The main competition restrictions assessed under competition legislation are: resale price maintenance, territory or client sharing,
- What are the legal sources that set out the antitrust law applicable to vertical restraints?
Article 5(1) of the Competition Law No. 21/1996 (the Competition Law) prohibits agreements between undertakings having as their object or effect the restriction, prevention or distortion of competi- tion on the Romanian market or a part thereof.
The norms detailing the application of the above rules were abol- ished following an amendment to the Competition Law that came into force on 5 August 2010. The amendment expressly provides that any assessment of vertical restraints falling under article 5(1) of the Competition Law or article 101(1) of the Treaty on the Function- ing of the European Union (TFEU) will be carried out according to European Commission Regulation No. 330/2010 (the Vertical Block Exemption Regulation – VBER), the related notices and guidelines and all other relevant EU sector-specific regulations (see question 7). Although the substantive national rules were already similar to the EU rules, it is as yet unclear how the EU rules will be interpreted and applied to block-exempt vertical agreements under the national rules. In 2011, the Competition Council applied the VBER criteria in order to assess whether agreements under its review could be qualified as agency agreements or not (see question 12).
Types of vertical restraint
- List and describe the types of vertical restraints that are subject to antitrust Is the concept of vertical restraint defined in the antitrust law?
There is no legal definition of the concept of vertical restraint covered by the Competition Law. Vertical restraints that represent hard-core restrictions under the VBER are listed as such in the Competition Law as restrictions of competition that eliminate the benefit of the de minimis thresholds for the agreement in which they are placed. The concept of vertical restraints and detailed references to this type of agreement are interpreted by the national competition authority (Competition Council) in the light of the EU regulations. The VBER defines the concept of vertical agreements, which includes any agree- ment or concerted practice entered into between two or more under- takings – each of them operating, for the purposes of the agreement, at different levels of the production or distribution chains – and related to the conditions under which the parties may purchase, sell or resell products. Examples include: agreements concerning exclu- sive distribution (territorial exclusivity, trademark exclusivity, exclu- sive clients’ allocation), selective distribution, exclusive purchase and exclusive sale.
Vertical restraints, however, are not exhaustively defined within the VBER. Such restraints are any competition restrictions falling within the scope of article 5(1) of the Competition Law and included in vertical agreements.
restriction of active or passive sales within the context of various distribution systems (exclusive, selective), non-compete clauses, fran- chise, exclusive sale and tying. Under Romanian antitrust practice so far, restrictions such as resale price maintenance, limitation of output or sales, market sharing and auction-related restraints were considered as having an anti-competitive object and were therefore analysed as per se restrictions whose anti-competitive effects do not need to be identified on the market.
- Is the only objective pursued by the law on vertical restraints economic, or does it also seek to promote or protect other interests?
The ultimate objective of the Competition Law is to promote consumer welfare.
Article 5 regarding (among others) vertical restraints seeks to protect competition rather than competitors. The Competition Council tends to apply the legal provisions in a conservative manner and usually adopts close to a per se approach, rather than taking into consideration substantially economic grounds.
- Which authority is responsible for enforcing prohibitions on anti- competitive vertical restraints? Where there are multiple responsible authorities, how are cases allocated? Do governments or ministers have a role?
The enforcement responsibility of antitrust rules lies principally with the Competition Council, an autonomous administrative authority, and secondarily with Romanian courts of law. A number of regula- tory agencies in certain sectors (energy, gas, communications, etc) also share certain competition enforcement powers. The Competi- tion Council may cooperate with those agencies based on protocols that have not been made public.
The Competition Council’s decisions are subject to appeal, which may be filed with the Bucharest Court of Appeal, within 30 days from the communication of the decision issued. The decision of the Bucharest Court of Appeal may be further challenged before the High Court of Cassation and Justice. A sanctioning decision issued by the Competition Council can be suspended upon a party’s request to the Bucharest Court of Appeal, subject to the payment of an amount up to 20 per cent of the established fine, according to legal provisions on budgetary receivables.
