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Parallel Trade and Export Restrictions Are Back in The Spotlight
Parallel Trade and Export Restrictions Are Back in The Spotlight
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Enforcement against parallel trade restrictions and export bans is back in the spotlight in
the EU. In this note, we review some recent decisions by the European Commission,
focusing on the types of cross-border restrictions that have attracted the Commission’s
attention, and offer tips to avoid breaking the law in this respect.
The Commission’s 2017 e-Commerce inquiry, which led the Commission to open a
number of investigations into Nike, Guess, Sanrio and Universal Studios.
The European Parliament in its Report on Competition Policy 2018, urged the
Commission to focus on effective competition throughout the food chain, leading
the Commission to pursue FMCG companies such as Ab InBev, and more
recently, Mondelez.
1 Recent parallel trade enforcement: 5 decisions in 8 months and fines reaching €200 million
The Commission has adopted five decisions in the space of eight months between
December 2018 and July 2019, and imposed fines of up to €200 million. These
decisions span a number of sectors and distribution systems, including selective
distribution and licensing arrangements. Also of interest is that the cases concern both
Article 101 (agreements) and Article 102 TFEU (unilateral conduct).
Guess received a fine of €40 million for flouting the rules on selective distribution by
restricting authorised wholesalers from selling outside their allocated territories, as well
as restricting authorised retailers from making cross-border sales to end users, or cross-
selling to other members of the selective distribution network within the EEA.
Additionally, Guess was fined for resale price maintenance alongside restrictions on
cross-border sales, which meant that it was able to maintain higher retail prices in
Eastern Europe than Western Europe.
1/5
The biggest fine, €200 million, was imposed on Ab InBev for abusing its dominance
under Article 102 TFEU by implementing measures that prevented supermarkets and
drinks wholesalers from procuring beer in the Netherlands and importing it into Belgium,
where some beer brands are more expensive. Infringing measures included using
different packaging and labelling for different countries, reducing volumes sold to Dutch
wholesalers in order to limit imports to Belgium, refusing to sell to Dutch retailers without
agreement that they would not import to Belgium, and making promotions conditional on
retailers not offering promotions in Belgium. This fine was awarded under Article 102
TFEU and not Article 101 TFEU, which meant the Commission did not need to establish
an agreement or concerted practice between Ab InBev and others in its supply chain.
At the outset, two notes of caution are in order. First, context will often be important.
Case law suggests that the enforcer often looks at the broader context of a body of
evidence and in particular, on the objectives pursued by the measures and practices.
Second, the Commission may sanction direct and indirect measures - indirect measures
refer to actions to reinforce and encourage compliance with cross-border restrictions.
Most of the measures included below have been considered “agreements” caught by
Article 101 TFEU. Purely unilateral conduct on the part of the supplier could, in principle,
only be problematic if the supplier is dominant (under Article 102 TFEU). We have
indicated in the table below where the measure in question is only (potentially)
problematic if the supplier is dominant. In the context of these recent cases, this related
only to unilateral changes of product packaging to make it harder to sell the products in
particular jurisdictions.
2/5
Supply Reducing volumes to distributors to limit cross-border
stoppages / sales (Ab InBev)
limitations Refusing to sell (key) products unless the distributor
agrees to limit cross-border sales of other (non-key)
products (Ab InBev)
Requiring distributors to stop supplying to customers that
sell cross-border (Nike)
3/5
Package Refusing to supply “official product” holograms or security
design labels to distributors suspected of cross-border sales
(Nike)
Specifying what language a licensee can use on the
licensed merchandise with the aim of preventing out-of-
territory sales (NBCUniversal, Sanrio)
Unilateral changing packaging of products to make it
harder to sell them in particular jurisdictions (e.g. by
removing mandatory label information in a particular
language or changing the design and size of the product)
(only where the supplier is dominant) (Ab InBev)
Firms should therefore take care when instituting measures that have an effect on cross
border trade in the EEA, since:
The Commission is looking beyond contractual measures and takes into account
informal engagements and agreements with customers (Sanrio).
Internal documents, including email exchanges and strategy documents, play a
particularly key role in uncovering conduct and establishing anti-competitive aims
to restrict cross-border sales (Ab InBev).
It does not matter whether the restrictions are infrequently or inconsistently
enforced - these can still contravene competition law (Guess).
The Commission will look at actions which are not in themselves problematic, such
as distributor audits and monitoring of the financial impact of cross border trade, or
measures which are only considered but not implemented, as part of a broader
body of evidence to establish an anti-competitive aim (Ab InBev, Sanrio).
4 Tips
Since the Commission’s appetite to pursue parallel trade cases is not waning, we set out
a number of tips below:
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Conduct compliance training with the relevant businesses to ensure that they
understand the specific EEA position (which may be different from the position
outside the EEA) and can spot and address issues, in both formal and informal
settings, including in exchanges with distributors who may complain about cross
border competition;
Have the supply, distribution and/or licensing contracts vetted by the legal team to
ensure that they do not contain problematic restrictions;
Ensure that all practices limiting parallel trade or cross border sales have a well-
documented and proper rationale, in line with EU law; and
Audit business communications, if appropriate, on a regular basis inside the
company and with resellers, and take appropriate action where needed.
5/5