WRITTEN QUESTION E-3319/98

by Paul Rübig (PPE) to the Commission

(10 November 1998)

Subject: Vertical restrictions and the area criterion established by the European Court of Justice

In the follow-up to the Green paper on vertical restrictions, COM(98) 544, the Commission proposes a general group exemption with one or more threshold values of up to 40 % with regard to the market share, instead of sectoral group exemptions. Undertakings which exceed these values will not qualify for the group exemption.

According to ECJ jurisprudence, in the beer sector the national pub/restaurant market is the yardstick for such threshold values. However, this creates special situations, especially for smaller states. For example, an Austrian brewer with an annual turnover of 1,3 million hectolitres would have a market share of over 40 %. On the other hand, brewers with the same annual turnover in large national markets would actually fall under the de minimis rule and thus not be subject to any restrictions.

Does this ruling of the ECJ apply to the new Commission proposals, in the light of the completion of the single market on 1.1.1993?

Does the Commission agree that the system of general group exemptions results in unfair treatment for some undertakings, depending on whether they operate in large or small national markets?

Should additional criteria not be applied which take into account the importance of the undertaking in the EU internal market?

Answer given by Mr Van Miert on behalf of the Commission

(7 December 1998)

The future policy outlined in the communication on the application of the Community competition rules to vertical restraints(1) signifies a shift in policy to a more economic approach. This is widely supported and made necessary by a number of structural weaknesses in the current block exemption regulations, including that covering certain of the beer delivery contracts.

Economic theory and Commission experience underline that vertical restraints can be assumed to have only beneficial effects when the companies involved have no market power. However, in cases where companies do have market power, vertical restraints can be used for beneficial and pro-competitive purposes as well as anti-competitive purposes, for example to foreclose the market.

The economic approach requires therefore a limit on the applicability of the block exemption to those that have market power. It is true that there is no single easy indicator of market power. The only criterion that is practicable and widely used in competition policy throughout the world is the market share on the relevant anti-trust market or indexes calculated on the basis of market shares. While acknowledging that market share and market power are not the same, the first can be used to define a safe harbour, that is to indicate when lack of significant market power can be assumed. The proposed new policy will create such a safe harbour for the large majority of vertical agreements.

To take the relevant anti-trust market does not discriminate against companies operating in smaller markets. It treats companies with similar market shares in the same way, whether operating on the same or different markets. To do differently would mean that consumers in smaller markets are less well protected than consumers in larger markets. This would be truly unjustified discrimination. Competition policy should in the first place protect competition and thereby the consumer interest.

The relevant anti-trust market can only be defined by taking into account the relevant factors on that particular market at that particular time (questions such as what are the substitutes, where can buyers source, is there substitutability on the producers side). The relevant market may change over time. A national market may become a European market or world market under the influence of new forms of distribution or the lowering of customs barriers. In assessing competition cases the Commission takes all such factors into account, including those relating to the progress of the internal market. It is therefore not possible to define markets rigidly and enshrine them in a general block exemption regulation.

(1) COM(98) 544.