The courts of law may resolve private enforcement cases, includ- ing the award of damages. In the latter case, the courts will apply general Romanian law rules on civil liability.
concluded by undertakings that are not competitors on any relevant market and whose market share does not exceed 15 per cent on any such market, provided that no such agreement includes the hard-core vertical restraints stipulated by the VBER. This threshold may be reduced to 5 per cent if the market suffers a cumulative effect.
- What is the test for determining whether a vertical restraint will be subject to antitrust law in your jurisdiction? Has the law in your
jurisdiction regarding vertical restraints been applied extraterritorially? Has it been applied in a pure internet context and if so what factors were deemed relevant when considering jurisdiction?
The Competition Law applies to vertical restraints carried out in Romania or abroad, but generating effects on the Romanian market or on a part thereof. To our knowledge, the Competition Council has not yet issued a decision grounded on a purely extraterritorial application of the Competition Law or in a pure internet context.
Agreements concluded by public entities
The Competition Law continues to exclude from its scope verti- cal agreements concluded between undertakings that are part of the same economic group and agency agreements.
- Is there a definition of ‘agreement’ – or its equivalent – in the antitrust law of your jurisdiction?
The Competition Law does not include an extensive definition of the concept of ‘agreement’, which covers any tacit or express ‘understandings’ between undertakings or associations of undertakings, any decision issued by the associations of undertakings and any con- certed practice between undertakings.
6 To what extent does antitrust law apply to vertical restraints in agreements concluded by public entities?
The law, regulations and guidelines do not contain provisions regard- ing the application of the vertical restraint rules to state and municipal authorities. State-owned companies clearly fall under the scope of the Competition Law. Following an amendment of the Competition Law, a general provision has been included that allows the Competition Council to censure any actions of central or local level public authori- ties that impede, restrain or distort competition by limiting freedom of trade or undertakings’ autonomy or by setting discriminatory con- ditions for the activity of undertakings As this prohibition concerns the activity of public entities in their capacity of public authority, competition rules including those on vertical restrains should apply to them in the context where they are party to an agreement. It is unclear, however, how state and municipal authorities would act in a vertical relationship, other than as mere end-consumers.
- In order to engage the antitrust law in relation to vertical restraints, is it necessary for there to be a formal written agreement or can the relevant rules be engaged by an informal or unwritten understanding?
In line with European Commission practice and the EU courts’ case law, the Competition Council and the courts will find an agreement existing where a ‘meeting of minds’ happened between the relevant undertakings, whether it was included in a formal, written contract or just an oral understanding or practice. The concurrence of wills may be proved by any type of acceptable evidence pursuant to the Romanian Civil Procedure Code. The Competition Council does not pay extra attention to the ‘form’ in order to find proof of unlawful vertical restraints. In one case, it decided that a policy paper communicated by email to the distributors and implemented by most of them created an agreement between the supplier and the distributors (Competition Council Decision No. 224/2005, Wrigley Romania).
7 Do particular laws or regulations apply to the assessment of vertical restraints in specific sectors of industry (motor cars, insurance, etc)? Please identify the rules and the sectors they cover.
As of 5 August 2010, all the Competition Council Regulations on the application of article 5(2) of the Competition Law to vertical agree- ments in specific sectors (motor vehicle, agreements on technology transfer, insurance, and so on) were abolished and replaced by rel- evant European Commission regulations. The Competition Council appears to have pursued total harmonisation with EU rules when assessing vertical restraints in these specific sectors.
It is still, however, unknown in what manner the Competition Council will apply these rules to practices having a purely national dimension and effects.
In a 2011 decision, the Competition Council found that an anti- competitive practice was carried out by a supplier and its distribu- tors outside their contractual relation, as the agreements concluded between them did not include any express provision in this sense. (Competition Council Decision No. 18/ 2011, Interfruct, Albinuta and Profi.)
Parent and related-company agreements
- In what circumstances do the vertical restraints rules apply to agreements between a parent company and a related company (or between related companies of the same parent company)?
Rules prohibiting vertical restraints are not applicable to agreements concluded between undertakings that are part of the same group.
The definition of the antitrust concept of ‘group’ is included in the Competition Council Guidelines on the concepts of concentration,
8 Are there any general exceptions from antitrust law for certain types of agreement containing vertical restraints? If so, please describe.
