Abstract
Exclusive distribution agreements are commonly used in both European Union (EU) and United States (US) markets to ensure the efficient distribution of products and services. This article compares the competition legislation in the EU and US and focuses on the differences in the treatment of vertical agreements. This topic is addressed also from an economic perspective and focuses on the possible abuse of dominant market position by international multisectoral companies. This article focuses on the following legal and economic questions: how do competition legislations regulating vertical agreements differ in EU and US and, what kind of possible effects do transnational exclusive distribution agreements have on international trade and competition. In EU law exclusive distribution agreements, even those which include a non-compete obligation limited to five years, are considered as lawful restrictions on competition as long as they fulfil certain criteria listed in the Block Exemption Regulation. EU competition law recognizes the terms of block exemption and ‘safe haven’, whereas the US antitrust law does not regulate any exemptions to vertical restraints. Vertical restraints are interpreted in the US common law of antitrust in the light of the principle of Rule of Reason. An important difference in these jurisdictions is the definition of relevant markets, which is taken into consideration when evaluating the legality of a vertical agreement under competition law. Both jurisdictions emphasize the market power of the producer, but the allowed percentage of market share varies between EU and US and only EU legislation gives emphasis to the market power of the distributor. These differences in competition legislations regulating vertical agreements can lead to conflicts when interpreting the legality of a distribution agreement. The definition of relevant product markets might lead to big international multisectoral companies abusing their dominant position by entering into exclusive arrangements.
Highlights
Distribution agreements can be highly international and transnational in nature, but there is no international legislation or treaty regulating vertical agreements between private parties in such
European Union (EU) competition law recognizes the terms of block exemption and ‘safe haven’, whereas the United States (US) antitrust law does not regulate any exemptions to vertical restraints
This article focuses on the following legal and economic questions: how do the competition legislations regulating vertical agreements differ in EU and US and what kind of effect can transnational exclusive arrangements and non-compete clauses have on the efficiency of international trade? This issue is highly relevant in light of the constant internationalization of trade and the increasing growth of e-commerce
Summary
Distribution agreements can be highly international and transnational in nature, but there is no international legislation or treaty regulating vertical agreements between private parties in such. Incardona analyzed the EC competition rules applicable to distribution agreements, with an eye to the European case-law, economic analysis and comparing with the US antitrust experience.[6] Gajin studied how EU and US antitrust laws assess the legality of exclusive distribution agreement and evaluated the extent of these two legal systems can be seen compatible with the economic theory of exclusive territories.[7]. Between non-dominant firms are often considered to increase efficiency and competition and economic welfare both under EU and US legislation.[12] as will be seen later in this article, the definition of relevant markets in exclusive distribution can lead to the abusive use of their dominant position by big multisectoral companies. This article focuses on the following legal and economic questions: how do the competition legislations regulating vertical agreements differ in EU and US and what kind of effect can transnational exclusive arrangements and non-compete clauses have on the efficiency of international trade? A distribution sector that stands between manufacturers and final consumers has implications for the magnitude of trade flows on an international level.[17]
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