The Court of Justice provided further guidance on long-term exclusivity clauses in distribution agreements

In an Order of 4 December 2014, the Court of Justice provided guidance on the compliance of long-term exclusive purchasing or "single branding" clauses in distribution agreements on the basis of preliminary questions from a Spanish civil court. The Court of Justice decided that long-term exclusivity clauses may not have the effect of restricting competition if the parties to the agreement have a limited market share and the duration of the exclusivity clause is not manifestly excessive of what is common in the relevant market.

The case concerned a supply agreement between oil supplier Galp and gas station operator Estación de Servicio Pozuelo, which included a single branding clause on the basis of which Estación de Servicio Pozuelo was bound to exclusively purchase oil products from Galp for a period of at least 30 years.

As already established in previous case law, the court noted that exclusive purchasing clauses cannot have the object to restrict competition but that the effects of the clauses need to be verified. The effects of the clause should not be assessed in isolation but account has to be taken of the legal and economic context, including similar contracts in the relevant market. If the market is not easily accessible as a result of a cumulation of long-term exclusivity clauses in the relevant market, it should be assessed whether the contract at stake significantly contributes to this foreclosure effect, taking into account the market position of the contract parties and the duration of the exclusivity. If the duration of the exclusivity is manifestly excessive of what is common on the relevant market, the clause will in principle be in violation of Article 101 TFEU. This will be a question to be decided by the referring court.

The Court of Justice continued and made an interesting addition by also considering that if the market share of GALP was only 3%, as stated by the referring court, it would be contrary to the purpose of free competition to declare a long-term exclusivity clause void, as this would make it more difficult for GALP to penetrate the market in favor of other parties with a stronger market position (in the case at hand 70% of the market was controlled by three competitors).

The case confirms that exclusive purchasing clauses with a duration that extends beyond the five year exemption for parties with a market share of 30% or less under Article 5 of the Block Exemption Regulation for vertical agreements, may very well still comply with competition law. Such clauses should be assessed on the basis of an effects-based approach, taking into account particularly the market position and relative duration of the clauses in the market context.

See for a more extensive analysis of the legal framework for exclusivity clauses in distribution agreements (in Dutch) S. Tuinenga, "Gas terug bij exclusiviteitsbedingen in de brandstofsector", M&M 2014-4.

Related : Stibbe ( Mr. Hendrik Viaene ,  Mrs. Delphine Gillet )

Mr. Hendrik Viaene Mr. Hendrik Viaene
Mrs. Delphine Gillet Mrs. Delphine Gillet

Click here to see the ad(s)
All articles Distribution law

Lastest articles Distribution law

Distribution sélective sur Internet : les mesures doivent être proportionnées

Le principe du réseau sélectif des produits Sthil (tronçonneuses, débroussailleuses, él...

Read more

Court of Justice opens up international jurisdiction for online sales

The Court of Justice of the European Union (“CJEU”) issued a ruling on 21 December 2016 (Case C-618/15) concer...

Read more

Distribution of certain derivative financial instruments to retail clients: a prospective ban?

On 8 January 2016, the Financial Services and Markets Authority (“FSMA”) initiated a consultation on a draft r...

Read more

Be careful when it comes to your Belgian distributor

Imagine that an internal study has demonstrated that your current distribution set-up in Europe is seriously out of d...

Be careful when it comes to your Belgian distributor Read more

Lastest articles by Mr. Hendrik Viaene

Court of Justice confirms the fine imposed on Toshiba and Panasonic in the cathode ray tubes cartel

On 18 January 2017, the Court of Justice delivered its judgment on Toshiba's appeal against the General Court'...

Read more

Court of Justice confirms Commission's approach in its first hybrid settlement case

On 12 January 2017, the Court of Justice fully dismissed the appeal of Timab and its parent company Roullier (the &qu...

Read more

General Court rules on the concept of a single and continuous infringement in the smart card chip...

On 15 December 2016, the General Court ("GC") dismissed the appeals brought by Infineon and Philips in the smart...

Read more

Brussels Court of Appeal confirms interim measures against exclusive TV broadcasting rights

On 7 September 2016, the Brussels Court of Appeal (the “Court”) confirmed the interim measures of the Bel...

Read more

Lastest articles by Mrs. Delphine Gillet

General Court awards damages for failure to adjudicate within a reasonable time

On 10 January 2017, the General Court ("GC") ruled on the non-contractual liability of EU institutions in a...

Read more

Court of Justice clarifies rules on evidence in bathroom fittings cartel judgments

On 26 January 2017, the Court of Justice delivered fourteen judgments on the appeals against the General Court's ...

Read more

Envelope maker's cartel fine annulled in first successful European settlement appeal

On 13 December 2016, the General Court ("GC") annulled the € 4.7 million cartel fine the European Commissio...

Read more

The European Commission orders Ireland to recover illegal tax benefits worth up to €13 billion ...

On 30 August 2016, the European Commission concluded that two tax rulings issued by Ireland in 1991 and 2007 to ...

Read more

LexGO Network