, while the buyer operates at 
the retail level and is not a competing undertaking at th e level of trade where it 
purchases the contract services. The fi rst exception covers situations of dual 
distribution, that is, the manu facturer of particular goods al so acts as a distributor of 
the goods in competition with independent di stributors of its goods. In case of dual 
distribution it is considered that in gene ral any potential impact on the competitive 
relationship between the manufacturer and retailer at the retail level is of lesser importance than the potential impact of th e vertical supply agreement on competition 
in general at the manufacturing or retail level. The second exception covers similar 
situations of dual distribution, but in this ca se for services, when the supplier is also a 
provider of products at the reta il level where the buyer operates. 
2.3 Associations of retailers 
(29) Article 2(2) of the Block Exemption Regul ation includes in its application vertical 
agreements entered into by an associati on of undertakings which fulfils certain 
conditions and thereby excludes from th e Block Exemption Regulation vertical 
agreements entered into by all other associ ations. Vertical agreements entered into 
                                                
 
16 OJ C 3, 6.1.2001, p. 2. A revision of those Guidelines is forthcoming.  
17 See Commission Notice on the definition of the relevant market for the purposes of Community 
competition law, OJ C 372, 9.12.1997, p. 5, paragr aphs 20 to 24, the Commission's Thirteenth Report 
on Competition Policy, point 55, and Commission Decision 90/410/EEC in Case No IV/32.009 — 
Elopak/Metal Box-Odin , OJ L 209, 8.8.1990, p. 15. 
EN 15   EN between an association and its members, or  between an association and its suppliers, 
are covered by the Block Exemption Regulatio n only if all the members are retailers 
of goods (not services) and if each indi vidual member of the association has a 
turnover not exceeding EUR 50 million. Reta ilers are distributors reselling goods to 
final consumers. Where only a limited numb er of the members of the association 
have a turnover exceeding the EUR 50 million threshold and where these members together represent less than 15 % of the collective turnover of all the members combined, the assessment under Article 101 will normally not be affected. 
(30) An association of undertakings may invol ve both horizontal and vertical agreements. 
The horizontal agreements must be assessed according to the principles set out in the Guidelines on the applicability of Article 81 of the EC Treaty to horizontal cooperation agreements
18. If that assessment leads to the conclusion that a 
cooperation between undertakings in the area of purchasing or selling is acceptable, a 
further assessment will be necessary to ex amine the vertical agreements concluded 
by the association with its s uppliers or its individual members. The latter assessment 
will follow the rules of the Block Exemp tion Regulation and these Guidelines. For 
instance, horizontal agreements concluded between the members of the association or decisions adopted by the association, such as the decision to require the members to purchase from the association or the decisi on to allocate exclusive territories to the 
members must first be assessed as a horizontal agreement. Once that assessment leads to the conclusion that the horizont al agreement is not anticompetitive, an 
assessment of the vertical agreements between the association and individual 
members or between the associati on and suppliers is necessary.  
2.4 Vertical agreements containing provisi ons on intellectual pr operty rights (IPRs) 
(31) Article 2(3) of the Block Exemption Regulation includes vertical agreements 
containing certain provisi ons relating to the assignment of  IPRs to or use of IPRs by 
the buyer in its application and thereby excludes all other vertical agreements 
containing IPR provisions from the Bl ock Exemption Regulation. The Block 
Exemption Regulation applies to vertical  agreements containing IPR provisions 
where five conditions are fulfilled: 
(a) The IPR provisions must be part of a ve rtical agreement, that is, an agreement 
with conditions under which the parties may purchase, sell or  resell certain 
goods or services; 
(b) The IPRs must be assigned t o, or licensed for use by, the buyer; 
(c) The IPR provisions must not constitute the primary object of the agreement; (d) The IPR provisions must be directly rela ted to the use, sale or resale of goods 
or services by the buyer or its customer s. In the case of franchising where 
marketing forms the object of the e xploitation of the IPRs, the goods or 
services are distributed by the master franchisee or the franchisees; 
                                                
 
18 See paragraph (27). 
EN 16   EN (e) The IPR provisions, in re lation to the contract goods  or services, must not 
contain restrictions of competition having the same object as vertical restraints which are not exempted under the Block Exemption Regulation. 
(32) Such conditions ensure that the Bloc k Exemption Regulation applies to vertical 
agreements where the use, sale or resale of goods or services can  be performed more 
effectively because IPRs are assigned to or licensed for use by the buyer. In other 
words, restrictions concerning the assignmen t or use of IPRs can be covered when 
the main object of the agreement is the pur chase or distribution of goods or services. 
(33) The first condition makes clear that the c ontext in which the IPRs are provided is an 
agreement to purchase or distribute goods or  an agreement to purchase or provide 
services and not an agreement concerning th e assignment or licensing of IPRs for the 
manufacture of goods, nor a pure licensi ng agreement. The Block Exemption 
Regulation does not cover for instance: 
(a) agreements where a party provides anot her party with a recipe and licenses the 
other party to produce a dr ink with this recipe; 
(b) agreements under which one party pr ovides another party with a mould or 
master copy and licenses the other part y to produce and distribute copies; 
(c) the pure licence of a trade mark or sign for the purposes of merchandising; 
(d) sponsorship contracts concerning the right to advertise on eself as being an 
official sponsor of an event; 
(e) copyright licensing such as broadcas ting contracts concerning the right to 
record and/or broadcast an event. 
(34) The second condition makes clear that  the Block Exemption Regulation does not 
apply when the IPRs are provided by the buyer to the supplier, no matter whether the 
IPRs concern the manner of manufacture or of distribution. An agreement relating to 
the transfer of IPRs to the supplier and containing possible rest rictions on the sales 
made by the supplier is not covered by th e Block Exemption Regulation. That means, 
in particular, that subc ontracting involving the tr ansfer of know-how to a 
subcontractor
19 does not fall within the scope of application of the Block Exemption 
Regulation (see also paragraph (22)). Howe ver, vertical agreements under which the 
buyer provides only specifications to th e supplier which describe the goods or 
services to be supplied fall within the sc ope of application of the Block Exemption 
Regulation. 
(35) The third condition makes clear that in order to be covered by the Block Exemption 
Regulation, the primary object of the ag reement must not be the assignment or 
licensing of IPRs. The primary object must be the purchase, sale or resale of goods or 
services and the IPR provisions must se rve the implementation of the vertical 
agreement. 
                                                 
19 See the subcontracting notice (referred to in paragraph (22)).  
EN 17   EN (36) The fourth condition requires that the IPR provisions facilitate the use, sale or resale 
of goods or services by the buyer or its cust omers. The goods or services for use or 
resale are usually supplied by the licensor but may also be purchased by the licensee 
from a third supplier. The IPR provisions  will normally concern the marketing of 
goods or services. An example would be a franchise agreement where the franchisor 
sells goods for resale to the franchisee and licenses th e franchisee to use its trade 
mark and know-how to market the goods or  where the supplier of a concentrated 
extract licenses the buyer to di lute and bottle the extract be fore selling it as a drink. 
(37) The fifth condition highlights the fact that the IPR provisions should not have the 
same object as any of the hardcore restri ctions listed in Article 4 of the Block 
Exemption Regulation or any of the restric tions excluded from the coverage of the 
Block Exemption Regulation by Article 5 of that Regulation (see paragraphs (47) to 
(69) of these Guidelines). 
(38) Intellectual property rights relevant to the implementation of vertical agreements 
within the meaning of Article 2(3) of the Block Exemption Regulation generally 
concern three main areas: trade marks, copyright and know-how. 
Trade mark 
(39) A trade mark licence to a distributor may be related to the distribution of the 
licensor's products in a particul ar territory. If it is an ex clusive licence, the agreement 
amounts to exclusive distribution. 
Copyright 
(40) Resellers of goods covere d by copyright (books, software , etc.) may be obliged by 
the copyright holder only to resell under the condition that the buyer, whether another reseller or the end us er, shall not infringe the c opyright. Such ob ligations on 
the reseller, to the extent that they fall under Article 101(1) at all, are covered by the 
Block Exemption Regulation. 
(41) Agreements, under which hard copies of software are supplied for resale and where 
the reseller does not acquire a licence to a ny rights over the soft ware but only has the 
right to resell the hard copi es, are to be regarded as agreements for the supply of 
goods for resale for the purpose of the Block Exemption Regulation. Under that form of distribution, licensing the software onl y occurs between the copyright owner and 
the user of the software. It may take the fo rm of a "shrink wrap" licence, that is, a set 
of conditions included in the package of the hard copy which the end user is deemed to accept by opening the package. 
(42) Buyers of hardware inco rporating software protected by copyright may be obliged by 
the copyright holder not to infringe the copyright, and must therefore not make 
copies and resell the softwa re or make copies and use the software in combination 
with other hardware. Such us e-restrictions, to the exte nt that they fall within 
Article 101(1) at all, are covere d by the Block Exemption Regulation. 
Know-how 
(43) Franchise agreements, with the exception of industrial franchise agreements, are the 
most obvious example of where know-how fo r marketing purposes is communicated 
EN 18   EN to the buyer20. Franchise agreements contain licences of intellectual property rights 
relating to trade marks or signs and know-how for the us e and distribution of goods 
or the provision of services. In addition to  the licence of IPR, the franchisor usually 
provides the franchisee during the life of the agreement with commercial or technical 
assistance, such as procurement services, training, advice on real  estate, financial 
planning etc. The licence and the assistan ce are integral components of the business 
method being franchised. 
(44) Licensing contained in franchise agreem ents is covered by the Block Exemption 
Regulation where all five conditions listed in paragraph (31) are fulfilled. Those conditions are usually fulfilled as under mo st franchise agreements, including master 
franchise agreements, the franchisor provide s goods and/or services, in particular 
commercial or technical assistance services , to the franchisee. The IPRs help the 
franchisee to resell the products supplie d by the franchisor  or by a supplier 
designated by the franchisor or to use thos e products and sell the resulting goods or 
services. Where the franchise agreement only or primarily concerns licensing 
of IPRs, it is not covered by the Block Exemption Regulation, but the Commission 
will, as a general rule, apply the principles set out in the Block Exemption Regulation and these Guidelines to such an agreement. 
(45) The following IPR-related obligations are generally considered necessary to protect 
the franchisor's intellectual property rights and are, where these obligations fall under Article 101(1), also covered by the Block Exemption Regulation: 
(a) an obligation on the franchisee not to engage, directly or indirectly, in any 
similar business; 
(b) an obligation on the franchisee not to acquire financial interests in the capital 
of a competing undertaking such as w ould give the franch isee the power to 
influence the economic conduct of such undertaking; 
(c) an obligation on the franchisee not to disclose to third parties the know-how 
provided by the franchisor as long as  this know-how is not in the public 
domain; 
(d) an obligation on the franchisee to communicate to the franchisor any 
experience gained in exploiting the fran chise and to grant the franchisor, and 
other franchisees, a non-exclusive licen ce for the know-how resulting from that 
experience; 
(e) an obligation on the franchisee to info rm the franchisor of infringements of 
licensed intellectual property rights, to take legal action against infringers or to assist the franchisor in any le gal actions against infringers; 
(f) an obligation on the franchisee not to  use know-how licensed by the franchisor 
for purposes other than the exploitation of the franchise; 
                                                
 
20 Paragraphs 43-45 apply by analogy to other types of distribution agreements which involve the transfer 
of substantial know-how from supplier to buyer. 
EN 19   EN (g) an obligation on the franchisee not to assign the rights and obligations under 
the franchise agreement without the franchisor's consent. 
2.5 Relationship to other block exemption regulations 
(46) Article 2(5) states that the Block Exem ption Regulation does " not apply to vertical 
agreements the subject matter of which fa lls within the scope of any other block 
exemption regulation, unless otherwise provid ed for in such a regulation". The Block 
Exemption Regulation does not therefore appl y to vertical agreements covered by 
Commission Regulation (EC) No 772/2004 of  27 April 2004 on the application of 
Article 81(3) of the Treaty to categor ies of technology transfer agreements21, 
Regulation 1400/2002 on the application of Arti cle 81(3) of the Treaty to categories 
of vertical agreements and concerted practices in the motor vehicle sector22 or 
Commission Regulation (EC) No 2658/ 2000 of 29 November 2000 on the 
application of Article 81(3) of the Treaty to categories of specialisation agreements23 
and Commission Regulation (EC) No  2659/2000 of 29 November 2000 on the 
application of Article 81(3) of the Treaty to categories of research and development 
agreements24 exempting vertical agreements conc luded in connection with horizontal 
agreements, or any future regulations of that kind, unless otherwise provided for in 
such a regulation. 
3. Hardcore restrictions under the Block Exemption Regulation 
(47) Article 4 of the Block Exemption Regulati on contains a list of ha rdcore restrictions 
which lead to the exclusion of the whol e vertical agreement from the scope of 
application of the Block Exemption Regulation25. Where such a hardcore restriction 
is included in an agreement, that agreement is presumed to fall within Article 101(1). 
It is also presumed that the agreemen t is unlikely to fulfil the conditions of 
Article 101(3), for which reason the bloc k exemption does not apply. However, 
undertakings may demonstrate pro-competitive effects under Article 101(3) in an 
individual case26. Where the undertakings substantiate th at likely efficiencies result 
from including the hardcore restriction in  the agreement and demonstrate that in 
general all the conditions of Article 101( 3) are fulfilled, the Commission will be 
required to effectively assess the likely negative impact on competition before 
                                                 
21 OJ L 123, 27.4.2004, p. 11. 
22 See paragraph (25). 
23 OJ L 304, 5.12.2000, p. 3. 
24 OJ L 304, 5.12.2000, p. 7. 
25 This list of hardcore restrictions applies to vertical  agreements concerning trad e within the Union. In so 
far as vertical agreements concern exports outside the Union or imports/re-imports from outside the 
Union see judgment of the Court of Justice in Case C-306/96 Javico v Yves Saint Laurent  [1998] 
ECR I-1983. In that judgment the ECJ held in paragraph 20 that "an agreement in which the reseller 
gives to the producer an undertaking that it will sell the contractual products on a market outside the 
Community cannot be regarded as having the object of appreciably restricting competition within the 
common market or as being capable of affecti ng, as such, trade between Member States". 
26 See in particular paragraphs 106 to 109 describing in general possible efficiencies related to vertical 
restraints and Section VI.2.10 on resale price restrictions. See for general guidance on this the 
Communication from the Commission - Notice – Guidelines on the application of Article 81(3) of the 
Treaty, OJ C 101, 27.4.2004, p. 97.  
EN 20   EN making an ultimate assessment of whethe r the conditions of Article 101(3) are 
fulfilled27. 
(48) The hardcore restriction set out in Ar ticle 4(a) of the Block Exemption Regulation 
concerns resale price maintenance (RPM), th at is, agreements or concerted practices 
having as their direct or in direct object the establishm ent of a fixed or minimum 
resale price or a fi xed or minimum price level to be  observed by the buyer. In the 
case of contractual provisions or concerted pr actices that directly establish the resale 
price, the restriction is clear cut. Ho wever, RPM can also be achieved through 
indirect means. Examples of the latter are an agreement fixing the distribution 
margin, fixing the maximum level of disc ount the distributor can grant from a 
prescribed price level, making the grant of  rebates or reimbursement of promotional 
costs by the supplier subject to the observa nce of a given price level, linking the 
prescribed resale price to the resale pric es of competitors, threats, intimidation, 
warnings, penalties, delay or suspension of  deliveries or contract terminations in 
relation to observance of a given price leve l. Direct or indirect means of achieving 
price fixing can be made more effective wh en combined with measures to identify 
price-cutting distributors, such as the implementation of a price monitoring system, or the obligation on retailers to report othe r members of the distribution network that 
deviate from the standard price level. Simila rly, direct or indire ct price fixing can be 
made more effective when combined w ith measures which may reduce the buyer's 
incentive to lower the resale price, such as the supplier printing a recommended resale price on the product or the suppl ier obliging the buyer to apply a most-
favoured-customer clause. The same indi rect means and the same "supportive" 
measures can be used to make maximum or recommended prices work as RPM. 
However, the use of a particular supportiv e measure or the pr ovision of a list of 
recommended prices or maximum prices by the supplier to the buyer is not 
considered in itself as leading to RPM. 
(49) In the case of agency agreements, the pr incipal normally establishes the sales price, 
as the agent does not beco me the owner of the goods. However, where such an 
agreement cannot be qualified as an agency agreement fo r the purposes of applying 
Article 101(1) (see paragraphs (12) to (21 )) an obligation preventing or restricting 
the agent from sharing its commission, fixed or variable, with th e customer would be 
a hardcore restriction under Article 4(a) of  the Block Exemption Regulation. In order 
to avoid including such a hardcore restricti on in the agreement, the agent should thus 
be left free to lower the effective price paid by the customer without reducing the income for the principal
28. 
(50) The hardcore restriction set out in Ar ticle 4(b) of the Block Exemption Regulation 
concerns agreements or concerted practices th at have as their dire ct or indirect object 
the restriction of sale s by a buyer party to the agreement or its customers, in as far as 
those restrictions relate to the territory into which or the customers to whom the 
buyer or its customers may sell the contra ct goods or services. This hardcore 
restriction relates to market  partitioning by territory or by customer group. That may 
be the result of direct obligations, such as the obligation not to sell to certain 
                                                 
27 Although, in legal terms, these are two distinct step s, they may in practice be an iterative process where 
the parties and Commission in several steps enhance and improve their respective arguments. 
28 See, for instance, Commission Decision 91/562/EEC in Case No IV/32.737 — Eirpage , OJ L 306, 
7.11.1991, p. 22, in particular recital (6). 
EN 21   EN customers or to customers in certain territor ies or the obligation to  refer orders from 
these customers to other distributors. It may also result from indirect measures aimed 
at inducing the distributor not to sell to such  customers, such as refusal or reduction 
of bonuses or discounts, termination of supply, reduction of supplied volumes or 
limitation of supplied volumes to the demand within the allocated territory or customer group, threat of contract termin ation, requiring a highe r price for products 
to be exported, limiting the proportion of sa les that can be exported or profit pass-
over obligations. It may further result from  the supplier not providing a Union-wide 
guarantee service under which normally all di stributors are oblig ed to provide the 
guarantee service and are reimbursed for this service by the supplier, even in relation 
to products sold by other dist ributors into their territory
29. Such practices are even 
more likely to be viewed as a restrict ion of the buyer's sales when used in 
conjunction with the implementation by the s upplier of a monitoring system aimed at 
verifying the effective destination of the supplied goods, su ch as the use of 
differentiated labels or serial numbers. Howe ver, obligations on the reseller relating 
to the display of the supplier's brand na me are not classified as hardcore. As 
Article 4(b) only concerns restrictions of  sales by the buyer or its customers, this 
implies that restrictions of the supplier’s sales are also not a hardcore restriction, 
subject to what is stated in paragraph ( 59) regarding sales of spare parts in the 
context of Article 4(e) of the Block Ex emption Regulation. Article 4(b) applies 
without prejudice to a restriction on the buyer's place of establishment. Thus, the 
benefit of the Block Exemption Regulation is  not lost if it is agreed that the buyer 
will restrict its distribution outlet(s) and ware house(s) to a particular address, place or 
territory. 
(51) There are four exceptions to the hardcore  restriction in Article 4(b) of the Block 
Exemption Regulation. The first exception in  Article 4(b)(i) allows a supplier to 
restrict active sales by a buyer party to the agreement to a territory or a customer 
group which has been allocated exclusively to another buyer or which the supplier 
has reserved to itself. A territory or cust omer group is exclusively allocated when the 
supplier agrees to sell its product only to one distribut or for distribution in a 
particular territory or  to a particular customer group and the exclusive distributor is 
protected against activ e selling into its territory or to its customer group by all the 
other buyers of the s upplier within the Union, irrespec tive of sales by the supplier. 
The supplier is allowed to combine the allo cation of an exclusiv e territory and an 
exclusive customer group by for instance a ppointing an exclusiv e distributor for a 
particular customer group in a certain te rritory. Such protection of exclusively 
allocated territories or customer groups must, however, permit passive sales to such 
territories or customer groups. For the a pplication of Article 4(b) of the Block 
Exemption Regulation, the Commission interp rets “active” and “passive” sales as 
follows: 
                                                 
