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Examples of Vertical Agreements

Article 101(1) TFEU prohibits agreements between undertakings which have as their object or effect the restriction, prevention or distortion of competition within the EU and which affect trade between EU Member States[3]. This prohibition applies to all agreements between two or more undertakings, whether competing or not. Susannah Torpey: You know, that`s right. And American Express doesn`t quite dispel the confusion, so there`s still something left. Going back to resale pricing, which is not the kind of deal involved in American Express, courts and scientists have been discussing the contours of an analysis of the rule of reason since Leegin was decided more than 10 years ago. On the federal side, the courts have certainly discussed Leegin, but there haven`t been many district court decisions that have analyzed resale price-fixing agreements according to the rule of reason. Vertical agreements can increase prices, restrict production, restrict or exclude competitors, or reduce the variety of products or services available. Any agreement, understanding or measure that unreasonably restricts competition in this way could be anti-competitive. We focus on vertical restraints in our first episode because we understand that this is a matter of concern, especially for foreign companies trying to understand what types of vertical restraints are acceptable or not from a U.S. perspective. My name is Molly Donovan. I am now a host and partner in Winston & Strawn`s New York office. In leegin, the court announced a new rule to replace the per se rule allowing courts to assess whether resale price-fixing agreements violate section 1 of the Sherman Act.

Under the new rule, resale pricing agreements should be judged under the “rule of convenience”, which is the standard normally applied to assess whether certain vertical restraints violate Article 1. There is more flexibility compared to other vertical agreements. For example, the following types of agreements under the block exemption are not considered to be `hardcore restrictions` (they are referred to as `non-essential agreements`): where it is confirmed that the parties are active at different levels of trade for the purposes of an agreement and that the agreement has an `effect on trade`, the procedure for assessing the vertical agreement under Article 101 TFEU is broadly as follows: Even in cases where a block exemption is not applicable, a vertical agreement can still benefit from an individual exemption. The parties have the right to conduct a self-assessment to determine whether the restrictive vertical agreement meets the conditions for an individual exemption. Like Community competition law, the conditions for an individual exemption are as follows: (i) the agreement must contribute to improving the production or distribution of goods or to promoting technical or economic progress, (ii) it must enable consumers to participate adequately in the resulting benefit, (iii) it must not impose any restrictions on the undertakings concerned; which are not indispensable for the achievement of those objectives, and (iv) it should not impose on the parties restrictions which are not indispensable for the achievement of those objectives. the possibility of eliminating competition in respect of a substantial part of the products concerned. This is not an alternative test and all the requirements of an individual exemption must be met. Molly Donovan: Okay. So let`s start with price-based restrictions.

Can you give some common examples? Susannah Torpey: Of course. Overall, there are two types of agreements, collusion or other anti-competitive measures in antitrust law, which can have the effect of restricting trade. These are vertical restraints and horizontal restraints. A vertical restraint is an agreement concluded at different levels of production, distribution or supply. For example, if you have entered into an anti-competitive agreement between a manufacturer and a distributor, it would be a vertical restraint. This is different from a horizontal restriction, which is an agreement between competitors at the same level of production, distribution or supply. For example, one manufacturer enters into an anti-competitive agreement with another manufacturer. Some vertical agreements may contain restrictions that are not in line with Article 101 TFEU. These are agreements that contain provisions: Susannah Torpey: They can be, but they are not always, depending on where the products are sold. Resale pricing agreements may set a minimum or maximum price for resale. U.S. antitrust laws typically deal with an agreement that sets a reserve price.

Whenever an agreement sets a reserve price, it may conflict with U.S. competition laws, but not necessarily. This is due to a 2007 U.S. Supreme Court decision that changed the law in the United States. The original rule established by the Supreme Court in 1911 was that a minimum purchase price contract in itself was illegal under section 1 of the Sherman Act. This means that the existence of an agreement automatically means that there has been a breach of the agreement. It does not matter whether the agreement actually stimulates competition or has pro-competitive effects that are in the best interests of consumers. According to a per se rule, as long as there is an agreement, there is a violation of the agreement. Susannah Torpey: The Department of Justice has recently focused on resale pricing agreements in the film industry.

Last year, the Justice Department announced that it had launched a review of Paramount`s consent decisions that have been in place for decades. Paramount, the film studio, is one of the oldest in Hollywood. In the 1930s, the government began investigating possible antitrust violations in the film industry, and the DOJ eventually sued five major film studios, including Paramount. The government`s case was settled in 1940 by consent decrees known as Paramount consent decrees. Molly Donovan: It seems that companies need to be quite careful in this area when it comes to resale pricing agreements. Are there examples of resale price-fixing contracts that have recently been reviewed by courts or law enforcement authorities? An “English clause” is a contractual provision that requires a buyer to report a better offer to its supplier and allows it to accept such an offer only if the supplier does not agree. .

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