The amendments that came into force in 2010 repealed the excep- tions according to which competition law did not apply to the labour market and labour relationships or to the money market and the securities market. Now no special sector is excluded from the scope of the Competition Law. Regular employment relationships might fall outside the scope of the Competition Law, to the extent that the employee would not be deemed an ‘undertaking’, within the mean- ing of the Competition Law (ie, an entity carrying out an economic activity which provides goods and services on a market).
The de minimis rule was amended, now being in line with the EU rules: the competition rules do not apply to vertical agreements
undertaking concerned, full functionality and turnover.
As a general rule, the ‘group’ includes:
- the relevant undertaking (the firm);
- its subsidiaries, defined as the undertakings to which the firm directly or indirectly:
- holds more than half of the share capital or of the assets;
- can exercise more than half of the voting rights;
- can appoint more than half of the members of the board of directors, or of the bodies that legally represent the undertak- ings; and
- has the right to direct the businesses of the respective undertakings;
- the firm’s control-holders, viewed as the undertakings that are entitled to exercise the above rights or powers over the firm;
- the subsidiaries of the firm’s control-holders – the undertakings over which the firm’s control holders can exercise the above rights; and
- the joint ventures that are controlled by two or more of the undertakings previously
The underlying justification of the rule is the fact that companies within the same group fall under the control of the same final party or parties and do not act independently in the market while conclud- ing vertical agreements.
- In what circumstances does antitrust law on vertical restraints apply to agent–principal agreements in which an undertaking agrees to perform certain services on a supplier’s behalf for a sales-based commission payment?
Agency agreements are now treated under the EU competition rules. Therefore, as a matter of principle, the Competition Law does not apply to agency agreements, in so far as the vertical restraints con- cern the agents’ obligations under the agreements concluded on behalf of their principal. An agency agreement is qualified as such when the agent does not bear or bears insignificant risks related to the contracts negotiated or concluded on behalf of the principal or in relation to sector-specific investments. In a 2011 resale price-fix- ing decision, the Competition Council assessed an agreement from the perspective of: (i) the transfer of the ownership rights over the goods from the supplier to the retailers; (ii) the joint bearing of risks between the parties; (iii) the elimination of the intermediary position of the agent between supplier and client; and (iv) the existence of specific types of expenses (eg, for the training of the personnel or for marketing activities) made by the agent. In refusing the qualifica- tion as an agency agreement, the Competition Council paid specific attention to the manner in which the parties reflected the remunera- tion received in their accounting records: the supplier recorded that remuneration as a genuine discount by decreasing its profits with the amount paid to the retailer and the later reflected these amounts as additional income on which VAT was applied (Competition Council Decision No. 18/2011, Interfruct, Albinuta and Profi).
However, the clauses regulating the relations between the agent and the principal (exclusive agency clauses and non-compete clauses) may fall under the prohibition of article 5(1) of the Competition Law, particularly when the inter-brand competition on the relevant market is limited.
Compliance with the above criteria does not offer a full guaran- tee on the competitive framework applying to an agency agreement. An agency agreement compliant with all the applicable rules listed above will fall under article 5(1) if it facilitates a secret anti-compet- itive agreement on the relevant market.
Article 5(1) will apply entirely to a non-genuine agency agree- ment. Furthermore, a clause forbidding the agent to offer a price reduction by limiting its own commission will be seen by the Com- petition Council as a hard-core restriction.
A sales-based commission payment should not prevent the appli- cation of this safe harbour. If the sales-based remuneration is com- bined with a system where the agent buys and resells the products in question, or where the agent bears risks and investment costs, it is likely that the Competition Council will view such an arrangement more like a distribution than an agency.
- Where antitrust rules do not apply (or apply differently) to agent– principal relationships, is there guidance (or are there recent authority decisions) on what constitutes an agent–principal relationship for these purposes?
Please see above. The guidance derives mainly from the EU rules.
In its practice until 2010, there were cases where the Competition Council accepted as agency systems agreements where the agent acquired and resold the products in question, without bearing signifi- cant risks (eg, returning unsold products to the principal); however, the 2011 practice seems to have adopted the position in line with the EU practice, so that such agency systems are not excluded from the scope of application of the Competition Law.