29 If the supplier decides not to reimburse its distri butors for services rendered under the Union-wide 
guarantee, it may be agreed with these distributors that a distributor which makes a sale outside its 
allocated territory, will have to pay the distributor appointed in the territory of destination a fee based 
on the cost of the services (to be) carried out including a reasonable profit margin. This type of scheme may not be seen as a restriction of the distributors' sales outside their territory (see judgment of the 
Court of First Instance in Case T-67/01 JCB Service v Commission  [2004] ECR II-49, paragraphs 136 
to 145). 
EN 22   EN – “Active” sales mean actively approaching individual customers by for instance 
direct mail, including the sending of unso licited e-mails, or visits; or actively 
approaching a specific customer group or  customers in a specific territory 
through advertisement in media, on th e internet or other promotions 
specifically targeted at that customer group or targeted at customers in that 
territory. Advertisement or promotion that is only attractive for the buyer if it 
(also) reaches a specific group of customer s or customers in a specific territory, 
is considered active selling to that customer group or customers in that territory. 
– “Passive” sales mean responding to uns olicited requests from individual 
customers including delivery of goods or services to such customers. General 
advertising or promotion that reaches customers in other distributors' (exclusive) territories or customer gr oups but which is a reasonable way to 
reach customers outside those territorie s or customer groups, for instance to 
reach customers in one's own territory, are considered passive selling. General 
advertising or promotion is consider ed a reasonable way to reach such 
customers if it would be attractive for the buyer to undertake these investments 
also if they would not reach customer s in other distributors' (exclusive) 
territories or customer groups. 
(52) The internet is a powerful tool to re ach a greater number and variety of customers 
than by more traditional sales methods, whic h explains why certain  restrictions on 
the use of the internet are dealt with as (re)sales restrictions. In principle, every 
distributor must be allowed to  use the internet to sell pr oducts. In general, where a 
distributor uses a website to se ll products that is  considered a form of passive selling, 
since it is a reasonable way to allow custom ers to reach the distributor. The use of a 
website may have effects that extend be yond the distributor's own territory and 
customer group; however, such effects result from the technology allowing easy 
access from everywhere. If a customer visits the web site of a distributor and contacts 
the distributor and if such contact leads to a sale, including delivery, then that is considered passive selling. The same is true if a customer opts to be kept (automatically) informed by the distributor and it leads to a sale. Offering different 
language options on the website does not, of itself, change the passive character of 
such selling. The Commission thus regard s the following as examples of hardcore 
restrictions of passive selling given the cap ability of these restrictions to limit the 
distributor's access to a greater num ber and variety of customers: 
(a) an agreement that the (exclusive) dist ributor shall prevent customers located in 
another (exclusive) territory from viewing its website or shall automatically re-rout its customers to the manufacturer' s or other (exclusive) distributors' 
websites. This does not exclude an agr eement that the distributor’s website 
shall also offer a number of links to we bsites of other distributors and/or the 
supplier; 
(b) an agreement that the (exclusive) distributor shall terminate consumers' 
transactions over the internet once their cr edit card data reveal an address that 
is not within the distribut or's (exclusive) territory; 
(c) an agreement that the distributor shal l limit its proportion of overall sales made 
over the internet. This does not exclude  the supplier requir ing, without limiting 
EN 23   EN the online sales of the distri butor, that the buyer sells at  least a certain absolute 
amount (in value or volume) of the produc ts offline to ensure an efficient 
operation of its brick and mortar shop (physical point of sales), nor does it 
preclude the supplier from making sure  that the online activity of the 
distributor remains consistent with the supplier's distribution model (see paragraphs (54) and (56)). This absolu te amount of required offline sales can 
be the same for all buyers, or determ ined individually for each buyer on the 
basis of objective criteria,  such as the buyer's size in the network or its 
geographic location; 
(d) an agreement that the distributor sha ll pay a higher price for products intended 
to be resold by the distributor online th an for products intended to be resold 
offline. This does not exclude the supp lier agreeing with the buyer a fixed fee 
(that is, not a variable fee where the su m increases with the realised offline 
turnover as this would amount indirectly to dual pricing) to  support the latter’s 
offline or online sales efforts. 
(53) A restriction on the use of the internet by distributors th at are party to the agreement 
is compatible with the Block Exemption Regulation to the extent that promotion on the internet or use of the internet would l ead to active selling into, for instance, other 
distributors' exclusive territories or customer groups. The Commission considers 
online advertisement specifically addressed to certain customers as a form of active 
selling to those customers. For instance,  territory-based banners on third party 
websites are a form of active sales into the territory where these banners are shown. In general, efforts to be found specifically  in a certain territory or by a certain 
customer group is active selling into that territory or to that customer group. For 
instance, paying a search engine or online advertisement provider to have 
advertisements displayed specifically to users in a particular territory is active selling 
into that territory. 
(54) However, under the Block Exemption the supplier may require qua lity standards for 
the use of the internet site to resell its goods, just as the supplier may require quality 
standards for a shop or for selling by catal ogue or for advertising and promotion in 
general. This may be relevant in particul ar for selective distribution. Under the Block 
Exemption, the supplier may, for example, re quire that its distributors have one or 
more brick and mortar shops or showroom s as a condition for becoming a member of 
its distribution system. Subsequent change s to such a condition are also possible 
under the Block Exemption, except where t hose changes have as their object to 
directly or indirectly limit the online sa les by the distributors. Similarly, a supplier 
may require that its distributors use third pa rty platforms to distribute the contract 
products only in accordance w ith the standards and cond itions agreed between the 
supplier and its distributors for the di stributors' use of the internet. For 
instance, where the distributor's website is hosted by a third party platform, the 
supplier may require that customers do not visit the distributor's website through a 
site carrying the name or logo of the third party platform. 
(55) There are three further exceptions to the hardcore restriction set out in Article 4(b) of 
the Block Exemption Regulation. All three ex ceptions allow for the restriction of 
both active and passive sales. Under the firs t exception, it is permissible to restrict a 
wholesaler from selling to end users, whic h allows a supplier to keep the wholesale 
and retail level of trade se parate. However, that exception does not exclude the 
EN 24   EN possibility that the wholesaler  can sell to certain end users,  such as bigger end users, 
while not allowing sales to (all) other end users. The second exception allows a supplier to restrict an  appointed distributor in a sele ctive distribution system from 
selling, at any level of trad e, to unauthorised distribut ors located in any territory 
where the system is currently operated or  where the supplier does not yet sell the 
contract products (referred to  as "the territory reserved by the supplier to operate that 
system" in Article 4(b)(iii)). The third excep tion allows a supplier to restrict a buyer 
of components, to whom the component s are supplied for incorporation, from 
reselling them to competitors of the supplier. The term "component" includes any intermediate goods and the term  "incorporation" refers to  the use of any input to 
produce goods. 
(56) The hardcore restriction set out in Ar ticle 4(c) of the Block Exemption Regulation 
excludes the restriction of ac tive or passive sales to end users, whether professional 
end users or final consumers, by member s of a selective di stribution network, 
without prejudice to the possibility of pr ohibiting a member of  the network from 
operating out of an unauthorised place of es tablishment. Accordingly, dealers in a 
selective distribution system, as defined in  Article 1(1)(e) of the Block Exemption 
Regulation, cannot be restricted in the choi ce of users to whom they may sell, or 
purchasing agents acting on be half of those users except to protect an exclusive 
distribution system operated elsewhere (s ee paragraph (51)). Within a selective 
distribution system the dealers should be free to sell, both activ ely and passively, to 
all end users, also with the help of the internet. Therefore, the Commission considers 
any obligations which dissuade appointed deal ers from using the internet to reach a 
greater number and variety of customers by imposing criteria for online sales which 
are not overall equivalent to the criteria imposed for the sales from the brick and mortar shop as a hardcore restriction. This  does not mean that the criteria imposed 
for online sales must be identical to those imposed for offline sales , but rather that 
they should pursue the same objectives and achieve comparable results and that the 
difference between the criteria must be jus tified by the different nature of these two 
distribution modes. For example, in order to  prevent sales to unauthorised dealers, a 
supplier can restrict its selected dealers from selling more than a given quantity of 
contract products to an i ndividual end user. Such a requirement may have to be 
stricter for online sales if it is easier fo r an unauthorised dealer to obtain those 
products by using the internet. Si milarly, it may have to be st ricter for offline sales if 
it is easier to obtain them from a brick and mortar shop. In order to ensure timely delivery of contract products, a supplier may impose that the pr oducts be delivered 
instantly in the case  of offline sales. Whereas an identical requirement cannot be 
imposed for online sales, the supplier may sp ecify certain practicab le delivery times 
for such sales. Specific requirements may ha ve to be formulated for an online after-
sales help desk, so as to cover the costs of customers returning the product and for applying secure payment systems. 
(57) Within the territory wher e the supplier operates  selective distribu tion, this system 
may not be combined with ex clusive distribu tion as that would le ad to a hardcore 
restriction of active or passive selling by the dealers under Articl e 4(c) of the Block 
Exemption Regulation, with the exception th at restrictions can be imposed on the 
dealer's ability to determine the location of its business premises. Selected dealers may be prevented from operating their busin ess from different premises or from 
opening a new outlet in a different location. In  that context, the use by a distributor 
of its own website cannot be considered to be the same thing as the opening of a new 
EN 25   EN outlet in a different location. If  the dealer's outlet is mobile , an area may be defined 
outside which the mobile outlet cannot be  operated. In addition, the supplier may 
commit itself to supplying only one dealer or a limited number of dealers in a 
particular part of the territory where th e selective distributi on system is applied. 
(58) The hardcore restriction set out in Ar ticle 4(d) of the Block Exemption Regulation 
concerns the restriction of  cross-supplies between appoi nted distributors within a 
selective distribution system. Accordingly, an agreement or concerted practice may 
not have as its direct or indi rect object to prevent or restrict the active or passive 
selling of the contract pr oducts between the selected  distributors. Selected 
distributors must remain free to purchase the contract pr oducts from other appointed 
distributors within the network, operating either at the same or at a different level of 
trade. Consequently, selective distribu tion cannot be combined with vertical 
restraints aimed at forcing distributors to  purchase the contract products exclusively 
from a given source. It also means that within a selective di stribution network, no 
restrictions can be imposed on appointed w holesalers as regards their sales of the 
product to appointed retailers. 
(59) The hardcore restriction set out in Ar ticle 4(e) of the Bloc k Exemption Regulation 
concerns agreements that prevent or rest rict end-users, inde pendent repairers and 
service providers from obtaining spare part s directly from the manufacturer of those 
spare parts. An agreement between a manuf acturer of spare parts and a buyer that 
incorporates those parts into its  own products (original equipment 
manufacturer (OEM)), may not, ei ther directly or indirectly , prevent or restrict sales 
by the manufacturer of those spare parts to end users, independent repairers or 
service providers. Indi rect restrictions may arise particularly when the supplier of the 
spare parts is restricted in  supplying technical inform ation and special equipment 
which are necessary for the use of spare parts by users, indepe ndent repairers or 
service providers. However,  the agreement may place restrictions on the supply of 
the spare parts to the repairers or serv ice providers entruste d by the original 
equipment manufacturer with  the repair or servicing of its own goods. In other 
words, the original equipment manufacturer  may require its own repair and service 
network to buy spare parts from it. 
4. Individual cases of hardcore sales restric tions that may fall outside the scope of 
Article 101(1) or may fulfil the conditions of Article 101(3) 
(60) Hardcore restrictions may be objectiv ely necessary in exceptional cases for an 
agreement of a particular type or nature30 and therefore fall outside Article 101(1). 
For example, a hardcore restriction may be  objectively necessary to ensure that a 
public ban on selling dangerous substances to certain customers for reasons of safety or health is respected. In addition, undertakings may pl ead an efficiency defence 
under Article 101(3) in an individual case. This section provides some examples for 
(re)sales restrictions, whereas for RPM this is dealt with  in section VI.2.10. 
(61) A distributor which will be  the first to sell a new brand or the first to sell an existing 
brand on a new market, thereby ensuring a ge nuine entry on the relevant market, may 
have to commit substantial investments wh ere there was previously no demand for 
                                                
 
30 See paragraph 18 of Communication from the Commission - Notice – Guidelines on the application of 
Article 81(3) of the Treaty, OJ C 101, 27.4.2004, p. 97. 
EN 26   EN that type of product in gene ral or for that type of pr oduct from that producer. Such 
expenses may often be sunk and in such ci rcumstances the distri butor may not enter 
into the distribution agreement without prot ection for a certain period of time against 
(active and) passive sales into its territory or to its customer group by other 
distributors. For example such a situ ation may occur where a manufacturer 
established in a particular national market enters another national market and introduces its products with the help of an exclusive distributor and where this 
distributor needs to invest in launching and establishing the brand on this new market. Where substantial investments by th e distributor to star t up and/or develop 
the new market are necessary, restrictions of  passive sales by other distributors into 
such a territory or to such a customer group  which are necessary fo r the distributor to 
recoup those investments generally fall outs ide the scope of Article 101(1) during the 
first two years that the distributor is selli ng the contract goods or  services in that 
territory or to that customer group, even though such hardcore restrictions are in 
general presumed to fall within  the scope of Article 101(1). 
(62) In the case of genuine testing of a new product in a limited territory or with a limited 
customer group and in the case of a sta ggered introduction of a new product, the 
distributors appointed to  sell the new product on the test  market or to participate in 
the first round(s) of the st aggered introduction may be re stricted in their active 
selling outside the test market or the ma rket(s) where the product is first introduced 
without falling within the scope of Artic le 101(1) for the period necessary for the 
testing or introduction of the product. 
(63) In the case of a selective distributi on system, cross supplies between appointed 
distributors must normally remain free (see paragraph (58)). However, if appointed 
wholesalers located in different territories  are obliged to inve st in promotional 
activities in ‘their’ te rritories to support th e sales by appointed re tailers and it is not 
practical to specify in a contract the requi red promotional activities, restrictions on 
active sales by the wholesalers to appointed retailers in ot her wholesalers’ territories 
to overcome possible free riding may, in an individual case, fulfil the conditions of Article 101(3). 
(64) In general, an agreem ent that a distributor shall pay a higher price for products 
intended to be resold by the distributor online than for pr oducts intended to be resold 
offline ("dual pricing") is a hardcore restriction (see paragraph (52)). However, in 
some specific circumstances, such an agreement may fulfil the conditions of 
Article 101(3). Such circumstances may be  present where a manufacturer agrees 
such dual pricing with its distributors, b ecause selling online l eads to substantially 
higher costs for the manufacturer  than offline sales. For example, where offline sales 
include home installation by th e distributor but online sa les do not, the latter may 
lead to more customer complaints and warra nty claims for the ma nufacturer. In that 
context, the Commission will also consider to  what extent the restriction is likely to 
limit internet sales and hinder the distributor to reach more and different customers.  
5. Excluded restrictions under the Block Exemption Regulation 
(65) Article 5 of the Block Exemption Regul ation excludes certain obligations from the 
coverage of the Block Exemption Regulati on even though the market share threshold 
is not exceeded. However, the Block Exemp tion Regulation continues to apply to the 
EN 27   EN remaining part of the vertical agreement if that part is severable from the non-
exempted obligations. 
(66) The first exclusion is provided for in  Article 5(1)(a) of the Block Exemption 
Regulation and concerns non-compete oblig ations. Non-compete obligations are 
arrangements that result in the buyer purch asing from the supplier or from another 
undertaking designated by the supplier more than 80 % of  the buyer's total purchases 
of the contract goods and serv ices and their substitutes du ring the preceding calendar 
year (as defined by Article 1(1)(d) of the Block Exemption Regulation), thereby 
preventing the buyer from purchasing compe ting goods or services or limiting such 
purchases to less than 20 % of total purchases . Where, in the first year after entering 
in the agreement, for the year preceding th e conclusion of the contract no relevant 
purchasing data for the buyer are available,  the buyer's best estimate of its annual 
total requirements may be used. Such non- compete obligations are not covered by 
the Block Exemption Regulation where the du ration is indefinite or exceeds five 
years. Non-compete obligations that are tacitly renewable beyond a period of five 
years are also not covered by the Bloc k Exemption Regulation (see the second 
subparagraph of Article 5(1)). In genera l, non-compete obligations are exempted 
under that Regulation where their duration is  limited to five years or less and no 
obstacles exist that hinder  the buyer from effectively terminating the non-compete 
obligation at the end of the fi ve year period. If, for instance, the agreement provides 
for a five-year non-compete obligation and th e supplier provides a loan to the buyer, 
the repayment of that loan should not hi nder the buyer from eff ectively terminating 
the non-compete obligation at the end of the five-year period. Similarly, when the 
supplier provides the buyer with equipmen t which is not relationship-specific, the 
buyer should have the possibili ty to take over th e equipment at its market asset value 
once the non-compete obligation expires. 
(67) The five-year duration limit does not appl y when the goods or serv ices are resold by 
the buyer "from premises and land owned by the supplier or leas ed by the supplier 
from third parties not connected with th e buyer". In such cases the non-compete 
obligation may be of the same duration as the period of occupancy of the point of 
sale by the buyer (Article 5( 2) of the Block Exemption Regulation). The reason for 
this exception is that it is normally unreasonable to expect a supplier to allow 
competing products to be sold from prem ises and land owned by the supplier without 
its permission. By analogy, the same princi ples apply where the buyer operates from 
a mobile outlet owned by the supplier or le ased by the supplier from third parties not 
connected with the buyer. Ar tificial ownership constructi ons, such as a transfer by 
the distributor of its propri etary rights over the land and premises to the supplier for 
only a limited period, intended to avoid the five-year limit cannot benefit from this 
exception. 
(68) The second exclusion from the block exemption is provided for in Article 5(1)(b) of 
the Block Exemption Regulation and concerns  post term non-compete obligations on 
the buyer. Such obligations are normally  not covered by the Block Exemption 
Regulation, unless the obligation is indispen sable to protect know-how transferred by 
the supplier to the buye r, is limited to th e point of sale from  which the buyer has 
operated during the contract period, and is limited to a ma ximum period of one year 
(see Article 5(3) of the Block Exemption Re gulation). According to the definition in 
Article 1(1)(g) of the Block Exempti on Regulation the know-how needs to be 
EN 28   EN "substantial", meaning that the know-how includes information which is significant 
and useful to the buyer for the use, sale or  resale of the contra ct goods or services. 
(69) The third exclusion from the block exemp tion is provided for in Article 5(1)(c) of the 
Block Exemption Regulation and concerns th e sale of competing goods in a selective 
distribution system. The Block Exemption Regulation covers the combination of 
selective distribution with a non-compete oblig ation, obliging the dealers not to resell 
competing brands in general. However, if the supplier prevents its appointed dealers, 
either directly or indirect ly, from buying products for resale from specific competing 
suppliers, such an obligation cannot enj oy the benefit of the Block Exemption 
Regulation. The objective of  the exclusion of such an  obligation is to avoid a 
situation whereby a number of suppliers usi ng the same selective distribution outlets 
prevent one specific competitor or certain specific competitors from using these outlets to distribute their products (forecl osure of a competing supplier which would 
be a form of collective boycott)
31. 
6. Severability 
(70) The Block Exemption Regulation exempts vertical agreements on condition that no 
hardcore restriction, as set out in Article 4 of that Regulation, is contained in or 
practised with the vertical ag reement. If there are one or more hardcore restrictions, 
the benefit of the Block Exemption Regul ation is lost for the entire vertical 
agreement. There is no severabil ity for hardcore restrictions. 
(71) The rule of severability does apply, howev er, to the excluded restrictions set out in 
Article 5 of the Block Exemption Regulati on. Therefore, the benefit of the block 
exemption is only lost in relation to that part of the vertical agreement which does 
not comply with the conditions set out in Article 5. 
7. Portfolio of products distributed th rough the same distribution system 
(72) Where a supplier uses the same dist ribution agreement to distribute several 
goods/services some of these may, in view of  the market share threshold, be covered 
by the Block Exemption Regulation while ot hers may not. In that case, the Block 
Exemption Regulation applies to those goods  and services for which the conditions 
of application are fulfilled. 
(73) In respect of the goods or services which are not covered by the Block Exemption 
Regulation, the ordinary rules of competition apply, which means: 
(a) there is no block exemption but also no presumption of illegality; (b) if there is an infringement of Article 101(1) which is not exemptible, 
consideration may be given to whether th ere are appropriate remedies to solve 
the competition problem within the existing distribution system; 
(c) if there are no such ap propriate remedies, the supp lier concerned will have to 
make other distribution arrangements. 
                                                
