Vertical Agreements Under EU Competition Law: Proposals for Pushing Article 101 Analysis, and the Modernization Process, to a Logical Conclusion

Abstract

This paper examines how vertical agreements are analysed under Article 101 of the Treaty on the Functioning of the European Union. It observes that, in spite of modernization and the Commission’s promise to adopt a more ‘effects-based’ approach towards vertical agreements, Article 101 analysis has not evolved as might have been anticipated. Rather, it argues that the legal system still fails adequately to reflect, and is out of kilter with, the economic logic of vertical restraints. Not only does it continue to rely heavily on broad presumptions of illegality which are not justified by economic theory or experience (creating a risk of Type I errors), but the dearth of decided cases has meant that a transparent structure for analysing and balancing the competitive harms and benefits of vertical arrangements (especially new online distribution practices) has not developed. This uncertainty has been compounded by the disparities in approach to enforcement emerging at the national level.

The paper considers how best to align EU law with mainstream economic thinking and proposes an approach which focuses more closely on the concepts underpinning the rules than the historic categories of analysis that have, to date, been relied upon. It also suggests how these changes might be effected and an administrable system governing vertical restraints put in place. It argues that, in order to achieve this change, the Commission should publish some carefully selected decisions in relation to vertical agreements, especially more complex effects cases. Such decisions will provide the opportunity for scrutiny of the Commission’s policy by the EU courts and ensure that the law in this important area is elucidated, particularly as distribution practices adapt to the challenges presented by the online environment and growth of e-commerce. These decisions, along with the information gathered in the course of the Commission’s e-commerce sector inquiry, may provide the crucial foundations for a necessary review and revision of the current regime and guidelines governing vertical agreements in the EU.

Keywords: Vertical Agreements, Hardcore Restraints, Antitrust Analysis

JEL Classification: K21, L40, L42