WRITTEN QUESTION P-0831/00

by Claude Desama (PSE) to the Commission

(10 March 2000)

Subject: Regulation 2790/1999 providing for a block exemption for vertical agreements

Regulation 2790/1999 providing for a block exemption for vertical agreements(1) is having an adverse effect on tens of thousands of small and medium-sized undertakings forming part of structured distribution networks, in particular in the automobile sector.

The new block exemption does not contain any provision enabling suppliers to be penalised for any infringements of the rights of their distributors and retailers.

In order to avoid jeopardising the existence of many SMEs, which are the driving force behind our European economy, is it not essential to add to the regulation a hard core restriction prohibiting licensors from taking advantage of the economic over-dependence of SMEs involved in distribution and the service sector?

(1) OJ L 336, 29.12.1999, p. 21.

Answer given by Mr Monti on behalf of the Commission

(12 April 2000)

In accordance with Article 2(5) of Commission Regulation (EC) No 2790/1999 on the application of Article 81(3) (formerly Article 85(3)) of the Treaty to categories of vertical agreements, the Regulation does not apply to agreements under Commission Regulation (EC) No 1475/95 on the application of Article 81(3) of the Treaty to certain categories of motor vehicle distribution and servicing agreements(1). Consequently, small and medium-sized firms (SMEs) operating as dealers in the motor vehicle sector are not currently affected by the new regulations on vertical restrictions.

Regulation (EC) No 1475/95 will remain in force until 30 September 2002. Looking ahead to that date, the Commission is currently drawing up the evaluation report provided for by Article 11 of that regulation. On the basis of this report, the Commission will draft its proposals for the motor vehicle distribution sector, on which the parties concerned and the Member States will be consulted.

Regarding the more general question raised by the Honourable Member on the lack of hard core restrictions in Regulation (EC) No 2790/1999 to prohibit suppliers from taking advantage of the economic dependence of their distributors, the following points are of relevance:

- the purpose of the reform instigated by the Commission with the introduction of Regulation (EC) No 2790/1999 is to establish a competition policy on vertical restrictions which has a real economic basis and which has, at its core, an analysis of the effects of vertical agreements on the market. Community competition rules do not cover contractual relations between the parties with a view to readjusting the balance of power. The objective of these rules is solely to protect competition and to discourage the introduction of anti-competitive practices, particularly by suppliers with greater market strength.

- however, the Commission's new approach still offers SMEs in the distribution sector substantial guarantees. Firstly, in contrast to the old rules on block exemptions applicable to certain forms of distribution, Regulation (EC) No 2790/1999 does not cover firms whose market share is greater than 30 %, which in itself is a disincentive to suppliers with considerable market strength to abuse the economically-dependent situation of their distributors.

- secondly, the Regulation contains a list of hard core restrictions which involve the loss of the block exemption and whose content broadly reflects Community case law on restrictions on the sales activities of distributors.

- thirdly, the Regulation covers for the first time vertical agreements concluded by retailers' associations whose members are SMEs, which should allow such firms to strengthen their market position both as regards their suppliers and integrated distribution chains.

- fourthly, the new legal framework provides for specific mechanisms to allow competition authorities to act against anti-competitive practices even where the firm's market share is less than 30 %. These involve either the withdrawal of the benefit of the Regulation, which can be done by the Commission (Article 6) or, in certain cases, by the competent authority in the Member State concerned (Article 7), or the procedure whereby the Commission declares by regulation that, where parallel networks or similar vertical restraints cover more than 50 % of a relevant market, the field of application of the Regulation should be limited.

- finally, under Regulation (EC) No 2790/1999, block exemptions do apply to non-compete obligations imposed on distributors only if their duration is less than five years, while, under the previous arrangements, such obligations could apply to dealers for up to ten years, and even for an indefinite period in some cases. The new rules offer distributors a real opportunity to opt for alternative suppliers and, consequently, to exert direct pressure on their suppliers, which is more effective than trying to legislate in detail on the rights and obligations of the contracting parties.

(1) OJ L 145, 29.6.1995.