 
31 An example of indirect measures having such exclusionary effects can be found in Commission 
Decision 92/428/EEC in Case No IV/33.542 — Parfum Givenchy , OJ L 236, 19.8.1992, p. 11. 
EN 29   EN Such a situation can also arise where Article  102 applies in respect of some products 
but not in respect of others. 
IV. WITHDRAWAL  OF THE  BLOCK  EXEMPTION  AND  DISAPPLICATION  
OF THE  BLOCK  EXEMPTION  REGULATION 
1. Withdrawal procedure 
(74) The presumption of legality conferre d by the Block Exemption Regulation may be 
withdrawn where a vertical agreement, considered eith er in isolation or in 
conjunction with similar agreements en forced by competing suppliers or buyers, 
comes within the scope of Article 101(1) and does not fulfil all the conditions of 
Article 101(3).  
(75) The conditions of Article 101(3) may in pa rticular not be fulfilled when access to the 
relevant market or competition therein is  significantly restricted by the cumulative 
effect of parallel networks of similar ve rtical agreements practised by competing 
suppliers or buyers. Parallel ne tworks of vertical agreemen ts are to be regarded as 
similar if they contain restraints producing similar effects on the market. Such a situation may arise for example when, on a given market, certain suppliers practise 
purely qualitative selective distribution whil e other suppliers practise quantitative 
selective distribution. Such a situation may also arise when, on a given market, the 
cumulative use of qualitative criteria forecl oses more efficient distributors. In such 
circumstances, the assessment must take account of the anti-competitive effects attributable to each individual netw ork of agreements. Where appropriate, 
withdrawal may concern only a particul ar qualitative crit erion or only the 
quantitative limitations imposed on the num ber of authorised distributors.  
(76) Responsibility for an anti-competitive cumu lative effect can onl y be attributed to 
those undertakings which make an appreciable  contribution to it. Agreements entered 
into by undertakings whose contribution to  the cumulative effect is insignificant do 
not fall under the prohibition provided for in Article 101(1)
32 and are therefore not 
subject to the withdrawal mechanism. The assessment of such a contribution will be 
made in accordance with the criteria set out in paragraphs (128) to (229). 
(77) Where the withdrawal procedure is applied, the Commission bears the burden of 
proof that the agreement falls within th e scope of Article 101(1) and that the 
agreement does not fulfil one  or several of the condi tions of Article 101(3). A 
withdrawal decision can only have ex nunc effect, which means that the exempted 
status of the agreements concerned will no t be affected until the date at which the 
withdrawal becomes effective. 
(78) As referred to in recital 14 of the Block Exemption Regulation, the competition 
authority of a Member State may withdr aw the benefit of the Block Exemption 
Regulation in respect of vertical agreements  whose anti-competitive effects are felt in 
the territory of the Member State concerne d or a part thereof, which has all the 
characteristics of a distinct geographic market. The Commission has the exclusive 
                                                 
32 Judgment of the Court of Justice of 28 February 1991 in Case C-234/89, Stergios Delimitis v Henninger 
Bräu AG [1991] ECR I-935 . 
EN 30   EN power to withdraw the bene fit of the Block Exemption Regulation in respect of 
vertical agreements restricting competition on a relevant geographic market which is 
wider than the territory of a single Member  State. When the territory of a single 
Member State, or a part thereof, constitutes the relevant geographic market, the Commission and the Member State concer ned have concurrent competence for 
withdrawal.  
2. Disapplication of the Block Exemption Regulation 
(79) Article 6 of the Block Exemption Re gulation enables the Co mmission to exclude 
from the scope of the Block Exemption Re gulation, by means of regulation, parallel 
networks of similar verti cal restraints where these cover more than 50 % of a 
relevant market. Such a measure is not addressed to individual undertakings but 
concerns all undertakings whose agreem ents are defined in the regulation 
disapplying the Block Exemption Regulation. 
(80) Whereas the withdrawal of the benef it of the Block Exemption Regulation implies 
the adoption of a decision establishing an infringe ment of Article 101 by an 
individual company, the effect of a regulati on under Article 6 is merely to remove, in 
respect of the restraints and the markets c oncerned, the benefit of the application of 
the Block Exemption Regulation and to rest ore the full applicati on of Article 101(1) 
and (3). Following the adoption of a regulation declaring the Block Exemption Regulation inapplicable in respect of certain vertical restraints on a particular market, 
the criteria developed by th e relevant case-law of th e Court of Justice and the 
General Court and by notices and previ ous decisions adopte d by the Commission 
will guide the application of Article 101 to individual agreements. Where appropriate, the Commission will take a de cision in an indivi dual case, which can 
provide guidance to all th e undertakings operating on the market concerned. 
(81) For the purpose of calculating the 50 % ma rket coverage ratio, account must be taken 
of each individual network of vertical agreements containing restraints, or 
combinations of restraints, producing similar effects on the market. Article 6 of the 
Block Exemption Regulation does not enta il an obligation on the part of the 
Commission to act where the 50 % market-cove rage ratio is exceeded. In general, 
disapplication is appropriate when it is likely that access to the relevant market or competition therein is appreciably restrict ed. This may occur in particular when 
parallel networks of selective distributi on covering more than 50 % of a market are 
liable to foreclose the market by using selection criteria which are not required by the nature of the relevant goods or which discriminate against certain forms of distribution capable of selling such goods. 
(82) In assessing the need to apply Arti cle 6 of the Block Ex emption Regulation, the 
Commission will consider whether indivi dual withdrawal would be a more 
appropriate remedy. This may depend, in pa rticular, on the number of competing 
undertakings contributing to a cumulative effect on a market or the number of 
affected geographic markets within the Union. 
(83) Any regulation referred to in Articl e 6 of the Block Exemption Regulation must 
clearly set out its scope. Therefore, the Co mmission must first define the relevant 
product and geographic market(s) and, secondl y, must identify the type of vertical 
restraint in respect of which the Block Exemption Regulation will no longer apply. 
EN 31   EN As regards the latter aspect, the Co mmission may modulate the scope of its 
regulation according to the competition co ncern which it intends to address. For 
instance, while all parallel networks of si ngle-branding type arra ngements shall be 
taken into account in view of establis hing the 50 % market coverage ratio, the 
Commission may nevertheless restrict the sc ope of the disapplication regulation only 
to non-compete obligations exceeding a ce rtain duration. Thus, agreements of a 
shorter duration or of a less restrictive nature might be left unaffected, in 
consideration of the lesser de gree of foreclosure attributable to such restraints. 
Similarly, when on a particular market selective distributi on is practised in 
combination with additional restraints su ch as non-compete or quantity-forcing on 
the buyer, the disapplication regulation may concern only such additional restraints. 
Where appropriate, the Commission may al so provide guidan ce by specifying the 
market share level which, in the specific market context, may be regarded as insufficient to bring about a significant contribution by an individual undertaking to 
the cumulative effect. 
(84) Pursuant to Regulation No 19/65/EEC  of 2 March 1965 of  the Council on the 
application of Article 85(3) of the Treaty to certain categories of agreements and 
concerted practices
33, the Commission will have to set a transitional period of not 
less than six months before a regulation disapplying the Block Exemption Regulation 
becomes applicable. This should allow th e undertakings concer ned to adapt their 
agreements to take account of the re gulation disapplying the Block Exemption 
Regulation. 
(85) A regulation disapplying the Block Exemption Regulation will not affect the 
exempted status of the agreements concerned for the period preceding its date of application. 
V. MARKET DEFINITION AND MARKET SHARE CALCULATION 
1. Commission Notice on definiti on of the relevant market 
(86) The Commission Notice on definition of the relevant market for the purposes of 
Community competition law
34 provides guidance on the rule s, criteria and evidence 
which the Commission uses when consideri ng market definition issues. That Notice 
will not be further explained in these Guid elines and should serve as the basis for 
market definition issues. These Guidelines will only deal with specific issues that 
arise in the context of vertical restraints and that are not dealt with in that notice. 
2. The relevant market for calculating th e 30 % market share threshold under the 
Block Exemption Regulation 
(87) Under Article 3 of the Block Exempti on Regulation, the market  share of both the 
supplier and the buyer are decisive to determine if the block exemption applies. In order for the block exemption to apply, the market share of the supplier on the 
market where it sells the c ontract products to the buyer, and the market share of the 
buyer on the market where it purchases the contract products, mu st each be 30 % or 
                                                
 
33 OJ 36, 6.3.1965, p. 533/65, English special edition: OJ Series I Chapter 1965-1966, p. 35.  
34 OJ C 372, 9.12.1997, p. 5. 
EN 32   EN less. For agreements between small and me dium-sized undertakings  it is in general 
not necessary to calculate market shares (see paragraph (11)). 
(88) In order to calcula te an undertaking’s market share, it is necessary to determine the 
relevant market where that undertaking sells  and purchases, respectively, the contract 
products. Accordingly, the relevant produc t market and the relevant geographic 
market must be defined. The relevant  product market comprises any goods or 
services which are regarded by the buyers as interchangeable, by reason of their characteristics, prices and intended use. The relevant geographic market comprises 
the area in which the undertakings concer ned are involved in the supply and demand 
of relevant goods or services, in which th e conditions of competition are sufficiently 
homogeneous, and which can be distingui shed from neighbouring geographic areas 
because, in particular, conditions of comp etition are appreciably different in those 
areas. 
(89) The product market definition primarily depends on substitutability from the buyers' 
perspective. When the supplied product is used as an input to  produce other products 
and is generally not recognisa ble in the final product, th e product market is normally 
defined by the direct buyers' preferences. The customers of the buyers will normally 
not have a strong preference concerning th e inputs used by the buyers. Usually, the 
vertical restraints agreed between the s upplier and buyer of the input only relate to 
the sale and purchase of the intermediate product and not to the sale  of the resulting 
product. In the case of dist ribution of final goods, substi tutes for the direct buyers 
will normally be influenced or determined by the preferences of the final consumers. A distributor, as reseller, cannot ignore th e preferences of final consumers when it 
purchases final goods. In additi on, at the distribution leve l the vertical restraints 
usually concern not only the sale of pr oducts between supplier and buyer, but also 
their resale. As different distribution format s usually compete, markets are in general 
not defined by the form of distribution that is applied. Where suppliers generally sell 
a portfolio of products, the entire portfolio  may determine the product market when 
the portfolios and not the individual produc ts are regarded as substitutes by the 
buyers. As distributors are pr ofessional buyers, the geographic wholesale market is 
usually wider than the retail market, where the product is resold to final consumers. 
Often, this will lead to the definition of national or wider wholesale markets. But retail markets may also be wider than the final consumers’ search area where 
homogeneous market conditions and overlap ping local or regional catchment areas 
exist. 
(90) Where a vertical agreement involves thre e parties, each operating at a different level 
of trade, each party's market share must be 30 % or less in order for the block 
exemption to apply. As specified in Article  3(2) of the Block Exemption Regulation, 
where in a multi party agreement an undertaking buys the contract goods or services from one undertaking party to  the agreement and sells the contract goods or services 
to another undertaking party to the agreemen t, the block exemption applies only if its 
market share does not exceed the 30 % thre shold both as a buyer and a supplier. If, 
for instance, in an agreement between a manuf acturer, a wholesaler (or association of 
retailers) and a re tailer, a non-compete oblig ation is agreed, then the market shares of 
the manufacturer and the wholesaler (or asso ciation of retailers)  on their respective 
downstream markets must not exceed 30 % an d the market share of the wholesaler 
(or association of retailers) and the retail er must not exceed 30 % on their respective 
purchase markets in order to benefit from the block exemption. 
EN 33   EN (91) Where a supplier produces both original equipment and the repair or replacement 
parts for that equipment, the supplier will often be the only or the major supplier on 
the after-market for the repair and replacemen t parts. This may also arise where the 
supplier (OEM supplier) subcontracts the manu facturing of the repair or replacement 
parts. The relevant market for application of the Block Exemption Regulation may be the original equipment mark et including the spare parts or a separate original 
equipment market and after-market depending on the circumstances of the case, such 
as the effects of the rest rictions involved, the lifet ime of the equipment and 
importance of the repair or replacement costs
35. In practice, the issue is whether a 
significant proportion of buyers make their choice taking into account the lifetime 
costs of the product. If so, it indicates ther e is one market for the original equipment 
and spare parts combined. 
(92) Where the vertical agreement, in add ition to the supply of the contract goods, also 
contains IPR provisions — such as a provisi on concerning the use of the supplier's 
trademark — which help the buyer to ma rket the contract goods, the supplier's 
market share on the market where it sells the contract goods is  relevant for the 
application of the Block Exemption Regul ation. Where a franchisor does not supply 
goods to be resold but provi des a bundle of services a nd goods combined with IPR 
provisions which together form the busine ss method being franchised, the franchisor 
needs to take account of its market share as a provider of a business method. For that 
purpose, the franchisor needs to calculate its market share on the market where the 
business method is exploited, which is the market where the franchisees exploit the 
business method to provide goods or services to e nd users. The franchisor must base 
its market share on the value of the goods or  services supplied by its franchisees on 
this market. On such a market, the competito rs may be providers of other franchised 
business methods but also suppliers of substitutable goods or services not applying 
franchising. For instance, wit hout prejudice to the definitio n of such market, if there 
was a market for fast-food services, a fran chisor operating on such a market would 
need to calculate its market share on the basis of the relevant sales figures of its 
franchisees on this market.  
3. Calculation of market shares und er the Block Exemption Regulation 
(93) The calculation of market shares needs to be based in principle on value figures. 
Where value figures are not available subs tantiated estimates can be made. Such 
estimates may be based on other reliable ma rket information such as volume figures 
(see Article 7(a) of the Bl ock Exemption Regulation). 
(94) In-house production, that is, production of an intermediate product for own use, may 
be very important in a competition analysis as one of the competitive constraints or to accentuate the market position of a compa ny. However, for the purpose of market 
definition and the calculation of market shar e for intermediate goods and services, in-
house production will not be taken into account. 
                                                
 
35 See for example Commission Decision in Pelikan/Kyocera  (1995), COM(96) 126 (not published), 
point 87, and Commission Decision 91/595/EEC in Case No IV/M.12 — Varta/Bosch , OJ L 320, 
22.11.1991, p. 26, Commission Decision in Case No IV/M.1094 — Caterpillar/Perkins Engines , 
OJ C 94, 28.3.1998, p. 23, and Commission Decision in Case No IV/M.768 — Lucas/Varity , OJ C 266, 
13.9.1996, p. 6. See also point 56 of the Notice on the definition of the relevant market for the purposes 
of Community competition law (see paragraph 86). 
EN 34   EN (95) However, in the case of dual distribution of final goods, that is, where a producer of 
final goods also acts as a distributor on the market, the market definition and market 
share calculation need to include sales of their own goods ma de by the producers 
through their vertically  integrated distribut ors and agents (see Article 7(c) of the 
Block Exemption Regulation). "Integrated di stributors" are conne cted undertakings 
within the meaning of Article 1(2)  of the Block Exemption Regulation36. 
VI. ENFORCEMENT POLICY IN INDIVIDUAL CASES 
1. The framework of analysis 
(96) Outside the scope of the block exemption, it is relevant to examine whether in the 
individual case the agreement falls within  the scope of Article 101(1) and if so 
whether the conditions of Article 101(3) are satisfied. Provided that they do not contain restrictions of competition by object a nd in particular hardcore restrictions of 
competition, there is no presumption that vertical agreements falling outside the 
block exemption because the market share th reshold is exceeded fa ll within the scope 
of Article 101(1) or fail to  satisfy the conditions of  Article 101(3). Individual 
assessment of the likely effects of th e agreement is required. Companies are 
encouraged to do their own assessment. Agreements that either do not restrict competition within the meani ng of Article 101(1) or whic h fulfil the conditions of 
Article 101(3) are valid and enforceable. Pursuant to Article 1(2) of Council 
Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty
37 no notification needs 
to be made to benefit from an individua l exemption under Article 101(3). In the case 
of an individual examination by the Commi ssion, the latter will bear the burden of 
proof that the agreement in question infringes Article 101(1). The undertakings claiming the benefit of Article 101(3) bear  the burden of proving that the conditions 
of that paragraph are fulfilled. When likely anti-competitive effects are 
demonstrated, undertakings may substantiate  efficiency claims and explain why a 
certain distribution system is indispensabl e to bring likely bene fits to consumers 
without eliminating competition, before  the Commission decides whether the 
agreement satisfies the c onditions of Article 101(3). 
(97) The assessment of whether a vertical  agreement has the effect of restricting 
competition will be made by comparing the actual or likely future situation on the relevant market with the vertical restrain ts in place with the situation that would 
prevail in the absence of the vertical restra ints in the agreement. In the assessment of 
individual cases, the Commission will take, as appropriate, both actual and likely effects into account. For vertical agreements to be restrictive of  competition by effect 
they must affect actual or potential competition to such an extent that on the relevant market negative effects on prices, output, innovation, or the variety or quality of goods and services can be expected with  a reasonable degree of probability. The 
likely negative effects on compet ition must be appreciable
38. Appreciable 
anticompetitive effects are likely to occur wh en at least one of the parties has or 
                                                 
36 For these market definition and market share calculation purposes, it is not relevant whether the 
integrated distributor sells in addition products of competitors. 
37 OJ L 1, 4.1.2003, p. 1. 
38 See Section II.1. 
EN 35   EN obtains some degree of market power and th e agreement contributes to the creation, 
maintenance or strengthening of that market  power or allows the parties to exploit 
such market power. Market power is the ab ility to maintain prices above competitive 
levels or to maintain output in terms of product quantities, product quality and variety or innovation below competitive levels for a not insignificant period of time. The degree of market power normally require d for a finding of an infringement under 
Article 101(1) is less than the degree of  market power required for a finding of 
dominance under Article 102. 
(98) Vertical restraints are generally less harmful than horizontal restraints. The main 
reason for the greater focus on horizontal re straints is that such restraints may 
concern an agreement between competitors  producing identical or substitutable 
goods or services. In such hor izontal relationships, the exer cise of market power by 
one company (higher price of its product)  may benefit its competitors. This may 
provide an incentive to competitors to induce each other to behave anti-competitively. In vertical relationships, the product of the one is the input for the other-, in other words, the activities of the parties to the agreement are complementary to each other. The exercise  of market power by either the upstream 
or downstream company would therefore normally hurt the demand for the product 
of the other. The companies involved in the agreement therefore usually have an 
incentive to prevent the exercise  of market power by the other. 
(99) Such self-restraining character should not, however , be over-estimated. When a 
company has no market power, it can only try to increase its profits by optimising its 
manufacturing and distribution processes, with or without the help of vertical 
restraints. More generally, be cause of the complementary role of the parties to a 
vertical agreement in getting a product on th e market, vertical restraints may provide 
substantial scope for efficiencies. However,  when an undertaking does have market 
power it can also try to increase its profits at  the expense of its direct competitors by 
raising their costs and at the expense of its buyers and ultimately consumers by trying to appropriate some of their surplu s. This can happen when the upstream and 
downstream company share the extra profits or when one of the two uses vertical 
restraints to appropriate all the extra profits. 
1.1 Negative effects of vertical restraints 
(100) The negative effects on the market that ma y result from vertical restraints which EU 
competition law aims at preventing are the following: 
(a) anticompetitive foreclosure of othe r suppliers or other buyers by raising 
barriers to entry or expansion; 
(b) softening of competition between th e supplier and its competitors and/or 
facilitation of collusion amongst these suppliers, often referred to as reduction 
of inter-brand competition
39;  
(c) softening of competition between the buyer and its competitors and/or 
facilitation of collusion amongst these competitors, often referred to as 
                                                 
