Vertical agreements are contracts between two or more companies operating at different levels of the production or distribution chain, such as manufacturers and distributors, or distributors and retailers. In recent years, such agreements have become a focus of competition law enforcement worldwide. Governments and regulatory bodies have been scrutinizing vertical agreements to ensure that they do not harm competition or lead to higher prices for consumers. In this article, we look at some of the recent cases on vertical agreements in the European Union and the United States.
The European Union`s approach to vertical agreements is governed by EU competition law. Under these laws, vertical agreements that may have anti-competitive effects are prohibited, unless they qualify for an exemption. One of the most significant cases in recent years is the Coty Germany v. Parfümerie Akzente case. Coty was a leading supplier of luxury cosmetics, while Parfümerie Akzente was a retailer selling Coty products in Germany. Coty prohibited its retailers from selling its products on third-party online marketplaces such as Amazon and eBay. The European Court of Justice (ECJ) found that Coty`s selective distribution network was not anti-competitive, as it was intended to preserve the luxury image of its products. The ECJ held that such a restriction was necessary to maintain the quality of the product and preserve the luxury image. Therefore, the ECJ held that such a restriction did not infringe competition law.
In the United States, the approach to vertical agreements is governed by the Sherman Act. This law prohibits agreements that unreasonably restrain competition. The Supreme Court`s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. has been seminal in this area. The case challenged a manufacturer`s policy that required retailers to adhere to a minimum resale price. The Supreme Court held that such agreements were permissible since they promoted interbrand competition. The Court identified several factors to consider when deciding whether a vertical agreement was anti-competitive or not: the market power of the manufacturer, the nature of the product, the competitive environment, and the efficacy of less restrictive alternatives.
Another recent case is the United States v. American Express Co., which dealt with vertical agreements in the credit card market. The case challenged the anti-steering rules of American Express that prohibited merchants from suggesting customers use a different credit card. The Supreme Court held that such agreements did not harm competition in the credit card market, as the rewards offered by American Express attracted customers who would not have otherwise used their cards. The Court held that American Express`s anti-steering rules were necessary to promote competition between credit card networks and avoid free-riding by other networks.
In conclusion, vertical agreements have been increasingly scrutinized by competition law enforcement authorities worldwide. The cases discussed in this article highlight the complexity of these agreements and the need to balance the interest of producers, distributors, and retailers against the need to protect competition and consumer welfare. As a professional, it is important to keep abreast of recent developments in competition law to provide accurate and up-to-date content to readers.
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