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LPC Law Notes International Competition and Anti-Trust Notes

Vertical Agreements Notes

Updated Vertical Agreements Notes

International Competition and Anti-Trust Notes

International Competition and Anti-Trust

Approximately 103 pages

A collection of the best LPC International Competition and Anti-Trust notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor". In short these are what we believe to be the strongest set of International Competition and Anti-Trust notes available in the UK t...

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Outcomes

  1. Appreciate the pro and anti-competitive effects of vertical agreements

  2. Understand the methods employed in vertical agreements to restrict competition

  3. Identify the criteria contained in the European Commission’s Regulation 330/2010 (Vertical Restraints Block Exemption (‘VRBE’))

  4. Apply the VRBE to the terms of a draft distribution agreement

  5. Develop drafting skills

Definition ? set out in VRBE: agreements … entered into between two or more undertakings each of which operates, for the purposes of the agreement or the concerted practice, at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services. (Article 1(1)(a))

Outcome 1 – pro and anti competitive effects of vertical agreements

Outcome 2 - methods employed in vertical agreements to restrict competition

Anti-competitive
Inter-brand competition

  • Describes the competitive dynamic relating to the different brands of the same product e.g. levis, lee, diesel

  • Inter-brand competition relates to how these brands compete against each other in order to gain greater sales

E.g. single purchasing agreement

  • Retailer agrees to supply just one brand of product, which means that other brands are restricted

  • Other brands route to market and consumer is restricted due to single branding agreement

  • Route to market must be in fact restricted

    • Will be dependent on the power of the retailer

    • Market share must be reviewed and known by the legal adviser
Intra- brand competition

  • Describes the competition dynamic relating to the same branded product

E.g. manufacturer attempts to prevent or reduce competition between those that stock product

  • For example when a manufacturer insist all stores sell product at same price which removes the opportunity for stores to sell competitively to induce customers

  • Customers are forced to buy product at a fixed price irrespective of where they purchase the product
Resale price maintenance

  • Form of price fixing

  • Resale price maintenance occurs where, for example, a manufacturer insists that its products can only be sold at a certain price (max, min, recommended)

  • The main competition concern with these types of arrangements is the reduction of intra-brand competition

  • Often accompanied with market partitioning to stop undermining of the brand by other sellers by creating an export ban between markets

  • From a competition law perspective, market partitioning impacts on intrabrand competition, as it will remove competition between retailer A and B
Limited distribution agreement

  • In these agreements, the manufacturer sells to only one or a limited number of buyers

  • At its most extreme, where only one buyer is allocated this can eliminate intra-brand competition
Single Branding Group

  • In these types of arrangements, the buyer is rewarded, or forced, to buy its requirement for a particular product from one supplier. For example, the buyer will buy one brand of computer, rather than stocking a number of competing products

  • Often, this may not matter because brand owners two and three will simply get their products to market via other retailers

  • However, if the retailer is a particularly significant player on the market, and is the only, or one of a very limited number of routes via which the product in question can get to the relevant market, then there is a clear impact on interbrand competition

  • Therefore consideration of market conditions, including the parties’ market share would normally need to be considered
Pro-competitive effects

  • Possibility for vertical agreements to increase competitive dynamic on market

  • In fact vertical agreements are often required as a commercial solution to get product to market (e.g. where the manufacturer has little or no experience in a sector)

  • Without ability to enter vertical agreements there may be difficulties with the product getting to market

  • The competition rules relating to vertical arrangements must be sufficiently robust in order to prohibit anti-competitive behaviour, but also sufficiently flexible to allow parties to enter into useful commercial arrangements

  • Competition law needs to ensure that the protection granted to distributors goes no further than necessary and stifles competition
Resale price maintenance

  • There may be perfectly legitimate reasons for a manufacturer to suggest a price at which its goods should be sold

  • If the price of the product is too high, the number of products sold may be less than the manufacturer would hope for. If the price is too low, then the manufacturer’s brand could be damaged

  • Looked at like this, a recommended resale price becomes a perfectly legitimate commercial practice

  • So we can see that the rules must acknowledge the diversity of the commercial environment and the business arrangements within it. They need to be flexible enough to allow certain types of pricing strategy, such as setting a maximum or recommended retail price, whilst ensuring that this never amounts to the setting of fixed or minimum prices, which is always prohibited
Limited Distribution Agreement

  • The new distributor is likely to take on financial risk when agreeing to distribute a new product. It’ll have to invest in things such as premises, employees and stock, and in some industries this initial investment by the distributor will be considerable

  • The new distributor, not unreasonably, will want some reassurance that the other distributors in the network will not target its customers and thereby undermine its business

  • If no reassurance can be given because the competition rules are too inflexible, potential distributors may simply be unwilling to take on the financial risk. If this is the case, consumers in the new territory will be denied easy access to the product
Single Branding

  • A manufacturer entering a new market may want to be sure that its distributor or retailer is devoting their attention to the manufacturer’s...

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