39 By collusion is meant both explicit collusion and tacit collusion (conscious parallel behaviour). 
EN 36   EN reduction of intra-brand competition if it concerns distributors' competition on 
the basis of the brand or product of the same supplier; 
(d) the creation of obstacles to market in tegration, including, above all, limitations 
on the possibilities for consumers to purch ase goods or services in any Member 
State they may choose. 
(101) Foreclosure, softening of competition a nd collusion at the manufacturers' level may 
harm consumers in particular by increasi ng the wholesale prices of the products, 
limiting the choice of products, lowering th eir quality or reducing the level of 
product innovation. Foreclosure, softening of competition and collusion at the distributors' level may harm consumers in pa rticular by increasing the retail prices of 
the products, limiting the choice of price- service combinations and distribution 
formats, lowering the availability and quality of retail services and reducing the level of innovation of distribution.  
(102) On a market where individual distribu tors distribute the brand(s) of only one 
supplier, a reduction of competition between the distributors of the same brand will lead to a reduction of intra-brand compe tition between these distributors, but may not 
have a negative effect on competition between distributors in general. In such a case, if inter-brand competition is fierce, it is unlikely that a reduction of intra-brand competition will have negative effects for consumers. 
(103) Exclusive arrangements are generally more anti-competitive than non-exclusive 
arrangements. Exclusive arrangements, wh ether by means of express contractual 
language or their practical eff ects, result in one party sourci ng all or practically all of 
its demand from another party. For instan ce, under a non-compete obligation the 
buyer purchases only one brand. Quantity forcing, on the other hand, leaves the 
buyer some scope to purchase competing goods. The degree of foreclosure may therefore be less with quantity forcing. 
(104) Vertical restraints agre ed for non-branded goods and se rvices are in general less 
harmful than restraints affecting the di stribution of branded goods and services. 
Branding tends to increase product differen tiation and reduce subst itutability of the 
product, leading to a reduced elasticity of  demand and an increased possibility to 
raise price. The distinction between bra nded and non-branded goods or services will 
often coincide with the dis tinction between intermediate goods and services and final 
goods and services. 
(105) In general, a combination of vertical restraints aggrav ates their individual negative 
effects. However, certain combinations of vertical restraints are less anti-competitive 
than their use in isolation. For instance, in an exclusive dist ribution system, the 
distributor may be tempted to increase th e price of the produc ts as intra-brand 
competition has been reduced. The use of quantity forcing or the setting of a maximum resale price may limit such price increases. Possible negative effects of vertical restraints are rein forced when several suppliers  and their buyers organise 
their trade in a similar way, leading to so-called cumulative effects.  
1.2. Positive effects of vertical restraints 
(106) It is important to recogn ise that vertical restraints may have positive effects by, in 
particular, promoting non-price competition and improved quality of services. When 
EN 37   EN a company has no market power, it can only tr y to increase its profits by optimising 
its manufacturing or distribution processes.  In a number of situations vertical 
restraints may be helpful in this respect since the usual arm's length dealings between 
supplier and buyer, determining only price a nd quantity of a certa in transaction, can 
lead to a sub-optimal level of investments and sales. 
(107) While trying to give a fair overview of the various justifications for vertical 
restraints, these Guidelines do not claim to be complete or exhaustive. The following reasons may justify the application of certain vertical restraints: 
(a) To solve a "free-rider" problem. One distributor may free-ride on the 
promotion efforts of another distributor.  That type of problem is most common 
at the wholesale and retail level. Exclusive distributi on or similar restrictions 
may be helpful in avoiding such free- riding. Free-riding can also occur 
between suppliers, for instance where one invests in promotion at the buyer's premises, in general at the retail level, that may also attract customers for its 
competitors. Non-compete type restraints can help to overcome free-riding
40. 
 For there to be a problem, there needs to  be a real free-rider issue. Free-riding 
between buyers can only occur on pre- sales services and other promotional 
activities, but not on after-sales services for which the distribut or can charge its 
customers individually. The product will us ually need to be relatively new or 
technically complex or the reputation of the pr oduct must be a major 
determinant of its demand, as the cust omer may otherwise very well know 
what it wants, based on past purch ases. And the product must be of a 
reasonably high value as it is otherwise not attractive for a customer to go to one shop for information and to another to  buy. Lastly, it must not be practical 
for the supplier to impose on all buyers , by contract, effective promotion or 
service requirements. 
 Free-riding between suppliers is also rest ricted to specific situations, namely to 
cases where the promotion takes place at  the buyer's premises and is generic, 
not brand specific. 
(b) To "open up or enter new markets". Where a manufacturer wants to enter a 
new geographic market, for instance by exporting to another country for the first time, this may involve special "first  time investments" by the distributor to 
establish the brand on the market. In or der to persuade a lo cal distributor to 
make these investments, it may be necessa ry to provide territorial protection to 
the distributor so that it can recoup th ese investments by temporarily charging a 
higher price. Distributors ba sed in other markets should then be restrained for a 
limited period from selling on the new mark et (see also paragraph (61) in 
Section III.4). This is a special case of the free-rider problem described under 
point (a). 
                                                
 
40 Whether consumers actually benefit overall from extra promotional efforts depends on whether the 
extra promotion informs and convinces and thus be nefits many new customers or mainly reaches 
customers who already know what th ey want to buy and for whom the extra promotion only or mainly 
implies a price increase. 
EN 38   EN (c) The "certification free-ride r issue". In some sectors,  certain retailers have a 
reputation for stocking only "quality" produc ts. In such a case, selling through 
those retailers may be vital for the introduction of a new product. If the manufacturer cannot initially limit its sa les to the premium stores, it runs the 
risk of being de-listed and the pro duct introduction may fail. There may, 
therefore, be a reason for allowing for a limited duration a restriction such as 
exclusive distribution or selective distribution. It must be enough to guarantee 
introduction of the new product but not  so long as to hinder large-scale 
dissemination. Such benefits are more likely with "experience" goods or 
complex goods that represent a relatively  large purchase for the final consumer. 
(d) The so-called "hold-up problem". Sometimes there are client-specific 
investments to be made by either the s upplier or the buyer, such as in special 
equipment or training. For instance, a component manufacturer that has to 
build new machines and tools in order to satisfy a part icular requirement of one 
of its customers. The investor may not commit the necessary investments 
before particular supply  arrangements are fixed. 
 However, as in the other free-riding ex amples, there are a number of conditions 
that have to be met before  the risk of under-investmen t is real or significant. 
Firstly, the investment must be relations hip-specific. An investment made by 
the supplier is considered to be relations hip-specific when, af ter termination of 
the contract, it cannot be used by the supplier to supply other customers and can only be sold at a significant loss. An investment made  by the buyer is 
considered to be relationship-specific wh en, after termination of the contract, it 
cannot be used by the buyer to purchase and/or use products supplied by other 
suppliers and can only be sold at a si gnificant loss. An investment is thus 
relationship-specific because it can only, for instance, be used to produce a 
brand-specific component or to store a pa rticular brand and thus cannot be used 
profitably to produce or resell alterna tives. Secondly, it must be a long-term 
investment that is not recouped in the short run. And thirdly, the investment 
must be asymmetric, that is, one party to the contract invests more than the 
other party. Where these conditions are met, there is usually a good reason to have a vertical restraint for the duration it takes to depreciate the investment. 
The appropriate vertical restraint will be of the non-compete type or quantity-forcing type when the investment is ma de by the supplier and of the exclusive 
distribution, exclusive customer allocatio n or exclusive supply type when the 
investment is made by the buyer. 
(e) The "specific hold-up problem that ma y arise in the case of transfer of 
substantial know-how". The know-how, once provided, cannot be taken back 
and the provider of the know-how may not  want it to be used for or by its 
competitors. In as far as the know-how was not readily available to the buyer, is substantial and indispensable for th e operation of the agreement, such a 
transfer may justify a non-compete type  of restriction, which would normally 
fall outside Article 101(1). 
(f) The “vertical externality issue”. A retail er may not gain all the benefits of its 
action taken to improve sales; some may go to the manufacturer. For every 
extra unit a retailer sells by lowering its resale price or by increasing its sales effort, the manufacturer benefits if its wholesale price exceeds its marginal 
EN 39   EN production costs. Thus, there may be a positive externality bestowed on the 
manufacturer by such retailer’s ac tions and from the manufacturer’s 
perspective the retailer may be pricing too high and/or ma king too little sales 
efforts. The negative externality of too high pricing by the reta iler is sometimes 
called the “double marginalisation probl em” and it can be avoided by imposing 
a maximum resale price on the retailer. To  increase the retailer’s sales efforts 
selective distribution, excl usive distribution or similar restrictions may be 
helpful41. 
(g) "Economies of scale in distribution" . In order to have scale economies 
exploited and thereby see a lower retail price for it sproduct, the manufacturer 
may want to concentrate the resale of its products on a limited number of 
distributors. To do so, it could use exclusive distribu tion, quantity forcing in 
the form of a minimum purchasing requirement, selective distribution 
containing such a requirement or exclusive sourcing. 
(h) "Capital market imperfections". The us ual providers of capital (banks, equity 
markets) may provide capital sub-op timally when they have imperfect 
information on the quality of the borrower or there is an inadequate basis to 
secure the loan. The buyer or supplier may have better information and be able, 
through an exclusive relationship, to obtai n extra security for its investment. 
Where the supplier provides  the loan to the buyer,  this may lead to non-
compete or quantity forcing on the buyer.  Where the buyer provides the loan to 
the supplier, this may be the reason for having exclusive supply or quantity forcing on the supplier. 
(i) "Uniformity and quality standardisati on". A vertical restraint may help to 
create a brand image by imposing a certa in measure of uniformity and quality 
standardisation on the distributors, ther eby increasing the attractiveness of the 
product to the final consumer and increasi ng its sales. This can for instance be 
found in selective distribution and franchising. 
(108) The nine situations listed in paragra ph (107) make clear that under certain conditions, 
vertical agreements are likely  to help realise efficiencies  and the development of new 
markets and that this may offset possible negative effects. The case is in general strongest for vertical restraints of a lim ited duration which help the introduction of 
new complex products or protect relations hip-specific investments. A vertical 
restraint is sometimes necessary for as l ong as the supplier sells its product to the 
buyer (see in particular the situations described in paragr aph (107)(a), (e), (f), (g) and 
(i)). 
(109) A large measure of substitutability exists between the different ve rtical restraints. As 
a result, the same inefficiency problem can be solved by different vertical restraints. 
For instance, economies of scale in dist ribution may possibly be achieved by using 
exclusive distribution, selec tive distribution, quantity forcing or exclusive sourcing. 
However, the negative effects on competition may differ between the various vertical restraints, which plays a role  when indispensability is discussed under Article 101(3). 
                                                
 
41 See however the previous footnote. 
EN 40   EN 1.3. Methodology of analysis 
(110) The assessment of a vertical restrain t generally involves th e following four steps42: 
(a) First, the undertakings involved need to establish the market shares of the 
supplier and the buyer on the market wh ere they respectively sell and purchase 
the contract products. 
(b) If the relevant market share of th e supplier and the buyer each do not exceed 
the 30 % threshold, the vert ical agreement is covered by the Block Exemption 
Regulation, subject to the hardcore restri ctions and excluded re strictions set out 
in that Regulation. 
(c) If the relevant market share is above the 30 % threshold for supplier and/or 
buyer, it is necessary to assess whethe r the vertical agreement falls within 
Article 101(1). 
(d) If the vertical agreement falls within Article 101(1), it is necessary to examine 
whether it fulfils the conditions for exemption under Article 101(3). 
1.3.1. Relevant factors for the assessment under Article 101(1) 
(111) In assessing cases above the market share threshold of 30 %, the Commission will 
undertake a full competition an alysis. The following factors are particularly relevant 
to establish whether a vertical agreement br ings about an appreci able restriction of 
competition under Article 101(1): 
(a) nature of the agreement; (b) market position of the parties; (c) market position of competitors; (d) market position of buyers of the contract products; (e) entry barriers; (f) maturity of the market; (g) level of trade; 
(h) nature of the product; 
(i) other factors. 
(112) The importance of individual factors may vary from case to case and depends on all 
other factors. For instance, a high market  share of the parties is usually a good 
indicator of market power, but in the case  of low entry barriers it may not be 
                                                
 
42 These steps are not intended to present a legal reasoning that the Commission should follow in this 
order to take a decision.  
EN 41   EN indicative of market power. It is therefor e not possible to provi de firm rules on the 
importance of the individual factors.  
(113) Vertical agreements can take many shapes  and forms. It is th erefore important to 
analyse the nature of the agreement in term s of the restraints that it contains, the 
duration of those restraints a nd the percentage of total sale s on the market affected by 
those restraints. It may be necessary to go beyond the express terms of the 
agreement. The existence of implicit restraints may be derived from the way in which the agreement is implemented by the parties and the incentives that they face. 
(114) The market position of the parties provide s an indication of the degree of market 
power, if any, possessed by the supplier, th e buyer or both. The higher their market 
share, the greater their market power is likel y to be. This is particularly so where the 
market share reflects cost advantages or other competitive advantages vis-à-vis competitors. Such competitive advantages may, for instance, result from being a first mover on the market (having the best site, etc.), from holding essential patents or 
having superior technology, from being the brand leader or ha ving a superior 
portfolio. 
(115) Such indicators, namely market share and possible competitive advantages, are used 
to assess the market position of competitors.  The stronger the competitors are and the 
greater their number, the less risk there is th at the parties will be able to individually 
exercise market power and foreclose the market or soften competition. It is also relevant to consider whether there are e ffective and timely counterstrategies that 
competitors would be likely to deploy. Ho wever, if the number of competitors 
becomes rather small and their market posi tion (size, costs, R&D potential, etc.) is 
rather similar, such a market structure ma y increase the risk of collusion. Fluctuating 
or rapidly changing market shares are in general an indication of intense competition. 
(116) The market position of the parties’ cust omers provides an indication of whether or 
not one or more of those customers posse ss buyer power. The first indicator of buyer 
power is the market share of  the customer on the purchase market. That share reflects 
the importance of its demand for possible suppliers. Other indicators focus on the 
position of the customer on its resale market , including characteristics such as a wide 
geographic spread of its outlets, own bra nds including private labels and its brand 
image amongst final consumers. In some circumstances, buyer power may prevent the parties from exercising market power  and thereby solve a competition problem 
that would otherwise have ex isted. This is particularly so when strong customers 
have the capacity and incentive to bring ne w sources of supply on to the market in 
the case of a small but permanent increase in  relative prices. Where strong customers 
merely extract favourable terms for themselves or simply pass on any price increase to their customers, their position does not pr event the parties from exercising market 
power. 
(117) Entry barriers are measured by the extent to which incumbent companies can 
increase their price above th e competitive level without attracting new entry. In the 
absence of entry barriers, easy and qui ck entry would rende r price increases 
unprofitable. When effective entry, preven ting or eroding the exercise of market 
power, is likely to occur within  one or two years, entry barriers can, as a general rule, 
be said to be low. Entry barriers may result  from a wide variety of factors such as 
economies of scale and scope, government regulations, especially where they 
EN 42   EN establish exclusive rights, state aid, import tariffs, intellectual property rights, 
ownership of resources where the supply is limited due to fo r instance natural 
limitations43, essential facilities, a first move r advantage and brand loyalty of 
consumers created by strong advertising over a period of time. Vertical restraints and 
vertical integration may also work as  an entry barrier by making access more 
difficult and foreclosing (potential) competitors. Entry barriers may be present at only the supplier or bu yer level or at both levels. Th e question whether certain of 
those factors should be descri bed as entry barriers depe nds particularly on whether 
they entail sunk costs. Sunk costs are those co sts that have to be incurred to enter or 
be active on a market but that are lost when  the market is exited. Advertising costs to 
build consumer loyalty are normally sunk cost s, unless an exiting firm could either 
sell its brand name or use it somewhere el se without a loss. The more costs are sunk, 
the more potential entrants have to wei gh the risks of entering the market and the 
more credibly incumbents can threaten that  they will match new competition, as sunk 
costs make it costly for incumbents to l eave the market. If, for instance, distributors 
are tied to a manufacturer via a non-compete obligation, the foreclosing effect will be 
more significant if setting up its own distributors will impose sunk costs on the potential entrant. In gene ral, entry requires sunk co sts, sometimes minor and 
sometimes major. Therefore, actual competitio n is in general more effective and will 
weigh more heavily in the assessment of a case than potential competition. 
(118) A mature market is a market that ha s existed for some time, where the technology 
used is well known and widespread and not changing very much, where there are no 
major brand innovations and in which demand is relatively stable or declining. In 
such a market, negative effects are more  likely than in more dynamic markets. 
(119) The level of trade is linked to the di stinction between intermediate and final goods 
and services. Intermediate goods  and services are sold to undertaki ngs for use as an 
input to produce other goods or services and are genera lly not recognisable in the 
final goods or services. The buyers of intermediate pr oducts are usually well-
informed customers, able to assess quality  and therefore less reliant on brand and 
image. Final goods are, directly or indirectl y, sold to final consum ers that often rely 
more on brand and image. As distributors have to respond to the demand of final 
consumers, competition may suffer more when distributors are foreclosed from selling one or a number of brands than when buyers of intermediate products are 
prevented from buying competing products  from certain sources of supply.  
(120) The nature of the produc t plays a role in particular for final products in assessing 
both the likely negative and the likely positive effects. When assessing the likely negative effects, it is important whether the produc ts on the market are more 
homogeneous or heterogeneous, whether th e product is expensiv e, taking up a large 
part of the consumer's budget, or is ine xpensive and whether the product is a one-off 
purchase or repeatedly purchased. In general, when the product is more heterogeneous, less expensive and resemb les more a one-off purchase, vertical 
restraints are more likely to have negative effects. 
(121) In the assessment of particular restrain ts other factors may have to be taken into 
account. Among these factors can be the cumula tive effect, that is , the coverage of 
                                                
 
43 See Commission Decision 97/2 6/EC (Case No IV/M.619 — Gencor/Lonrho ), OJ L 11, 14.1.1997, 
p. 30. 
EN 43   EN the market by similar agreements of othe rs, whether the agreement is "imposed" 
(mainly one party is subject to the restri ctions or obligations) or "agreed" (both 
parties accept restri ctions or obligations), the regul atory environment and behaviour 
that may indicate or facilita te collusion like price lead ership, pre-announced price 
changes and discussions on the "right" price,  price rigidity in response to excess 
capacity, price discrimination a nd past collusive behaviour. 
1.3.2. Relevant factors for the assessment under Article 101(3) 
(122) Restrictive vertical agreements may al so produce pro-competitive effects in the form 
of efficiencies, which may outweigh thei r anti-competitive effects. Such an 
assessment takes place within the framewor k of Article 101(3), which contains an 
exception from the prohibition rule of Ar ticle 101(1). For that exception to be 
applicable, the vertical agreement must  produce objective economic benefits, the 
restrictions on competition must be indi spensable to attain the efficiencies, 
consumers must receive a fair share of the efficiency gains, and the agreement must 
not afford the parties the possibility of eliminating competition in respect of a 
substantial part of the products concerned44. 
(123) The assessment of restri ctive agreements under Article 101(3) is made  within the 
actual context in which they occur45 and on the basis of the facts existing at any 
given point in time. The assessment is sensit ive to material changes in the facts. The 
exception rule of Article 101(3) applies as  long as the four conditions are fulfilled 
and ceases to apply when that is no longer the case46. When applying Article 101(3) 
in accordance with th ese principles it is necessary  to take into account the 
investments made by any of the parties an d the time needed and the restraints 
required to commit and recoup an e fficiency enhancing investment.  
(124) The first condition of Article 101(3) requi res an assessment of what are the objective 
benefits in terms of efficiencies produced by the agreement. In th is respect, vertical 
agreements often have the potential to help realise efficiencies, as explained in 
section 1.2, by improving the way in which the parties conduct their complementary activities. 
(125) In the application of the indispensability test c ontained in Article 101(3), the 
Commission will in particular examine whet her individual restrictions make it 
possible to perform the production, purchase an d/or (re)sale of the contract products 
more efficiently than would have been th e case in the absence of the restriction 
concerned. In making such an assessment,  the market conditions and the realities 
facing the parties must be taken into acc ount. Undertakings invoking the benefit of 
Article 101(3) are not required to consider hypothetical a nd theoretical alternatives. 
They must, however, explain and dem onstrate why seemingly realistic and 
significantly less restrictive alte rnatives would be significant ly less efficient. If the 
application of what appears to be a co mmercially realistic and less restrictive 
                                                
