Out-Law News

CJEU ruling on exclusivity clauses will have far-reaching implications

A recent judgment from the Court of Justice of the EU (CJEU) on exclusivity clauses used by ‘dominant’ companies will have “far-reaching implications”, according to legal experts.

Alan Davis of Pinsent Masons said the decision, handed down on 19 January 2023, would give large or dominant companies more scope in future to defend their exclusivity arrangements “and put forward economic evidence to support arguments as to why they do not breach Article 102 of the Treaty on the Functioning of the European Union (TFEU).”

His comments came after the CJEU clarified that a competition authority cannot assume that the use of exclusivity clauses by a dominant company automatically amounts to an exclusionary abuse in breach of Article 102. Instead, it must engage with the economic evidence put forward by the dominant company defending itself against such allegations. The CJEU said that the competition authority must establish that the exclusivity clauses in question can have exclusionary effects before a breach of Article 102 can be established.

The case centred on a dispute between Unilever and the Italian competition authority. The company was handed a €60 million fine in 2017 after the regulator found that exclusive ice cream distribution deals had harmed a smaller rival company. The competition authority had initially refused to engage with Unilever's economic analysis of the impact of the distribution deals.

Davis said: “This judgment extends the principles established in the landmark CJEU case of Intel, which dealt with loyalty rebates and other pricing-related restrictions, to also encompass the use of exclusivity clauses, which are non-pricing restrictions. The CJEU also clarified that, when a competition authority is investigating whether a dominant company’s conduct amounts to exclusionary abuse in breach of Article 102, there is no single prescribed economic test it is required to apply.”

He added: “The authority has some latitude in this respect. One test that can be applied is the ‘as efficient competitor’ (AEC) test, which was also explored by the CJEU in the Intel case. If the dominant company puts forward a defence by reference to the AEC test, the competition authority must consider it.”

The CJEU also ruled that, where exclusivity clauses are applied via a distribution network, the distributors’ use of such clauses should be imputed to the dominant company if the clauses were unilaterally decided by the dominant company and simply implemented through its distributors, rather than being independently adopted by them. 

Tadeusz Gielas of Pinsent Masons said: “This is another important aspect of the CJEU judgment and will need to be borne in mind by large manufacturers or suppliers active in the EU – that could potentially be considered ‘dominant’ – which require their distributors to use exclusivity clauses in dealings with consumer-facing sales outlets, such as retailers.”

We are working towards submitting your application. Thank you for your patience. An unknown error occurred, please input and try again.