Closed Distribution Networks and E-commerce: Antitrust Issues

Abstract

Closed distribution networks (ie exclusive or selective distribution networks) have to integrate the development of the internet, particularly in sectors such as fine fragrances or new cars sales. Producers (ie Chanel or Volkswagen) cannot ignore that their products are potentially available on the web. Considering the relationships between producers and their off-line dealers, the question is to know if these dealers could be authorized to resell the products on their own website. In each sector, producers have to adapt their distribution contracts for e-commerce. In a previous paper (published in the Journal of Information, Law and Technology , 2000, No 2) we conclude that electronic points of sales must respect criteria used for physical points of sales, but with some adaptations. The major issue for producers is to build legally secured contracts in order to manage both off-line and on-line distribution networks. But the adaptation of traditional distribution contracts cannot ignore the antitrust framework, especially in the European context, since the new Block Exemption Regulation No 2790/99 on Vertical Restraints has been published. Producers' strategies within the European Union must take into account potential competition restraints implied by their contract policy. When drafting their contracts for e-commerce opportunities, producers have to deal with the legal standing of their networks within the European antitrust law. In this paper, our purpose is to analyze implications of the on-line distribution strategy that could be drawn up by a producer from the European competition law viewpoint. We determine opportunities and constraints presented by the Guidelines from a producer's point of view, and we examine whether European competition law does offer any interesting 'room for manoeuvre' for producers who develop closed distribution networks. We also identify what kind of elements could lead to a withdrawal of the benefit of the Block Exemption Regulation No 2790/99; we show that this withdrawal could arise from a market share evaluation, or from the disproportion between competition restraints (stemming from the distribution contract clauses) and the necessity of an economic progress within the European Commission (EC).