 
44 See Communication from the Commission - Notice – Guid elines on the application of Article 81(3) of 
the Treaty, OJ C 101, 27.4.2004, p. 97.  
45 See Judgment of the Court of Justice in Joined Cases 25/84 and 26/84 Ford  [1985] ECR 2725. 
46 See in this respect for example Commission Decision 1999/242/EC (Case No IV/36.237 – TPS), 
OJ L 90, 2.4.1999, p. 6. Similarly, the prohibition of  Article 101(1) also only applies as long as the 
agreement has a restrictive obj ect or restrictive effects. 
EN 44   EN alternative would lead to a si gnificant loss of efficiencies, the restriction in question 
is treated as indispensable. 
(126) The condition that consumer s must receive a fair share of the benefits implies that 
consumers of the products purchased and/or  (re)sold under the vertical agreement 
must at least be compensated for the negative effects of the agreement.47 In other 
words, the efficiency gains must fully o ff-set the likely negative impact on prices, 
output and other relevant factors caused by the agreement. 
(127) The last condition of Article 101(3), according to which the agreement must not 
afford the parties the possibility of elimin ating competition in respect of a substantial 
part of the products concerned, presupposes an analysis of remaining competitive pressures on the market and the impact  of the agreement on such sources of 
competition. In the application of the last  condition of Article 101(3), the relationship 
between Article 101(3) and Article 102 must  be taken into account. According to 
settled case law, the applic ation of Article 101(3) cannot prevent the application of 
Article 102
48. Moreover, since Articles 101 and 102 both pursue the aim of 
maintaining effective competition on the market, consistency requires that Article 101(3) be interpreted as precluding any application of the exception rule to 
restrictive agreements that constitu te an abuse of a dominant position
49. The vertical 
agreement may not eliminate effective comp etition, by removing all or most existing 
sources of actual or potential competiti on. Rivalry between undertakings is an 
essential driver of economic efficiency, incl uding dynamic efficiencies in the form of 
innovation. In its absence, the dominant undertaking will lack adequate incentives to continue to create and pass on efficiency gains. Where there is no residual competition and no foreseeable threat of en try, the protection of rivalry and the 
competitive process outweighs possible efficiency gains. A restrictive agreement which maintains, creates or strengthens a market position approaching that of a 
monopoly can normally not be justified on the grounds that it also creates efficiency 
gains. 
2. Analysis of specific  vertical restraints 
(128) The most common vertical restraints a nd combinations of vert ical restraints are 
analysed in the remainder of these Guide lines following the framework of analysis 
developed in paragraphs (96)  to (127). Other restraints and combinations exist for 
which no direct guidance is provided in these Guidelines. They will, however, be 
treated according to the same principles a nd with the same emphasis on the effect on 
the market. 
                                                
 
47 See paragraph 85 of Communication from the Commission - Notice – Guidelines on the application of 
Article 81(3) of the Treaty, OJ C 101, 27.4.2004, p. 97. 
48 See Judgment of the Court of Justice in Joined Cases C-395/96 P and C-396/96 P Compagnie Maritime 
Belge  [2000] ECR I-1365, paragraph 130. Similarly, the application of Article 101(3) does not prevent 
the application of the Treaty rules on the free movement of goods, se rvices, persons and capital. These 
provisions are in certain circumst ances applicable to agreements, decisions and concerted practices 
within the meaning of Article 101 (1), see to that effect Judgme nt of the Court of Justice in 
Case C-309/99 Wouters  [2002] ECR I-1577, paragraph 120. 
49 See in this respect Judgment of the Court of First Instance in Case T-51/89 Tetra Pak  (I) [1990] 
ECR II-309. See also paragraph 106 of Communication from the Commission - Notice – Guidelines on 
the application of Article 81(3) of the Treaty, OJ C 101, 27.4.2004, p. 97. 
EN 45   EN 2.1. Single branding 
(129) Under the heading of "s ingle branding" fall those agre ements which have as their 
main element the fact that the buyer is oblig ed or induced to c oncentrate its orders 
for a particular type of product with one  supplier. That com ponent can be found 
amongst others in non-compete and quant ity-forcing on the buyer. A non-compete 
arrangement is based on an obligation or incentive scheme which makes the buyer purchase more than 80% of its requirements on a particular market from only one supplier. It does not mean th at the buyer can only buy dire ctly from the supplier, but 
that the buyer will not buy and resell or in corporate competing goods or services. 
Quantity-forcing on the buyer is a weaker fo rm of non-compete, where incentives or 
obligations agreed between th e supplier and the buyer make the latter concentrate its 
purchases to a large extent with one supplier. Quantity-f orcing may for example take 
the form of minimum purchase requirement s, stocking requirements or non-linear 
pricing, such as conditional rebate schemes or a two-part tariff (fix ed fee plus a price 
per unit). A so-called "English clause", re quiring the buyer to report any better offer 
and allowing him only to accept such an offer when the supplie r does not match it, 
can be expected to have the same effect  as a single branding obligation, especially 
when the buyer has to reveal who makes the better offer.  
(130) The possible competition risks of single branding are foreclosure of the market to 
competing suppliers and potential suppliers, softening of competition and facilitation of collusion between supplie rs in case of cumulative use and, where the buyer is a 
retailer selling to final consumers, a loss of in-store inter-brand competition. Such restrictive effects have a direct  impact on inter-brand competition. 
(131) Single branding is exempted by the Block Exemption Regulation where the supplier's 
and buyer’s market share each do not exceed 30 % and are subject to a limitation in 
time of five years for the non-compete obl igation. The remainder of this section 
provides guidance for the assessment of individual cases above the market share 
threshold or beyond the time limit of five years. 
(132) The capacity for single br anding obligations of one spec ific supplier to  result in 
anticompetitive foreclosure arises in partic ular where, without the obligations, an 
important competitive constraint is exercise d by competitors that either are not yet 
present on the market at the time the obliga tions are concluded, or that are not in a 
position to compete for the full supply of the customers. Competitors may not be able 
to compete for an individual customer’s  entire demand because the supplier in 
question is an unavoidable tr ading partner at least for part of the demand on the 
market, for instance because its brand is a ‘must stock item’ pref erred by many final 
consumers or because the capacity constraint s on the other suppliers are such that a 
part of demand can only be provid ed for by the supplier in question.
50 The market 
position of the supplier is thus of main im portance to assess possible anti-competitive 
effects of single branding obligations.  
(133) If competitors can compete on equal te rms for each individual customer’s entire 
demand, single branding obligations of one specific supplier are ge nerally unlikely to 
hamper effective competition unless th e switching of supplier by customers is 
                                                 
