Question 1

The Clear Vision Company (CVC) is a manufacturer of DVD recorders. It wishes to enter into an exclusive distribution agreement of unlimited duration with two dealers of electrical equipment to distribute its products in the United Kingdom (UK) and Germany. The German company ‘Foto GmbH’ (F) and the UK company ‘DVDcam Ltd’ (D) are the chosen companies. There is no connection between the two companies.

The agreements between CVC and F and CVC and D contain the following clauses:

1. CVC undertake not to supply any other distributor in the UK or Germany.
2. F and D shall follow the Advisory Retail Price structure and price increases of CVC.
3. F and D shall not seek to sell outside of their respective areas and shall pass on sales enquiries from the other area to the other party. They shall not sell to other distributors.
4. F and D shall provide a sales display area according to the annex attached and ensure that only CVC-trained staff are responsible for the sales of CVC DVD recorders.

The parties to the agreement wish to know whether the terms of their agreement are ones which fall either within or outside a block exemption. If not, you are asked to advise whether the terms do then infringe Art 101 TFEU.

Answer guidance

This problem on competition law concentrates on distribution agreements and the Vertical Restraints Regulation. The problem question itself sets out what issues it wants you to discuss. You are asked to determine whether the agreement reached between the parties is one which would, for special reasons, be exempted by a block exemption from the consequences of being contrary to EU competition law. This assumes that the agreement is already one likely to offend EU competition law provisions and it must be determined whether this is correct or incorrect.

Start by outlining the fundamentals of EU competition policy and law and providing details of Art 101 TFEU and in particular Art 101(3) TFEU. Explain the system and application of block exemptions.

It is not clear at first sight whether the agreement is an exclusive or selective one, as it appears it could be either. This is certainly less important now following the enactment of the single vertical agreement exemption (Vertical Restraints Regulation 330/2010) which replaced three different vertical agreements Regulations (1143/83, 1484/83, and 4087/88) and needs to be considered. The only question here as to whether Regulation 330/2010 may apply is whether we are dealing with a vertical agreement. As the problem concerns the agreement with a manufacturer and two distributors, this is clearly satisfied. Support any conclusions with relevant case law, for example, the pricing clause is ambiguous and thus if it tries to fix prices rather than simply recommend, it will not be acceptable; see the Pronuptia case (161/84) in which advisory prices were considered by the CoJ to be acceptable.

The sales restriction in Clause 3 of the agreement almost certainly amounts to an export ban and it will not be acceptable; see the cases of Consten and Grundig (56 and 58/64), the Bayer Dental case (65/86), or the Konica decision (88/172). The final clause appears to be an acceptable condition to ensure quality distribution of specialist products; see the Metro cases (26/76 and 75/84) and the Perfume cases (253/78, 1–3/79).

In conclusion, determine whether there is an infringement of Art 101 TFEU.

Question 2

On the information of Adam, a former employee of ‘Kidstuff’ (K), a manufacturer of children’s toys, the EU Commission is investigating the possibility that K has entered into forms of agreement with companies in France, Italy, and Germany which have resulted in price-fixing and market-sharing. Suspecting that this is the case, EU Commission officials raid all of the companies involved in an attempt to obtain further information.

When they arrived at the premises of K, they were refused entry for five hours and when finally they were allowed in, company employees were obstructive by not facilitating access to locked filing cabinets and computer programs. The Commission officials returned later and seized a considerable amount of correspondence. The company has later claimed that many of the letters were subject to principles of professional secrecy and legal privilege and should not have been taken and cannot be used in the investigation and decision in respect of their activities.

As a result of the fact that Adam’s new employer, a competitor of K, has learned from Commission documents that Adam had tipped off the Commission, he has been dismissed.

With reference to the case law of the Court of Justice, outline the rights and duties of the Commission and the company in the investigation of competition law infringements.

Answer guidance

This problem on competition law is largely concerned with the application of Regulation 1/2003 which sets out the powers and duties of the Commission in investigating suspected competition law infringements and is thus concerned with the procedural law of investigations by the Commission. First of all , it would be helpful to provide a broad outline of competition policy and enforcement.

To answer the question you will need to identify the issues and then outline the powers provided by Regulation 1/2003 and relevant case law of the Commission to deal with the factual issues as identified. These include the raid of the premises of companies, the entry rights the Commission has, the ability or power it has to take documents, professional privacy, the duty of secrecy which is imposed on it by reference to cases such as see the cases of Hoechst v Commission (46/87 and 227/88), Dow v Commission (85/87), and Orkem v Commission (374/87). Note the possibility of an action for damages by Adam for the loss of his job under the Stanley Adams case (145/83).