Vertical Restraints after Generics and Budapest Bank

Abstract

This paper considers the implications of Generics and Budapest Bank for the legal treatment of vertical restraints (in particular in the context of the ongoing review of the Block Exemption Regulation). The analysis focuses on two of the main justifications for vertical restraints, namely brand protection and the fight against free riding.

The logic underpinning Generics and Budapest Bank suggests that, insofar as they are capable of producing pro-competitive effects, vertical restraints aimed at preserving a firm's brand image and/or at addressing free riding concerns are not restrictive of competition by object. The lessons of experience and economic analysis lead to the same conclusion.

Three main conclusions follow. First, there seems to be little support for the treatment of MFN clauses as hardcore restrictions. A case-by-case approach seems more suited to their nature, purpose and potential effects. Second, clauses typically found in online selective distribution agreements, including online marketplace and price comparison site bans, should not be treated differently from other restraints having the same object (brand protection). Third, the case law on RPM is a rara avis.

Keywords: Article 101 TFEU; vertical restraints; online distribution; selective distribution; brand protection; free riding; MFN clauses

JEL Classification: K21, L14, L24, L41, L42