50 Judgment of the Court of First Instance in Case T-65/98 Van den Bergh Foods v Commission  [2003] 
ECR II-4653, paragraphs 104 and 156. 
EN 46   EN rendered difficult due to the duration and ma rket coverage of the single branding 
obligations. The higher its tied market share, that is, the part of its market share sold 
under a single branding obligation, the more  significant foreclosure is likely to be. 
Similarly, the longer the duration of the single branding obligations, the more 
significant foreclosure is likely to be. Si ngle branding obligations shorter than one 
year entered into by non-dominant companie s are generally not co nsidered to give 
rise to appreciable anti-competitive effects or net negative effects. Single branding obligations between one and five years entered into by non-dominant companies 
usually require a proper balancing of pro- and anti-competitive effects, while single branding obligations exceeding five years are for most types of investments not 
considered necessary to achieve the claimed efficiencies or the efficiencies are not 
sufficient to outweigh their foreclosure e ffect. Single branding obligations are more 
likely to result in anti-competitive foreclosure when entered into by dominant companies. 
(134) When assessing the supplier's market power , the market position of its competitors is 
important. As long as the competitors ar e sufficiently numer ous and strong, no 
appreciable anti-competitive effects can be expected. Foreclosure of competitors is 
not very likely where they have similar market positions and can offer similarly 
attractive products. In such a case, for eclosure may, however, occur for potential 
entrants when a number of major suppliers enter into single bra nding contracts with a 
significant number of buyers on the relevant market (cum ulative effect situation). 
This is also a situation where single br anding agreements may facilitate collusion 
between competing suppliers. If, individua lly, those suppliers are covered by the 
Block Exemption Regulation, a withdrawal of  the block exemption may be necessary 
to deal with such a negative cumulative e ffect. A tied market share of less than 5 % 
is not considered in general to contribu te significantly to a cumulative foreclosure 
effect. 
(135) In cases where the market share of the largest supplier is belo w 30 % and the market 
share of the five largest suppliers is below 50 %, there is unlikely to be a single or a 
cumulative anti-competitive effect situa tion. Where a potential entrant cannot 
penetrate the market profitabl y, it is likely to be due to  factors other than single 
branding obligations, such as consumer preferences.  
(136) Entry barriers are important to establis h whether there is anticompetitive foreclosure. 
Wherever it is relatively easy for competi ng suppliers to create new buyers or find 
alternative buyers for their product, forecl osure is unlikely to be a real problem. 
However, there are often entry barriers,  both at the manufacturing and at the 
distribution level. 
(137) Countervailing power is relevant, as powerful buyers will not easily allow 
themselves to be cut off from the suppl y of competing goods or services. More 
generally, in order to  convince customers to accept si ngle branding, th e supplier may 
have to compensate them, in whole or in  part, for the loss in competition resulting 
from the exclusivity. Where such compensa tion is given, it may be in the individual 
interest of a customer to enter into a si ngle branding obligation w ith the supplier. But 
it would be wrong to conclude  automatically from this that all single branding 
obligations, taken together, are overall beneficial for cu stomers on that market and 
for the final consumers. It is in particul ar unlikely that consumers as a whole will 
benefit if there are many customers a nd the single branding obligations, taken 
EN 47   EN together, have the effect of preventi ng the entry or expansion of competing 
undertakings.  
(138) Lastly, "the level of trade" is releva nt. Anticompetitive forecl osure is less likely in 
case of an intermediate product. When the supplier of an intermediate product is not 
dominant, the competing suppliers still have a substantial part of demand that is free. 
Below the level of dominance an anticom petitive foreclosure effect may however 
arise in a cumulative effect situation. A cu mulative anticompetitive effect is unlikely 
to arise as long as less than 50 % of the market is tied.  
(139) Where the agreement concerns the supply of a final product at the wholesale level, 
the question whether a competition problem is likely to arise depends in large part on the type of wholesaling and the entry barriers  at the wholesale level. There is no real 
risk of anticompetitive foreclosure if competing manufacturers can easily establish their own wholesaling operation. Whether en try barriers are low depends in part on 
the type of wholesaling, th at is, whether or not wholesalers can operate efficiently 
with only the product concerned by the ag reement (for example ice cream) or 
whether it is more efficient to trade in a whole range of products (for example frozen 
foodstuffs). In the latter case, it is not e fficient for a manufactu rer selling only one 
product to set up its own wholesaling operati on. In that case, anti-competitive effects 
may arise. In addition, cumulative effect pr oblems may arise if se veral suppliers tie 
most of the available wholesalers. 
(140) For final products, foreclosur e is in general more likely to  occur at the retail level, 
given the significant entry barriers for most  manufacturers to star t retail outlets just 
for their own products. In addition, it is at the retail level that single branding 
agreements may lead to reduced in-store inter-brand competition. It is for these 
reasons that for final products at the reta il level, significant anti-competitive effects 
may start to arise, taking into account all other relevant factors, if a non-dominant 
supplier ties 30 % or more of the relevant  market. For a dominant company, even a 
modest tied market share may already lead  to significant anti-competitive effects. 
(141) At the retail level, a cu mulative foreclosure effect may also arise. Where all suppliers 
have market shares below 30 %, a cumulative anticompetitive foreclosure effect is unlikely if the total tied market share is less than 40 % and wit hdrawal of the block 
exemption is therefore unlikely. That figur e may be higher when other factors like 
the number of competitors, entry barriers etc. are taken into account. Where not all 
companies have market shares below the threshold of the Block Exemption Regulation but none is domina nt, a cumulative anticompetitive foreclosure effect is 
unlikely if the total tied market share is below 30 %. 
(142) Where the buyer operates from premises and land owned by the supplier or leased by 
the supplier from a third party not connect ed with the buyer, the possibility of 
imposing effective remedies for a possible foreclosure effect will be limited. In that case, intervention by the Commission below the level of dominance is unlikely. 
(143) In certain sectors, the selling of more than one brand from a single site may be 
difficult, in which case a foreclosure problem can better be remedied by limiting the effective duration of contracts. 
EN 48   EN (144) Where appreciable anti-competitive effect s are established, the question of a possible 
exemption under Article 101(3) arises. For non-compete obligations, the efficiencies 
described in points (a) (free riding between suppliers), (d ), (e) (hold-up problems) 
and (h) (capital market imperfections) of paragraph (107), may be particularly 
relevant. 
(145) In the case of an efficiency as describe d in paragraph (107)(a),  (107)(d) and (107)(h), 
quantity forcing on the buyer co uld possibly be a less rest rictive alternative. A non-
compete obligation may be the only viable wa y to achieve an efficiency as described 
in paragraph (107)(e), (hold-up problem related to the transfer of know-how). 
(146) In the case of a relationship-specifi c investment made by the supplier (see 
paragraph (107)(d) ), a non-compete or quant ity forcing agreement for the period of 
depreciation of the investment will in gene ral fulfil the conditions of Article 101(3). 
In the case of high relationship-specifi c investments, a non-compete obligation 
exceeding five years may be justified. A relationship-specific investment could, for instance, be the installation or adaptati on of equipment by the supplier when this 
equipment can be used afterwards only to  produce components for a particular buyer. 
General or market-specific investments in (extra) capacity are normally not 
relationship-specific investments. Howeve r, where a supplier creates new capacity 
specifically linked to the ope rations of a particular buye r, for instance a company 
producing metal cans which creates new capac ity to produce cans on the premises of 
or next to the canning f acility of a food producer, th is new capacity may only be 
economically viable when producing for this particular customer, in which case the 
investment would be considered  to be relationship-specific. 
(147) Where the supplier provides the buye r with a loan or provides the buyer with 
equipment which is not relationship-specific, this in itself is normally not sufficient to justify the exemption of an anticompetitive foreclosure effect on the market. In 
case of capital market imperfection, it may be more efficient for the supplier of a 
product than for a bank to provide a loan (s ee paragraph (107)(h)). However, in such 
a case the loan should be provided in the least restrictive way and the buyer should 
thus in general not be pr evented from terminating the obligation and repaying the 
outstanding part of the loan at any point in  time and without paymen t of any penalty.  
(148) The transfer of substantial know-how (paragraph (107)(e)) usually justifies a non-
compete obligation for the whole duration of the supply agreement, as for example in 
the context of franchising. 
(149) Example of non-compete obligation  
 The market leader in a national market for an impulse consumer product, with a 
market share of 40 %, sells most of its products (90 %)  through tied retailers (tied 
market share 36 %). The agreements oblige the retailers to purchase only from the 
market leader for at least four years. The market leader is especially strongly 
represented in the more densely populated areas like the capital. Its competitors, 10 in number, of which some are only loca lly available, all have much smaller 
market shares, the biggest having 12 %.  Those 10 competitors together supply 
another 10 % of the market via tied outle ts. There is strong brand and product 
differentiation in the market. The market l eader has the strongest brands. It is the 
EN 49   EN only one with regular national advertising campaigns. It provides its tied retailers 
with special stocking cab inets for its product. 
 The result on the market is that in total 46 % (36 % + 10 %) of the market is 
foreclosed to potential entrants and to incumbents not having tied outlets. Potential entrants find entry even more difficu lt in the densely populated areas where 
foreclosure is even higher, although it is there that they would pr efer to enter the 
market. In addition, owing to the strong brand and pr oduct differentiation and the 
high search costs relative to the price of the product, the absence of in-store inter-
brand competition leads to an extra we lfare loss for consumers. The possible 
efficiencies of the outlet exclusivity, whic h the market leader claims result from 
reduced transport costs and a possible hold-up problem conc erning the stocking 
cabinets, are limited and do not outweigh the negative effects on competition. The efficiencies are limited, as the transport costs are linked to quantity and not exclusivity and the stocking cabinets do not  contain special know-how and are not 
brand specific. Accord ingly, it is unlikely that the conditions of Article 101(3) are 
fulfilled. 
(150) Example of quantity forcing 
 A producer X with a 40 % market share sells  80 % of its products  through contracts 
which specify that the reseller is required to purchase at least 75 % of its requirements for that type of product from X. In return X is offering financing and 
equipment at favourable rates. The contract s have a duration of five years in which 
repayment of the loan is foreseen in equal instalments. However, after the first two years buyers have the possibili ty to terminate the contra ct with a six-month notice 
period if they repay the outstanding loan a nd take over the equipment at its market 
asset value. At the end of the five-year period the equipment becomes the property of 
the buyer. Most of the competing producers are small, twelve in total with the 
biggest having a market share of 20 %, and en gage in similar contracts with different 
durations. The producers with market shares  below 10 % often have contracts with 
longer durations and with less generous termination clauses. The contracts of 
producer X leave 25 % of requirements free to be supplied by competitors. In the last three years, two new producers have entered the market and gained a combined market share of around 8 %, partly by taking over the loans of a number of resellers 
in return for contracts with these resellers. 
 Producer X's tied market share is 24 % (0,75 × 0,80 × 40 %). The other producers' 
tied market share is around 25 %. Therefore,  in total around 49 % of the market is 
foreclosed to potential entrants and to incumb ents not having tied outlets for at least 
the first two years of the supply contracts. The market shows that the resellers often 
have difficulty in obtaining loans from banks and are too small in general to obtain 
capital through other means lik e the issuing of shares. In addition, producer X is able 
to demonstrate that concentrating its sales on a limited number of resellers allows him to plan its sales better and to save tran sport costs. In the light of the efficiencies 
on the one hand and the 25 % non -tied part in the contract s of producer X, the real 
possibility for early termination of the c ontract, the recent entry of new producers 
and the fact that around half  the resellers are not tied on the other hand, the quantity 
forcing of 75 % applied by producer X is likely to fulfil the conditions of 
Article 101(3). 
EN 50   EN 2.2 Exclusive distribution 
(151) In an exclusive distribution agreement, the supplier agrees to sell its products to only 
one distributor for resale in a particular te rritory. At the same time, the distributor is 
usually limited in its active selling into ot her (exclusively allocated) territories. The 
possible competition risks are mainly reduced intra-brand competition and market partitioning, which may facilitate price discri mination in particular. When most or all 
of the suppliers apply exclusive distributi on, it may soften competition and facilitate 
collusion, both at the suppliers' and distributor s' level. Lastly, exclusive distribution 
may lead to foreclosure of other distribut ors and therewith redu ce competition at that 
level. 
(152) Exclusive distribution is exempted by the Block Exemption Regulation where both 
the supplier's and buyer's market share each  do not exceed 30 %, even if combined 
with other non-hardcore ver tical restraints, such as a non-compete obligation limited 
to five years, quantity forc ing or exclusive purchasing. A combination of exclusive 
distribution and selective di stribution is only exempted by the Block Exemption 
Regulation if active selling in other territories  is not restricted. Th e remainder of this 
section provides guidance for the assessmen t of exclusive distri bution in individual 
cases above the 30 % market share threshold. 
(153) The market position of the supplier and its competitors is of major importance, as the 
loss of intra-brand competition can only be problematic if inter-brand competition is limited. The stronger the position of the supplier,  the more serious is the loss of intra-
brand competition. Above the 30 % market shar e threshold, there ma y be a risk of a 
significant reduction of intra-brand competiti on. In order to fulfil the conditions of 
Article 101(3), the loss of intra-brand compe tition may need to be balanced with real 
efficiencies. 
(154) The position of the competitors can ha ve a dual significance. Strong competitors will 
generally mean that the reduction in intra-brand competition is outweighed by 
sufficient inter-brand competition. However, if the number of competitors becomes 
rather small and their market position is rather similar in terms of market share, capacity and distributio n network, there is a risk of collusion and/or softening of 
competition. The loss of intra-brand competition can increase that risk, especially when several suppliers operate similar distribution systems. Multiple exclusive dealerships, that is, when different suppliers  appoint the same exclusive distributor in 
a given territory, may further increase the risk of collusion and/or softening of 
competition. If a dealer is granted the exclusive right to distribute two or more important competing products in the same territory, inter-brand competition may be substantially restricted for those brands. The higher the cumulative market share of 
the brands distributed by the exclusive multiple brand dealers, the higher the risk of collusion and/or softening of competition and the more inter-brand competition will 
be reduced. If a retailer is the exclusive distributor for a number of brands this may 
have as result that if one producer cuts  the wholesale price for its brand, the 
exclusive retailer will not be eager to tran smit this price cut to the final consumer as 
it would reduce its sales and profits made w ith the other brands. Hence, compared to 
the situation without multiple  exclusive dealerships, producers have a reduced 
interest in entering into price competition with one another. Such cumulative effect 
situations may be a reason to withdraw  the benefit of the Block Exemption 
EN 51   EN Regulation where the market shares of the suppliers and buye rs are below the 
threshold of the Block Exemption Regulation. 
(155) Entry barriers that may hinder suppliers  from creating new di stributors or finding 
alternative distributors are less important in assessing the possible anti-competitive effects of exclusive distribution. Foreclosur e of other suppliers does not arise as long 
as exclusive distribution is not combined with single branding. 
(156) Foreclosure of other distributors is not an issue where the supp lier which operates the 
exclusive distribution system appoints a hi gh number of exclusive distributors on the 
same market and those exclus ive distributors are not rest ricted in selling to other 
non-appointed distributors. Foreclosure of other distributors may however become an 
issue where there is buying power and market  power downstream, in particular in the 
case of very large territorie s where the exclusive distributor becomes the exclusive 
buyer for a whole market. An example woul d be a supermarket chain which becomes 
the only distributor of a leading bra nd on a national food retail market. The 
foreclosure of other distributors may be aggr avated in the case of multiple exclusive 
dealership.  
(157) Buying power may also increase the risk  of collusion on the buyers' side when the 
exclusive distribution arrangements ar e imposed by important buyers, possibly 
located in different territorie s, on one or several suppliers. 
(158) Maturity of the market is important, as loss of intra-brand competition and price 
discrimination may be a serious problem in a mature market but may be less relevant 
on a market with growing demand, cha nging technologies and changing market 
positions. 
(159) The level of trade is important as the possible nega tive effects may differ between 
the wholesale and retail level. Exclusiv e distribution is main ly applied in the 
distribution of final goods and services . A loss of intra-brand competition is 
especially likely at the reta il level if coupled with la rge territories, since final 
consumers may be confronted with littl e possibility of choosing between a high 
price/high service and a low price/low serv ice distributor for an important brand. 
(160) A manufacturer that choos es a wholesaler to be its exclusive distributor will 
normally do so for a larger te rritory, such as a whole Memb er State. As long as the 
wholesaler can sell the produc ts without limitation to dow nstream retailers there are 
not likely to be appreciable anti-competitive effects. A possible loss of intra-brand competition at the wholesale level may be easily outweighed by efficiencies obtained in logistics, promotion etc., especially when  the manufacturer is based in a different 
country. The possible risks for inter-b rand competition of multiple exclusive 
dealerships are however higher at the wholesale than at th e retail level. Where one 
wholesaler becomes the exclusive distribut or for a significant number of suppliers, 
not only is there a risk that competition betw een these brands is reduced, but also that 
there is foreclosure at the wholesale level of trade. 
(161) As stated in paragraph (155), foreclosure of other suppl iers does not arise as long as 
exclusive distribution is not combined  with single branding. But even when 
exclusive distribution is combined with single branding anticom petitive foreclosure 
of other suppliers is unlike ly, except possibly when the single branding is applied to 
EN 52   EN a dense network of exclusive distributors wi th small territories or in case of a 
cumulative effect. In such a case it may be necessary to apply the principles on single 
branding set out in section 2.1. However, when the combination does not lead to 
significant foreclosure, the combination of exclusive distribution and single branding 
may be pro-competitive by increasing the incen tive for the exclusive distributor to 
focus its efforts on the particular brand. Therefore, in the absence of such a 
foreclosure effect, the combination of ex clusive distribution with non-compete may 
very well fulfil the conditions of Artic le 101(3) for the whole duration of the 
agreement, particularly at the wholesale level. 
(162) The combination of exclusive distribut ion with exclusive sourcing increases the 
possible competition risks of reduced intra-brand competition and market 
partitioning which may facilitate price discrimination in particular. Exclusive distribution already limits arbitrage by cu stomers, as it limits the number of 
distributors and usuall y also restricts the distributor s in their freedom of active 
selling. Exclusive sourcing, requiring the ex clusive distributors to buy their supplies 
for the particular brand directly from the manufacturer, eliminates in addition 
possible arbitrage by the ex clusive distributors, whic h are prevented from buying 
from other distributors in th e system. As a result, the s upplier's possibilities to limit 
intra-brand competition by applying dissimilar conditions of sale to the detriment of 
consumers are enhanced, unless the combina tion allows the creation of efficiencies 
leading to lower prices to  all final consumers.  
(163) The nature of the product is not particul arly relevant to the assessment of possible 
anti-competitive effects of exclusive distribution. It is, however, relevant to an assessment of possible efficiencies, that is, after an appreciable anti-competitive effect is established. 
(164) Exclusive distribution may lead to effi ciencies, especially where investments by the 
distributors are required to pr otect or build up the brand image. In general, the case 
for efficiencies is strongest for new pr oducts, complex products, and products whose 
qualities are difficult to judge before cons umption (so-called experience products) or 
whose qualities are difficult to judge ev en after consumption (so-called credence 
products). In addition, exclusiv e distribution may lead to sa vings in logistic costs due 
to economies of scale in transport and distribution. 
(165) Example of exclusive dist ribution at the wholesale level  
On the market for a consumer durable, A is the market leader . A sells its product 
through exclusive wholesalers. Territories  for the wholesalers correspond to the 
entire Member State for small Member States, and to a region for larger Member States. Those exclusive distributors deal w ith sales to all the retailers in their 
territories. They do not sell to final cons umers. The wholesalers are in charge of 
promotion in their markets, including spons oring of local events, but also explaining 
and promoting the new products to the reta ilers in their terr itories. Technology and 
product innovation are evolving fairly quickly on this market, and pre-sale service to 
retailers and to final consumers plays an important role. The wholesalers are not required to purchase all their requirements  of the brand of supplier A from the 
producer himself, and arbitrage by wholesaler s or retailers is practicable because the 
transport costs are relatively low compar ed to the value of the product. The 
wholesalers are not under a non-compete obliga tion. Retailers also sell a number of 
EN 53   EN brands of competing suppliers, and there ar e no exclusive or selective distribution 
agreements at the retail level. On the EU  market of sales to wholesalers A has around 
50 % market share. Its market share on th e various national reta il markets varies 
between 40 % and 60 %. A has between 6 and 10 competitors on every national market. B, C and D are its biggest competito rs and are also present on each national 
market, with market shares varying between 20 % and 5 %. The remaining producers are national producers, with smaller mark et shares. B, C and D have similar 
distribution networks, whereas the local producers tend to se ll their products directly 
to retailers. 
On the wholesale market described in this example, the risk of  reduced intra-brand 
competition and price discrimination is low. Arbitrage is not hindered, and the absence of intra-brand competition is not very  relevant at the wholesale level. At the 
retail level, neither intra- nor inter-brand competition are hindered. Moreover, inter-brand competition is largely unaffected  by the exclusive arrangements at the 
wholesale level. Therefore it is likely, even if anti-competitive effects exist, that also 
the conditions of Article 101(3) are fulfilled. 
(166) Example of multiple exclusive d ealerships in an oligopolistic market 
On a national market for a final product, there are four market leaders, which each 
have a market share of around 20 %. Those four market leaders sell their product 
through exclusive distributors at the retail level. Retail ers are given an exclusive 
territory which corresponds to the town in wh ich they are located or a district of the 
town for large towns. In most territories, the four market leaders happen to appoint 
the same exclusive retailer ("multiple dealer ship"), often centrally located and rather 
specialised in the product. The remaining 20 % of the national market is composed of 
small local producers, the largest of these producers having a market share of 5 % on the national market. Those local producers sell their products in general through 
other retailers, in particular because the exclusive distributors of the four largest 
suppliers show in general little interest in selling less well-known and cheaper 
brands. There is strong brand and produc t differentiation on the market. The four 
market leaders have large national advertising campaigns and strong brand images, whereas the fringe producers do  not advertise thei r products at the national level. The 
market is rather mature, with stable demand and no major product and technological 
innovation. The product is relatively simple. 
In such an oligopolistic mark et, there is a risk  of collusion between the four market 
leaders. That risk is increased through multiple dealerships. Intra-brand competition 
is limited by the territorial exclusivity. Competition between the four leading brands is reduced at the retail level, since one reta iler fixes the price of  all four brands in 
each territory. The multiple dealership implie s that, if one producer cuts the price for 
its brand, the retailer will not be eager to tr ansmit this price cut to the final consumer 
as it would reduce its sales and profits made  with the other brands. Hence, producers 
have a reduced interest in entering into  price competition with one another. Inter-
brand price competition exists mainly with  the low brand image goods of the fringe 
producers. The possible efficiency arguments  for (joint) exclusiv e distributors are 
limited, as the product is relati vely simple, the resale doe s not require any specific 
investments or training and advertising is mainly carrie d out at the level of the 
producers. 
EN 54   EN Even though each of the market leaders has a market share below the threshold, the 
conditions of Article 101(3)  may not be fulfilled and withdrawal of the block 
exemption may be necessary for the agreements concluded with distributors whose market share is below 30 % of the procurement market. 
(167) Example of exclusiv e distribution combined with exclusive sourcing 
Manufacturer A is the European market leader for a bulky consumer durable, with a 
market share of between 40 % and 60 % in mo st national retail markets. In Member 
States where it has a high market share, it has less competitors with much smaller market shares. The competitors are present on only one or two national markets. A’s 
long time policy is to sell its product thr ough its national subsidiaries to exclusive 
distributors at the retail level, which are not  allowed to sell actively into each other's 
territories. Those distributor s are thereby incentivised to promote the product and 
provide pre-sales services. Recently the reta ilers are in addition obliged to purchase 
manufacturer A's products exclusively from  the national subsidiary of manufacturer 
A in their own country. The retailers sell ing the brand of manu facturer A are the 
main resellers of that type  of product in th eir territory. They handle competing 
brands, but with varying degrees of su ccess and enthusiasm. Since the introduction 
of exclusive sourcing, A applies price diffe rences of 10 % to 15 % between markets 
with higher prices in the markets where it has less competition. The markets are 
relatively stable on the demand and the s upply side, and there are no significant 
technological changes. 
In the high price markets, the loss of intr a-brand competition results not only from 
the territorial exclusivity at the retail level but is aggravated by the exclusive 
sourcing obligation imposed on the retailers.  The exclusive sourcing obligation helps 
to keep markets and territories separate  by making arbitrage between the exclusive 
retailers, the main re sellers of that type  of product, impossi ble. The exclusive 
retailers also cannot se ll actively into each other's territory and in  practice tend to 
avoid delivering outside their own territor y. As a result, pric e discrimination is 
possible, without it leading to a significan t increase in total sa les. Arbitrage by 
consumers or independent traders is lim ited due to the bulkiness of the product. 
While the possible efficiency arguments for appointing exclusive distributors may be 
convincing, in particular because of th e incentivising of retailers, the possible 
efficiency arguments for the combination of exclusive distri bution and exclusive 
sourcing, and in particular the possible e fficiency arguments for exclusive sourcing, 
linked mainly to economies of scale in transport, are unlikely to outweigh the 
negative effect of price discriminati on and reduced intra-brand competition. 
Consequently, it is unlikely that the conditions of Ar ticle 101(3) are fulfilled. 
2.3. Exclusive customer allocation 
(168) In an exclusive customer allocation agreem ent, the supplier agrees to sell its products 
to only one distributor for resa le to a particular group of customers. At the same time, 
the distributor is usually limited in its active selling to other (exclusively allocated) groups of customers. The Block Exempti on Regulation does not limit the way an 
exclusive customer group can be  defined; it could for instan ce be a partic ular type of 
customers defined by their occupation but also a list of specific customers selected on the basis of one or more objective criteria. The possible competition risks are 
EN 55   EN mainly reduced intra-brand competition and market partitioning, which may in 
particular facilitate price discrimination. Where most or all of the suppliers apply 
exclusive customer allocation, competition may be softened and collusion, both at 
the suppliers' and the distributors' level,  may be facilitated. Lastly, exclusive 
customer allocation may lead to foreclos ure of other distribu tors and therewith 
reduce competition at that level. 
(169) Exclusive customer allocation is exem pted by the Block Exemption Regulation when 
both the supplier's and buyer's market shar e does not exceed th e 30 % market share 
threshold, even if combined with other non-ha rdcore vertical restraints such as non-
compete, quantity-forcing or exclusiv e sourcing. A combination of exclusive 
customer allocation and selec tive distribution is normally a hardcore restriction, 
as active selling to end-users by the appoint ed distributors is usually not left free. 
Above the 30 % market share threshold, th e guidance provided in paragraphs (151) 
to (167) applies also to the assessment of exclusive customer a llocation, subject to 
the specific remarks in the remainder of this section. 
(170) The allocation of customers normally makes arbitrage by the customers more 
difficult. In addition, as each appointed dist ributor has its own class of customers, 
non-appointed distributors not falling with in such a class may find it difficult to 
obtain the product. Consequently, possibl e arbitrage by non-appoi nted distributors 
will be reduced.  
(171) Exclusive customer allocation is mainly applied to intermediate  products and at the 
wholesale level when it concerns final products, where customer groups with 
different specific requirements con cerning the product can be distinguished. 
(172) Exclusive customer allocation may lead  to efficiencies, especially when the 
distributors are required to ma ke investments in for inst ance specific equipment, 
skills or know-how to adapt to the requi rements of their group of customers. The 
depreciation period of these investment s indicates the justified duration of an 
exclusive customer allocation system. In general the case is strongest for new or complex products and for products requiring ad aptation to the needs of the individual 
customer. Identifiable differentiated needs are more likely for intermediate products, 
that is, products sold to different types of professional buyers.  Allocation of final 
consumers is unlikely to lead to efficiencies. 
(173) Example of exclus ive customer allocation 
A company has developed a sophisticated sprinkler installation. The company has 
currently a market share of 40 % on the ma rket for sprinkler installations. When it 
started selling the sophisticated sprinkler it had a market share of 20 % with an older 
product. The installation of the new type of  sprinkler depends on the type of building 
that it is installed in and on the use of the building (office, chemical plant, hospital 
etc.). The company has appointed a number of distributors to sell and install the 
sprinkler installation. Each di stributor needed to train its  employees for the general 
and specific requirements of installing the sprinkler installation for a particular class of customers. To ensure that distributors  would specialise, th e company assigned to 
each distributor an exclusive class of cust omers and prohibited active sales to each 
others' exclusive customer classes. After fi ve years, all the excl usive distributors will 
be allowed to sell actively to all classes of customers, thereby ending the system of 
EN 56   EN exclusive customer allocation. The supplie r may then also start selling to new 
distributors. The market is quite dynamic,  with two recent entries and a number of 
technological developments. Competitors,  with market shares between 25 % and 
5 %, are also upgrading their products. 
As the exclusivity is of limited duration and helps to ensure that the distributors may 
recoup their investments and c oncentrate their sales efforts first on a certain class of 
customers in order to learn the trade, and as the possible anti-competitive effects 
seem limited in a dynamic market, the conditi ons of Article 101(3) are likely to be 
fulfilled. 
2.4. Selective distribution 
(174) Selective distribution agr eements, like exclusive distribution agreements, restrict the 
number of authorised distributors on the one hand and the possibili ties of resale on 
the other. The difference with exclusive di stribution is that the restriction of the 
number of dealers does not depend on the number of territori es but on selection 
criteria linked in the first place to the nature of the product. Another difference with 
exclusive distribution is that the restric tion on resale is not a restriction on active 
selling to a territory but a restriction on any sales to non-authorised distributors, 
leaving only appointed dealers and final customers as possible buyers. Selective 
distribution is almost always used to distribute branded final products. 
(175) The possible competition risks are a re duction in intra-bra nd competition and, 
especially in case of cumulative effect, for eclosure of certain type(s) of distributors 
and softening of competition and facilita tion of collusion between suppliers or 
buyers. To assess the possible anti-competitiv e effects of selective distribution under 
Article 101(1), a distinction needs to be made between purely qualitative selective 
distribution and quantitative selective dist ribution. Purely qualitative selective 
distribution selects dealers only on the basis of objectiv e criteria required by the 
nature of the product such as training of sales personnel, the se rvice provided at the 
point of sale, a certain range of the products being sold etc.51 The application of such 
criteria does not put a dire ct limit on the number of dealers. Purely qualitative 
selective distribution is in ge neral considered to fall outside  Article 101(1) for lack of 
anti-competitive effects, provided that three conditions are satisfied. First, the nature of the product in question mu st necessitate a selective distribution system, in the 
sense that such a system must constitute a legitimate requirement, having regard to the nature of the product concerned, to pres erve its quality and ensure its proper use. 
Secondly, resellers must be chosen on the ba sis of objective criter ia of a qualitative 
nature which are laid down uniformly for all and made available to all potential resellers and are not applied in a discrimi natory manner. Thirdly, the criteria laid 
down must not go beyond what is necessary
52. Quantitative selective distribution 
adds further criteria for selection that more directly limit the potential number of 
                                                 
51 See for example judgment  of the Court of First Instance in Case T-88/92 Groupement d'achat Édouard 
Leclerc v Commission  [1996] ECR II-1961. 
52 See judgments of the Court of Justice in Case 31/80 L'Oréal v PVBA  [1980] ECR 3775, paragraphs 15 
and 16; Case 26/76 Metro I  [1977] ECR 1875, paragraphs 20 and 21; Case 107/82 AEG  [1983] 
ECR 3151, paragraph 35; and judgment of the Court of First Instance in Case T-19/91 Vichy v 
Commission  [1992] ECR II-415, paragraph 65. 
EN 57   EN dealers by, for instance, requiring minimum or maximum sales, by fixing the number 
of dealers, etc. 
(176) Qualitative and quantitative selec tive distribution is exempted by the 
Block Exemption Regulation as long as th e market share of both supplier and buyer 
each do not exceed 30 %, even if combined with other non-hardcore vertical restraints, such as non-compete or exclus ive distribution, provi ded active selling by 
the authorised distributors to each other and to end users is not restricted. The Block 
Exemption Regulation exempts selective dist ribution regardless of the nature of the 
product concerned and regardle ss of the nature of the se lection criteria. However, 
where the characteristics of the product
53 do not require selectiv e distribution or do 
not require the applied criteria, such as for instance the requirement for distributors 
to have one or more brick and mortar shops  or to provide specif ic services, such a 
distribution system does not generally bri ng about sufficient efficiency enhancing 
effects to counterbalance a significant re duction in intra-brand competition. Where 
appreciable anti-competitive effects occu r, the benefit of the Block Exemption 
Regulation is likely to be withdrawn. In  addition, the remainde r of this section 
provides guidance for the assessment of se lective distribution in individual cases 
which are not covered by the Block Exem ption Regulation or in the case of 
cumulative effects resulting from parall el networks of se lective distribution. 
(177) The market position of the supplier and its  competitors is of central importance in 
assessing possible anti-competitive effects, as the loss of intra-brand competition can only be problematic if inter-brand compe tition is limited. The stronger the position of 
the supplier, the more problematic is th e loss of intra-brand competition. Another 
important factor is the number of selectiv e distribution networks present in the same 
market. Where selective distribution is a pplied by only one supplier on the market, 
quantitative selective dist ribution does not normally create net negative effects 
provided that the contract goods , having regard to their nature, require the use of a 
selective distribution system and on condition that the sele ction criteria applied are 
necessary to ensure efficient distributi on of the goods in question. The reality, 
however, seems to be that selective distri bution is often applied by a number of the 
suppliers on a given market. 
(178) The position of competito rs can have a dual significance  and plays in particular a 
role in case of a cumulative effect. Strong co mpetitors will mean in general that the 
reduction in intra-brand competition is easily outweighed by sufficient inter-brand competition. However, when a majority of the main suppliers apply selective 
distribution, there will be a significant loss of intra-brand competition and possible 
foreclosure of certain types of distributors as well as an  increased risk of collusion 
between those major suppliers. The risk of fo reclosure of more e fficient distributors 
has always been greater with selective di stribution than with exclusive distribution, 
given the restriction on sales to non-authorised dealers in selective distribution. That 
restriction is designed to give selective distribution systems a closed character, 
making it impossible for non-authorised de alers to obtain supplies. Accordingly, 
selective distribution is part icularly well suited to avoi d pressure by price discounters 
                                                
 
53 See for example judgments of the Cour t of First Instance in Case T-19/92, Groupement d'achat 
Edouard Leclerc v Commission  [1996] ECR II-1851, paragraphs 112 to 123; Case T-88/92 Groupement 
d'achat Edouard Leclerc v Commission  [1996] ECR II-1961, paragraphs 106 to 117, and the case law 
referred to in the preceding footnote. 
EN 58   EN (whether offline or online-onl y distributors) on the margins of the manufacturer, as 
well as on the margins of the authorised d ealers. Foreclosure of such distribution 
formats, whether resulting from the cumula tive application of selective distribution 
or from the application by a single supplie r with a market share exceeding 30 %, 
reduces the possibilities for consumers to ta ke advantage of the specific benefits 
offered by these formats such as lower pri ces, more transparency and wider access.  
(179) Where the Block Exemption Regulation app lies to individual networks of selective 
distribution, withdrawal of  the block exemption or disapplication of the Block 
Exemption Regulation may be considered in case of cumulative effects. However, a 
cumulative effect problem is unlikely to ar ise when the share of the market covered 
by selective distribution is be low 50 %. Also, no problem is  likely to arise where the 
market coverage ratio exceeds 50 %, but th e aggregate market share of the five 
largest suppliers (CR5) is below 50 %. Where both the CR5 and the share of the 
market covered by selective distribution exceed 50 %, the assessment may vary 
depending on whether or not all five larg est suppliers apply se lective distribution. 
The stronger the position of the competitors which do not apply selective distribution, the less likely other distributors  will be foreclosed. If all five largest 
suppliers apply selective distribution, comp etition concerns may arise with respect to 
those agreements in particular that apply quantitative selection criteria by directly 
limiting the number of authorised  dealers or that apply quali tative criteria, such as a 
requirement to have one or more brick a nd mortar shops or to provide specific 
services, which forecloses certain di stribution formats. The conditions of 
Article 101(3) are in general unlikely to be fulfilled if the selective distribution 
systems at issue prevent access to the market by new distributors capable of 
adequately selling the products in questi on, especially price discounters or online-
only distributors offering lower prices to consumers, thereby limiting distribution to 
the advantage of certain existing channels and to the detriment of final consumers. 
More indirect forms of quant itative selective distribution, resulting for instance from 
the combination of purely qualitative select ion criteria with the requirement imposed 
on the dealers to achieve a minimum amount of annual purchases, are less likely to produce net negative effects, if such an amount does not re present a significant 
proportion of the dealer's total turnover ac hieved with the type of products in 
question and it does not go beyond what is necessary for the supplier to recoup its relationship-specific investment and/or real ise economies of scale in distribution. As 
regards individual contributions , a supplier with a market share of less than 5 % is in 
general not considered to contribute significantly to a cumulative effect. 
(180) Entry barriers are mainly of interest in  the case of foreclosur e of the market to non-
authorised dealers. In general, entry ba rriers will be considerable as selective 
distribution is usually applied by manuf acturers of branded products. It will in 
general take time and consider able investment for exclude d retailers to launch their 
own brands or obtain competitive supplies elsewhere. 
(181) Buying power may increase the risk of collusion between dealers and thus 
appreciably change the analysis of possible anti-competitive effects of selective distribution. Foreclosure of the market to  more efficient retailers may especially 
result where a strong dealer organisation imposes selectio n criteria on the supplier 
aimed at limiting distribution to the advantage of its members. 
EN 59   EN (182) Article 5(1)(c) of the Block Exemption Regulation provides that  the supplier may not 
impose an obligation causing the authorised dealers, either directly or indirectly, not 
to sell the brands of particular comp eting suppliers. Such a condition aims 
specifically at avoiding horizon tal collusion to exclude pa rticular brands through the 
creation of a selective club of brands by th e leading suppliers. That kind of obligation 
is unlikely to be exemptible when the CR5 is equal to or above 50 %, unless none of 
the suppliers imposing such an obligation be longs to the five la rgest suppliers on the 
market. 
(183) Foreclosure of other supp liers is normally not a problem  as long as other suppliers 
can use the same distributors, that is, as long as the selective distribution system is 
not combined with single branding. In th e case of a dense network of authorised 
distributors or in the case of a cumula tive effect, the combination of selective 
distribution and a non-compete obligation ma y pose a risk of foreclosure to other 
suppliers. In that case, the principles set out in sec tion 2.1. on single branding apply. 
Where selective distribution is not co mbined with a non-compete obligation, 
foreclosure of the market to competing s uppliers may still be a problem where the 
leading suppliers apply not only purely quali tative selection criteria, but impose on 
their dealers certain additional obligations  such as the obligation to reserve a 
minimum shelf-space for their products or to  ensure that the sales of their products 
by the dealer achieve a minimum percentage of the dealer's total turnover. Such a problem is unlikely to arise if the share of the market covered by selective distribution is below 50 % or, where this c overage ratio is exceeded, if the market 
share of the five largest suppliers is below 50 %. 
(184) Maturity of the market is important, as loss of intra-brand competition and possible 
foreclosure of suppliers or dealers may be a serious problem on a mature market but 
is less relevant on a market with grow ing demand, changing technologies and 
changing market positions. 
(185) Selective distribution may be  efficient when it leads to sa vings in logistical costs due 
to economies of scale in transp ort and that may occur irresp ective of the nature of the 
product (paragraph (107)(g)). However, such an  efficiency is usually only marginal 
in selective distribution systems. To help solve a free-rider problem between the distributors (paragraph (107)(a) ) or to help  create a brand image (paragraph (107)(i) 
), the nature of the product is  very relevant. In general, the case is strongest for new 
products, complex products, pr oducts whose qualities are difficult to judge before 
consumption (so-called experience products) or  whose qualities ar e difficult to judge 
even after consumption (so-ca lled credence products). Th e combination of selective 
distribution with a location clause, protecting an appoint ed dealer against other 
appointed dealers opening up a shop in its vicinity, may in pa rticular fulfil the 
conditions of Article 101(3) if  the combination is indispen sable to protect substantial 
and relationship-specific investment s made by the authorised dealer 
(paragraph (107)(d)). 
(186) To ensure that th e least anti-competitive restraint is  chosen, it is relevant to see 
whether the same efficiencies can be obtai ned at a comparable cost by for instance 
service requirements alone. 
EN 60   EN (187) Example of quantitat ive selective distribution 
On a market for consumer durables, the mark et leader (brand A) with a market share 
of 35 %, sells its product to final consumer s through a selective di stribution network. 
There are several criteria for admission to the network: the shop must employ trained 
staff and provide pre-sales se rvices, there must be a sp ecialised area in the shop 
devoted to the sales of the product and similar hi-tech produc ts, and the shop is 
required to sell a wide range of models of  the supplier and to display them in an 
attractive manner. Moreover, the number of  admissible retailers in the network is 
directly limited thr ough the establishment of a ma ximum number of retailers per 
number of inhabitants in each provi nce or urban area. Manufacturer A has 
6 competitors in that market. Its largest co mpetitors, B, C and D, have market shares 
of respectively 25, 15 and 10 %, whilst th e other producers have smaller market 
shares. A is the only manufacturer to use selective distri bution. The selective 
distributors of brand A alwa ys handle a few competing brands. However, competing 
brands are also widely sold in shops which are not member of A's selective 
distribution network. Channels of distribution are various: for instance, brands B and 
C are sold in most of A's selected shops, but also in other s hops providing a high 
quality service and in hyperm arkets. Brand D is mainly sold in high service shops. 
Technology is evolving quite rapidly in this market, and the main suppliers maintain 
a strong quality image for their products through advertising. 
On that market, the coverage ratio of se lective distribution is 35 %. Inter-brand 
competition is not directly affected by the selective distribution system of A. Intra-brand competition for brand A may be re duced, but consumers have access to low 
service/low price retailers for brands B and C, which have a comparable quality 
image to brand A. Moreover, access to high service retailers for other brands is not 
foreclosed, since there is no limitation on the capacity of selected distributors to sell 
competing brands, and the quantitative limitation on the number of retailers for brand 
A leaves other high service retailers free to distribute competing brands. In this case, 
in view of the service requirements and th e efficiencies these are likely to provide 
and the limited effect on intra-brand compe tition the conditions of Article 101(3) are 
likely to be fulfilled. 
(188) Example of selective distri bution with cumulative effects  
On a market for a particular sports arti cle, there are seven manufacturers, whose 
respective market shares are: 25 %, 20 %, 15 %, 15 %, 10 %, 8 % and 7 %. The five largest manufacturers distribute their pr oducts through quantitative selective 
distribution, whilst the two sma llest use different types of distribution systems, which 
results in a coverage ratio of selective di stribution of 85 %. The criteria for access to 
the selective distribution networks are remarkably uniform amongst manufacturers: 
the distributors are required to have one or  more brick and mortar shops, those shops 
are required to have trained personnel and to  provide pre-sale services, there must be 
a specialised area in the shop devoted to th e sales of the article and a minimum size 
for this area is specified. The shop is required to sell a wide range of the brand in question and to display the ar ticle in an attractive manner, the shop must be located 
in a commercial street, and that type of article must represent at least 30 % of the 
total turnover of th e shop. In general, the same de aler is appointed selective 
distributor for all five brands. The two br ands which do not use selective distribution 
usually sell through less specialised retailers with lower service le vels. The market is 
EN 61   EN stable, both on the supply and on the dema nd side, and there is  strong brand image 
and product differentiation. The five mark et leaders have strong brand images, 
acquired through advertising and sponsori ng, whereas the two smaller manufacturers 
have a strategy of cheaper produc ts, with no strong brand image. 
On that market, access by general price di scounters and online-only distributors to 
the five leading brands is denied. Indeed, the requirement that this type of article 
represents at least 30 % of th e activity of the dealers and the criteria on presentation 
and pre-sales services rule out most price discounters from the ne twork of authorised 
dealers. The requirement to have one or more brick and mortar shops excludes online-only distributors from the network. As a consequence, consumers have no 
choice but to buy the five leading brands in high service/high price shops. This leads 
to reduced inter-brand competition between the five leading brands. The fact that the 
two smallest brands can be bought in  low service/low price shops does not 
compensate for this, because the brand imag e of the five market leaders is much 
better. Inter-brand competition is also limited through multiple dealership. Even 
though there exists some degree of intra-brand competition and the number of retailers is not directly limite d, the criteria for admission are strict enough to lead to a 
small number of retailers for the fi ve leading brands in each territory. 
The efficiencies associated with these qua ntitative selective distribution systems are 
low: the product is not very complex and doe s not justify a particularly high service. 
Unless the manufacturers can prove that ther e are clear efficiencies linked to their 
network of selective distribut ion, it is probable that the block exemption will have to 
be withdrawn because of its  cumulative effects resulti ng in less choice and higher 
prices for consumers. 
2.5. Franchising 
(189) Franchise agreements contain licences of  intellectual property  rights relating in 
particular to trade marks or signs and know -how for the use and distribution of goods 
or services. In addition to the licence of IPRs, the fran chisor usually provides the 
franchisee during the life of the agreement with commercial or technical assistance. 
The licence and the assistance are integral  components of the business method being 
franchised. The franchisor is in general pa id a franchise fee by the franchisee for the 
use of the particular business method. Fr anchising may enable the franchisor to 
establish, with limited investments, a unifo rm network for the distribution of its 
products. In addition to the provision of the business me thod, franchise agreements 
usually contain a combination of different vertical restraints concerning the products 
being distributed, in particular selectiv e distribution and/or non-compete and/or 
exclusive distribution or weaker forms thereof. 
(190) The coverage by the Block Exemption Re gulation of the licensing of IPRs contained 
in franchise agreements is dealt with in paragraphs (24) to (46). As for the vertical restraints on the purchase, sale and resale  of goods and services within a franchising 
arrangement, such as selective distribut ion, non-compete obligations or exclusive 
distribution, the Block Exemption Regula tion applies up to the 30 % market share 
EN 62   EN threshold54. The guidance provided in respect of th ose types of restra ints applies also 
to franchising, subject to the following two specific remarks: 
(a) The more important the transfer of know-how, the more likely it is that the 
restraints create efficiencies and/or ar e indispensable to protect the know-how 
and that the vertical restraints fu lfil the conditions of Article 101(3); 
(b) A non-compete obligation on the goods or  services purchased by the franchisee 
falls outside the scope of Article 101(1)  where the obligation is necessary to 
maintain the common identity and reput ation of the franch ised network. In 
such cases, the duration of the non-compet e obligation is also irrelevant under 
Article 101(1), as long as it does not exceed the duration of the franchise 
agreement itself. 
(191) Example of franchising 
A manufacturer has developed a new format for selling sweets in so-called fun shops 
where the sweets can be coloured specially on demand from the consumer. The manufacturer of the sweets has also devel oped the machines to colour the sweets. 
The manufacturer also produces the colour ing liquids. The quality and freshness of 
the liquid is of vital importance to pr oducing good sweets. The manufacturer made a 
success of its sweets through a number of ow n retail outlets al l operating under the 
same trade name and with th e uniform fun image (style of lay-out of the shops, 
common advertising etc.). In order to e xpand sales the manu facturer started a 
franchising system. The franchisees are obliged to buy the sweets, liquid and 
colouring machine from the manufacturer, to have the same image and operate under 
the trade name, pay a franchise fee, contri bute to common advertis ing and ensure the 
confidentiality of the operat ing manual prepared by the fr anchisor. In addition, the 
franchisees are only allowed to sell from the agreed premises, to sell to end users or other franchisees and are not allowed to sell other sweets. The franchisor is obliged 
not to appoint another franch isee nor operate a retail outlet himself in a given 
contract territory. The franchisor is also  under the obligation to update and further 
develop its products, the business outlook a nd the operating manual and make these 
improvements available to all retail fran chisees. The franchise agreements are 
concluded for a duration of 10 years. 
Sweet retailers buy their sweet s on a national market from either national producers 
that cater for national tastes or from w holesalers which import sweets from foreign 
producers in addition to selli ng products from national producers. On that market the 
franchisor's products compete with other brands of sweets. The franchisor has a 
market share of 30 % on the market for sweet s sold to retailers. Competition comes 
from a number of national and internat ional brands, sometimes produced by large 
diversified food companies. There are many potential points of sale  of sweets in the 
form of tobacconists, general food retaile rs, cafeterias and speci alised sweet shops. 
The franchisor's market share of the ma rket for machines for colouring food is 
below 10 %. 
Most of the obligations contained in th e franchise agreements can be deemed 
necessary to protect the intellectual propert y rights or maintain the common identity 
                                                
 
54 See also paragraphs (86) to (95), in particular paragraph (92). 
EN 63   EN and reputation of the franchised networ k and fall outside Article 101(1). The 
restrictions on selling (cont ract territory and selectiv e distribution) provide an 
incentive to the franchisees to invest in  the colouring machine and the franchise 
concept and, if not necessary to, at least help maintain the common identity, thereby offsetting the loss of intra-brand competition. The non-compete clause excluding other brands of sweets from the shops for the full duration of the agreements does 
allow the franchisor to keep the outlets uniform and prevent competitors from benefiting from its trade name. It does not lead  to any serious for eclosure in view of 
the great number of potential outlets av ailable to other sweet producers. The 
franchise agreements of this franchisor  are likely to fulfil the conditions for 
exemption under Article 101(3) in as far as  the obligations contained therein fall 
under Article 101(1). 
2.6 Exclusive supply 
(192) Under the heading of exclus ive supply fall those restricti ons that have as their main 
element that the supplier is obliged or induced to sell th e contract products only or 
mainly to one buyer, in general or for a par ticular use. Such rest rictions may take the 
form of an exclusive suppl y obligation, restricting the supplier to sell to only one 
buyer for the purposes of resale or a particul ar use, but may for instance also take the 
form of quantity forcing on the supplier, where incentives are agreed between the 
supplier and buyer which make the former concentrate its sale s mainly with one 
buyer. For intermediate goods or services, ex clusive supply is often referred to as 
industrial supply. 
(193) Exclusive supply is exempted by the Block Exemption Regulation where both the 
supplier's and buyer's market share does not  exceed 30 %, even if combined with 
other non-hardcore vertical re straints such as non-compete. The remainder of this 
section provides guidance for the assessment of exclusive supply in individual cases 
above the market share threshold. 
(194) The main competition risk of exclusive supply is anticompetitive foreclosure of other 
buyers. There is a similarity with the possi ble effects of exclus ive distribution, in 
particular when the exclusive distributo r becomes the exclusive buyer for a whole 
market (see section 2.2, in pa rticular paragraph (156)). Th e market share of the buyer 
on the upstream purchase market is obviously  important for assessing the ability of 
the buyer to impose exclusive supply which forecloses other buyers from access to supplies. The importance of the buyer on the downstream  market is however the 
factor which determines whether a compe tition problem may arise. If the buyer has 
no market power downstream, then no apprec iable negative effects for consumers 
can be expected. Negative effects may aris e when the market share of the buyer on 
the downstream supply market as well as the upstream purchase market exceeds 
30 %. Where the market share of the buye r on the upstream market does not exceed 
30 %, significant foreclosure effects may still result, especially when the market share of the buyer on its downstream market  exceeds 30 % and the exclusive supply 
relates to a particular use of  the contract products. Wher e a company is dominant on 
the downstream market, any ob ligation to supply the product s only or mainly to the 
dominant buyer may easily have significant anti-competitive effects. 
(195) It is not only the market position of the buyer on the upstream and downstream 
market that is important but also the extent  to and the duration for which it applies an 
EN 64   EN exclusive supply obligation. The higher the tied supply share, and the longer the 
duration of the exclusive supply, the more si gnificant the foreclosure is likely to be. 
Exclusive supply agreements shorter than  five years entered into by non-dominant 
companies usually require a balancing of pro- and anti-competitive effects, while agreements lasting longer than five year s are for most types of investments not 
considered necessary to achieve the claimed efficiencies or the efficiencies are not 
sufficient to outweigh the foreclosure eff ect of such long-term exclusive supply 
agreements. 
(196) The market position of the competing buye rs on the upstream market is important as 
it is likely that competing buyers will be foreclosed for anti-competitive reasons, that 
is, to increase their costs, if they are significan tly smaller than th e foreclosing buyer. 
Foreclosure of competing buyers is not ve ry likely where thos e competitors have 
similar buying power and can offer the suppliers  similar sales possibilities. In such a 
case, foreclosure could only occur for poten tial entrants, which may not be able to 
secure supplies when a number of major buyers all enter into exclusive supply contracts with the majority of suppliers on the market. Such a cumulative effect may 
lead to withdrawal of the benef it of the Block Exemption Regulation. 
(197) Entry barriers at the supp lier level are relevant to esta blishing whether there is real 
foreclosure. In as far as it is efficient for competing buyers to provide the goods or 
services themselves via upstream vertical in tegration, foreclosure is unlikely to be a 
real problem. However, there are often significant entry barriers. 
(198) Countervailing power of s uppliers is relevant, as impor tant suppliers will not easily 
allow themselves to be cut off from a lternative buyers. Foreclosure is therefore 
mainly a risk in the case of weak supplie rs and strong buyers. In the case of strong 
suppliers, the exclusive supply may be found in combination with non-compete 
obligations. The combination with non-comp ete obligations brings in the rules 
developed for single branding. Where there are relationship-specific investments 
involved on both side s (hold-up problem) the combin ation of exclusive supply and 
non-compete obligations that is, recipr ocal exclusivity in industrial supply 
agreements may often be justified, in pa rticular below the level of dominance. 
(199) Lastly, the level of trad e and the nature of the product are relevant for foreclosure. 
Anticompetitive foreclosure is less likely in  the case of an intermediate product or 
where the product is homogeneous. Firstly, a foreclosed manufact urer that uses a 
certain input usually has more flexibility to respond to the demand of its customers 
than the wholesaler or retail er has in respondin g to the demand of the final consumer 
for whom brands may play an important ro le. Secondly, the loss of a possible source 
of supply matters less for the foreclosed  buyers in the case of homogeneous products 
than in the case of a heter ogeneous product with different  grades and qualities. For 
final branded products or di fferentiated intermediate pr oducts where there are entry 
barriers, exclusive supply may have apprec iable anti-competitive effects where the 
competing buyers are relatively small compared  to the foreclosing buyer, even if the 
latter is not dominant on the downstream market. 
(200) Efficiencies can be expected in the case of a hold-up probl em (paragraph (107)(d) 
and (107)(e)), and such efficiencies are more  likely for intermediate products than for 
final products. Other efficiencies are le ss likely. Possible econom ies of scale in 
distribution (paragraph (107)(g)) do not s eem likely to justif y exclusive supply. 
EN 65   EN (201) In the case of a hold-up pr oblem and even more so in th e case of economies of scale 
in distribution, quantity forcing on th e supplier, such as minimum supply 
requirements, could well be a less restrictive alternative. 
(202) Example of exclusive supply 
On a market for a certain type of com ponents (intermediate product market) supplier 
A agrees with buyer B to develop, with  its own know-how and considerable 
investment in new machines and with the help of specifications supplied by buyer B, 
a different version of the component. B will have to make considerable investments 
to incorporate the new component. It is agreed that A will supply the new product 
only to buyer B for a period of five years from  the date of first entry on the market. B 
is obliged to buy the new product only from A for the same period of five years. 
Both A and B can continue to sell and buy respectively othe r versions of the 
component elsewhere. The market shar e of buyer B on the upstream component 
market and on the downstream final goods mark et is 40 %. The market share of the 
component supplier is 35 %. There are two other component suppliers with 
around 20-25 % market share and a number of small suppliers. 
Given the considerable investme nts, the agreement is likely  to fulfil the conditions of 
Article 101(3) in view of the efficiencies  and the limited foreclosure effect. Other 
buyers are foreclosed from a particular ve rsion of a product of a supplier with 35 % 
market share and there are ot her component suppliers that  could develop similar new 
products. The foreclosure of part of buyer B' s demand to other supp liers is limited to 
maximum 40 % of the market. 
2.7. Upfront access payments 
(203) Upfront access payments are fixed fees that suppliers pay to distributors in the 
framework of a vertical relationship at the be ginning of a relevant period, in order to 
get access to their distribution network a nd remunerate services provided to the 
suppliers by the retailers. This category in cludes various practic es such as slotting 
allowances55, the so called pay-to-stay fees56, payments to have access to a 
distributor's promotion campaigns etc. Up front access payments are exempted under 
the Block Exemption Regulation when both the supplier's and buyer's market share 
does not exceed 30 %. The remainder of this section provides guidance for the assessment of upfront access payments in individual cases  above the market share 
threshold. 
(204) Upfront access payments may sometimes result in anticompetitive foreclosure of 
other distributors if such payments i nduce the supplier to channel its products 
through only one or a limited number of di stributors. A high fee may make that a 
supplier wants to channel a s ubstantial volume of its sale s through this distributor in 
order to cover the costs of the fee. In su ch a case, upfront access payments may have 
the same downstream foreclosure effect as an exclusive supply type of obligation. 
The assessment of that negative effect is made by analogy to  the assessment of 
exclusive supply obligations  (in particular paragra phs (194) to (199)).  
                                                 
55 Fixed fees that manufacturers pay to retailers  in order to get access to their shelf space. 
56 Lump sum payments made to ensure the continued presence of an existing product on the shelf for 
some further period. 
EN 66   EN (205) Exceptionally, upfront access payments  may also result in anticompetitive 
foreclosure of other suppliers, where the widespread use of upfront access payments 
increases barriers to entry for small entrants. The assessment of that possible negative effect is made by an alogy to the assessment of single branding obligations 
(in particular paragra phs (132) to (141)).  
(206) In addition to possible foreclosure e ffects, upfront access payments may soften 
competition and facilitate collusion between  distributors. Upfront access payments 
are likely to increase the price charged by the supplier for the contract products since 
the supplier must cover the expense of those payments. Higher supply prices may 
reduce the incentive of the retailers to compete on price on th e downstream market, 
while the profits of distribut ors are increased as a result of the access payments. Such 
reduction of competition between distributo rs through the cumulative use of upfront 
access payments normally requires the distribu tion market to be highly concentrated.  
(207) However, the use of upfront access pa yments may in many cases contribute to an 
efficient allocation of shelf space for ne w products. Distributors often have less 
information than suppliers on the potenti al for success of new products to be 
introduced on the market and, as a result, the am ount of products to  be stocked may 
be sub-optimal. Upfront acce ss payments may be used to  reduce this asymmetry in 
information between suppliers and distribut ors by explicitly allowing suppliers to 
compete for shelf space. The distributor ma y thus receive a signal of which products 
are most likely to be successful since a supplier would normally agree to pay an 
upfront access fee if  it estimates a low probability  of failure of the product 
introduction. 
(208) Furthermore, due to the asymmetry in  information mentioned in paragraph (207), 
suppliers may have incentives to free-rid e on distributors' promotional efforts in 
order to introduce sub-optimal products. If a product is not successful, the 
distributors will pay part of the costs of the product failure. The use of upfront access 
fees may prevent such free riding by shifting the risk of product failure back to the 
suppliers, thereby contributing to an optimal rate of product introductions. 
2.8. Category Management Agreements 
(209) Category management agreements are agreements by which, w ithin a distribution 
agreement, the distributor entrusts the s upplier (the "category captain") with the 
marketing of a category of products incl uding in general not only the supplier's 
products, but also the products of its co mpetitors. The category captain may thus 
have an influence on for instance the product placement and product promotion in 
the shop and product selection for the shop. Category management agreements are exempted under the Block Exemption Regulation when both the supplier's and buyer's market share does not exceed 30 %. The remainder of this  section provides 
guidance for the assessment of category management agreements in individual cases above the market share threshold. 
(210) While in most cases category management  agreements will not be problematic, they 
may sometimes distort competition betw een suppliers, and fi nally result in 
anticompetitive foreclosure of other suppliers , where the category captain is able, due 
to its influence over the marketing deci sions of the distributor, to limit or 
disadvantage the distribution of products of competing suppliers. While in most 
EN 67   EN cases the distributor may not have an intere st in limiting its choice of products, when 
the distributor also sells co mpeting products under its own brand (private labels), the 
distributor may also have incentives to exclude certain suppliers, in particular 
intermediate range products. The assessment of such upstream for eclosure effect is 
made by analogy to the assessment of si ngle branding obligati ons (in particular 
paragraphs (132) to (141)) by  addressing issues like the market coverage of these 
agreements, the market position of compe ting suppliers and the possible cumulative 
use of such agreements.  
(211) In addition, category management ag reements may facilita te collusion between 
distributors when the same supplier serves as  a category captain for all or most of the 
competing distributors on a market and pr ovides these distributors with a common 
point of reference for their marketing decisions.  
(212) Category management may also facil itate collusion between suppliers through 
increased opportunities to exchange via reta ilers sensitive market information, such 
as for instance information re lated to future pricing, prom otional plans or advertising 
campaigns57.  
(213) However, the use of category management agreements may also l ead to efficiencies. 
Category management agreements may allo w distributors to have access to the 
supplier's marketing expertise for a cer tain group of products  and to achieve 
economies of scale as they en sure that the optimal quantity  of products is presented 
timely and directly on the shelves. As cat egory management is based on customers' 
habits, category management agreements may lead to higher customer satisfaction as 
they help to better meet demand expectations. In genera l, the higher the inter-brand 
competition and the lower consumers' sw itching costs, the greater the economic 
benefits achieved through category management. 
2.9 Tying 
(214) Tying refers to situations where cust omers that purchase one product (the tying 
product) are required also to purchase anot her distinct product (the tied product) 
from the same supplier or someone designate d by the latter. Tying may constitute an 
abuse within the meaning of Article 10258. Tying may also constitute a vertical 
restraint falling under Artic le 101 where it results in a single branding type of 
obligation (see paragraphs (129) to (150 )) for the tied product. Only the latter 
situation is dealt with in these Guidelines. 
(215) Whether products will be considered as distinct depends on customer demand. Two 
products are distinct where, in the abse nce of the tying, a s ubstantial number of 
customers would purchase or would have pur chased the tying pr oduct without also 
buying the tied product from the same su pplier, thereby allo wing stand-alone 
                                                 
57 Direct information exchange between competitors is not covered by the Block Exemption Regulation, 
see Article 2(4) of that Regulation and paragraphs 27-28 of these Guidelines. 
58 Judgment of the Court of Justice in Case C-333/94 P Tetrapak v Commission  [1996] ECR I-5951, 
paragraph 37. See also Communication from the Commission – Guidance on the Commission's 
enforcement priorities in applying Article 82 of the EC Treaty to abusive conduct by dominant 
undertakings, OJ C 45, 24.2.2009, p. 7. 
EN 68   EN production for both the tying and the tied product59. Evidence that two products are 
distinct could include direct  evidence that, when given a choice, customers purchase 
the tying and the tied products separately from different sources of supply, or indirect 
evidence, such as the presen ce on the market of undert akings specialised in the 
manufacture or sale of the tied  product without the tying product60, or evidence 
indicating that undertakings with little market power, pa rticularly on competitive 
markets, tend not to tie or  not to bundle such products. For instance, since customers 
want to buy shoes with laces and it is not  practicable for distributors to lace new 
shoes with the laces of their choice, it has become commercial usage for shoe 
manufacturers to supply shoes with laces. Ther efore, the sale of shoes with laces is 
not a tying practice. 
(216) Tying may lead to anticompetitive forecl osure effects on the tied market, the tying 
market, or both at the same time. The foreclosure effect depends on the tied 
percentage of total sales on the market of the tied product. On the question of what 
can be considered appreciable foreclos ure under Article 101(1), the analysis for 
single branding can be applied. Tying means th at there is at least a form of quantity-
forcing on the buyer in respect of the tied product. Where in addition a non-compete obligation is agreed in respect of the tied product, this increases the possible 
foreclosure effect on the ma rket of the tied product. The tying may lead to less 
competition for customers interested in buying the tied product, but not the tying 
product. If there is not a sufficient number  of customers that will buy the tied product 
alone to sustain competitors of the supplier on the tied market, the tying can lead to 
those customers facing higher prices. If the tied product is an important 
complementary product for customers of the tying product, a reduction of alternative 
suppliers of the tied product and hence a reduced availability of that product can 
make entry onto the tying market alone more difficult. 
(217) Tying may also directly l ead to prices that are above th e competitive level, especially 
in three situations. Firstly, if  the tying and the tied produc t can be used in variable 
proportions as inputs to a pr oduction process, customers ma y react to an increase in 
price for the tying product by increasing their demand for the tied product while 
decreasing their demand for the tying product. By tying the two products the supplier may seek to avoid this substitution and as  a result be able to raise its prices. 
Secondly, when the tying allows price discrimination according to the use the customer makes of the tying product, for ex ample the tying of ink cartridges to the 
sale of photocopying machines (metering). Thirdly, when in the case of long-term 
contracts or in the case of after-market s with original equipment with a long 
replacement time, it becomes difficult for the customers to calculate the consequences of the tying.  
(218) Tying is exempted under the Block Exemption Regulation when the market share of 
the supplier, on both the market of the tied product and the market of the tying product, and the market share of the buyer,  on the relevant upstream markets, do not 
exceed 30 %. It may be combined with other vertical restraints, which are not hardcore restrictions under that Regulat ion, such as non-compete obligations or 
                                                
 
59 Judgment of the Court of First Instance in Case T-201/04 Microsoft v Commission  [2007] ECR II-3601, 
paragraphs 917, 921 and 922. 
60 Judgment of the Court of First Instance in Case T-30/89 Hilti v Commission  [1991] ECR II-1439, 
paragraph 67. 
EN 69   EN quantity forcing in respect of  the tying product, or exclusive sourcing. The remainder 
of this section provides guidance for the assessment of tying in individual cases 
above the market share threshold. 
(219) The market position of the supplier on the market of the tying product is obviously of 
central importance to assess possible anti-competitive effects. In general, this type of agreement is imposed by the supplier. The importance of the supplier on the market 
of the tying product is the main reason w hy a buyer may find it difficult to refuse a 
tying obligation. 
(220) The market position of the supplier's co mpetitors on the market of the tying product 
is important in assessing the supplier’s market power. As long as its competitors are sufficiently numerous and st rong, no anti-competitive eff ects can be expected, as 
buyers have sufficient alternatives to pur chase the tying produc t without the tied 
product, unless other suppliers  are applying similar tying. In addition, entry barriers 
on the market of the tying product are relevant to establish the market position of the supplier. When tying is combined with a non-compete obligation in respect of the 
tying product, this considerably stre ngthens the position of the supplier. 
(221) Buying power is relevant, as important  buyers will not easily be forced to accept 
tying without obtaining at least part of the possible efficiencies. Tying not based on 
efficiency is therefore mainly a risk where buyers do not have significant buying 
power. 
(222) Where appreciable anti-competitive effect s are established, the question whether the 
conditions of Article 101(3) are fulfilled arises. Tying obligations may help to 
produce efficiencies arising from joint production or joint di stribution. Where the 
tied product is not produced by the supplier, an efficiency may also arise from the 
supplier buying large quantities of the tied product. For tying to fulfil the conditions of Article 101(3), it must, however, be sh own that at least part of these cost 
reductions are passed on to the consumer, which is normally not the case when the 
retailer is able to obtain, on a regular basi s, supplies of the same or equivalent 
products on the same or better conditions than those offered by the supplier which applies the tying practice. A nother efficiency may exist where tying helps to ensure a 
certain uniformity and quality standardisa tion (see paragraph (107)(i)). However, it 
needs to be demonstrated that the positive effects cannot be realised equally efficiently by requiring the buyer to use or resell products satisfying minimum 
quality standards, without requiring the buye r to purchase these fr om the supplier or 
someone designated by the latter. The requirements concerning minimum quality 
standards would not normally  fall within the scope of Article 101(1). Where the 
supplier of the tying product imposes on th e buyer the suppliers from which the 
buyer must purchase the tied product, fo r instance because the formulation of 
minimum quality standards is not possible, this may also fall outside the scope of 
Article 101(1), especially where the supplie r of the tying product does not derive a 
direct (financial) benef it from designating the supp liers of the tied product. 
2.10 Resale price restrictions 
(223) As explained in section III.3, resale pri ce maintenance (RPM), that is, agreements or 
concerted practices having as their direct or  indirect object the establishment of a 
fixed or minimum resale price or a fixed or minimum price level to be observed by 
EN 70   EN the buyer, are treated as a hardcore rest riction. Where an agreement includes RPM, 
that agreement is presumed to restrict competition and thus to fall within Article 101(1). It also gives rise to the pr esumption that the agreement is unlikely to 
fulfil the conditions of Article 101(3), for which reason the bloc k exemption does not 
apply. However, undertakings have the possibility to plead an efficiency defence under Article 101(3) in an individual case.  It is incumbent on the parties to 
substantiate that likely efficiencies resu lt from including RPM in their agreement and 
demonstrate that all the conditi ons of Article 101(3) are fulf illed. It then falls to the 
Commission to effectively assess the lik ely negative effects on competition and 
consumers before deciding whether the c onditions of Article 101(3) are fulfilled. 
(224) RPM may restrict competition in a nu mber of ways. Firstl y, RPM may facilitate 
collusion between suppliers by enhancing pr ice transparency on the market, thereby 
making it easier to detect whether a supplier deviates from the collusive equilibrium 
by cutting its price. RPM also undermines th e incentive for the supplier to cut its 
price to its distributors, as the fixed resale  price will prevent it from benefiting from 
expanded sales. Such a negative effect is pa rticularly plausible where the market is 
prone to collusive outcomes, for instance if the manufactur ers form a tight oligopoly, 
and a significant part of the market is  covered by RPM agreements. Second, by 
eliminating intra-brand price competition, RP M may also facilitate collusion between 
the buyers, that is, at the distribution level.  Strong or well organised distributors may 
be able to force or convince one or more s uppliers to fix their re sale price above the 
competitive level and thereby help them to r each or stabilise a collusive equilibrium. 
The resulting loss of price competition seems especially problematic when the RPM is inspired by the buyers, whos e collective horizontal inte rests can be expected to 
work out negatively for consumers. Th ird, RPM may more generally soften 
competition between manufacturers and/or between retailers, in particular when 
manufacturers use the same distributors to distribute their products and RPM is 
applied by all or many of them. Fourth, the im mediate effect of RP M will be that all 
or certain distributors are pr evented from lowering their sale s price for that particular 
brand. In other words, the di rect effect of RPM is a pr ice increase. Fifth, RPM may 
lower the pressure on the margin of th e manufacturer, in particular where the 
manufacturer has a commitment problem, that is, where it has an interest in lowering 
the price charged to subseque nt distributors. In such a situation, the manufacturer 
may prefer to agree to RPM, so as to he lp it to commit not to lower the price for 
subsequent distributors and to reduce th e pressure on its ow n margin. Sixth, RPM 
may be implemented by a manufacturer with  market power to foreclose smaller 
rivals. The increased margin that RPM may offer distributors, may entice the latter to favour the particular brand over rival bra nds when advising customers, even where 
such advice is not in the interest of these customers, or not to sell these rival brands 
at all. Lastly, RPM may reduce dynamism and innovation at the distribution level.  
By preventing price competition between different distributors, RPM may prevent more efficient retailers from entering th e market or acquiring sufficient scale with 
low prices. It also may prevent or hinde r the entry and expans ion of distribution 
formats based on low prices, su ch as price discounters. 
(225) However, RPM may not only restrict comp etition but may also, in particular where it 
is supplier driven, lead to efficiencies, which will be assessed under Article 101(3). 
Most notably, where a manufacturer intr oduces a new product, RPM may be helpful 
during the introductory period  of expanding demand to i nduce distributors to better 
take into account the manufacturer’s in terest to promote the product. RPM may 
EN 71   EN provide the distributors with the means to in crease sales efforts and if the distributors 
on this market are under competitive pressure this may induce them to expand overall demand for the product and make the la unch of the product a success, also for 
the benefit of consumers
61. Similarly, fixed resale prices, and not just maximum 
resale prices, may be necessary to organise in a franchise system or similar distribution system applying a uniform dist ribution format a coordinated short term 
low price campaign (2 to 6 weeks in most cases) which will also benefit the consumers. In some situations, the extra margin provided by RPM may allow 
retailers to provide (additional) pre-sales se rvices, in particular in case of experience 
or complex products. If enough customers take advantage from such services to make their choice but then purchase at a lowe r price with retailers  that do not provide 
such services (and hence do not incur thes e costs), high-service retailers may reduce 
or eliminate these services that enhan ce the demand for the supplier's product. RPM 
may help to prevent such free-riding at the distribution level. The parties will have to 
convincingly demonstrate that the RPM ag reement can be expected to not only 
provide the means but also the incentive to overcome possible free riding between 
retailers on these services and that the pre- sales services overall benefit consumers as 
part of the demonstration that all the conditions of Article 101(3) are fulfilled. 
(226) The practice of recommending a resale pr ice to a reseller or re quiring the re seller to 
respect a maximum resale price is covere d by the Block Exemption Regulation when 
the market share of each of the parties to the agreement does not exceed the 30 % threshold, provided it does not amount to a mi nimum or fixed sale price as a result of 
pressure from, or incentives offered by, any of the parties. The remainder of this 
section provides guidance for the assessmen t of maximum or recommended prices 
above the market share threshold and fo r cases of withdrawal of the block 
exemption. 
(227) The possible competition risk of maximum and recommended prices is that they will 
work as a focal point for the resellers and might be followed by most or all of them 
and/or that maximum or r ecommended prices may soften competition or facilitate 
collusion between suppliers. 
(228) An important factor for assessing possi ble anti-competitive effects of maximum or 
recommended resale prices is the market position of the supplie r. The stronger the 
market position of the supplie r, the higher the risk that a maximum resale price or a 
recommended resale price leads to a more or less uniform application of that price 
level by the resellers, because they may use it as a focal point. They may find it difficult to deviate from what they perceive  to be the preferred resale price proposed 
by such an important supplier on the market.  
(229) Where appreciable anti-competitive effects are established for maximum or 
recommended resale prices, the que stion of a possible exemption under 
Article 101(3) arises. For maximum resale  prices, the effici ency described in 
paragraph (107)(f) (avoiding doubl e marginalisation), may be particularly relevant. A 
maximum resale price may also help to en sure that the brand in question competes 
more forcefully with other brands, incl uding own label products , distributed by the 
same distributor. 
                                                
 
61 This assumes that it is not practical for the supp lier to impose on all buyers by contract effective 
promotion requirements, see also paragraph 107 point (a).