Intellectual property rights
- Is antitrust law applied differently when the agreement containing the vertical restraint also contains provisions granting intellectual property rights (IPRs)?
Until the amendment of the Competition Law, the domestic block exemption regulation contained specific rules for licensing agree- ments related to intellectual property rights. As these rules are no longer in force as of 5 August 2010, such arrangements are gener- ally governed by rules set out in the VBER whenever the licensing or assignment of IPRs does not represent the agreement’s core objec- tive and their effect on the market is not similar to one of the non- exempted restrictions. On the other hand, agreements having as their principal objective the transfer of IPRs will have to comply with the European Block Exemption for Technology Transfer Agreements.
Analytical framework for assessment
- Explain the analytical framework that applies when assessing vertical restraints under antitrust
The assessment of a vertical agreement will include the following steps:
- determining whether the agreement falls within the scope of the competition rules;
- identifying structures or clauses that may raise competition con- cerns under the vertical restraints rules;
- identifying per se infringements: resale price fixing, market and client sharing, limitation of passive sales, restriction of selective distributors to supply each other and end-consumers, restriction agreed between a spare parts supplier and a buyer, limiting the supplier’s freedom to sell the respective products to other repair- ers, service providers and end-consumers. The existence of this kind of vertical restraint will lead to the exclusion of the agree- ment from the benefit of the VBER;
- assessing whether the VBER may apply. The analysis will include the definition of the relevant markets that are affected by the agreement, the calculation of the relevant party’s (supplier or distributor) market share and the substantive analysis of the relevant clauses. Parties to the vertical agreement must them- selves verify whether their agreement falls within the scope of the block exemption with no intervention from the Competition Council;
- if the agreement does not fulfil all the criteria for benefiting from the block exemption, the parties would have to self-assess their agreement and its impact on competition, in order to check the possibility of application of an individual Until 2010, agreements or concerted practices not qualifying for block exemption could have been individually exempted on the basis of a decision issued by the Competition Council following an investigation procedure. The amendments to the Competition Law now provide that vertical restraints satisfying the benefits conditions listed in article 5(2) of the Competition Law are con- sidered legal without any notification or decision from the Com- petition Council. Companies will therefore have to self-assess the competitive impact and effects of the vertical restraints, in line with the following requirements:
- the agreements contribute to improving the production or distribution of products or to the promotion of technical and economic progress while ensuring a corresponding advantage to consumers;
- the agreements do not impose on the undertakings party to the agreement restrictions that are not indispensable for attaining their purpose; and
- the agreements do not allow undertakings the possibility of eliminating competition on a substantial part of the market affected by the
- To what extent are supplier market shares relevant when assessing the legality of individual restraints? Are the market positions and conduct of other suppliers relevant? Is it relevant whether certain types of restriction are widely used by suppliers in the market?
The assessment of vertical restraints is based on key economic con- cepts such as relevant product and geographic market, market shares, market structure, cumulative effects and competitors.
The block exemption does not apply to agreements concluded by a supplier with a market share greater than 30 per cent on the relevant market or, respectively, by a buyer with a market share greater than 30 per cent. The structure of the relevant market (monopoly, oligopoly, concentrated market or competitive market) is also important. A specific competition concern related to vertical agreements is the existence of parallel networks of restrictive agreements that may lead to market foreclosure. The Competition Council may withdraw or refuse the benefit of the block or individual exemption if cumulative effects appear on the market: if such parallel networks of similar verti- cal restraints cover more than 50 per cent of the relevant market, even if individually each agreement fulfils the block exemption conditions, the Competition Council may withdraw the block exemption benefit and make the assessment under the individual exemption criteria.
- To what extent are buyer market shares relevant when assessing the legality of individual restraints? Are the market positions and conduct of other buyers relevant? Is it relevant whether certain types of restriction are widely agreed to by buyers in the market?
From 2010 buyer market shares in excess of 30 per cent will exclude an agreement from the scope of application of the VBER. Otherwise, the Competition Council took buyer power into account in cases where an individual exemption was required. In 2009 the Competi- tion Council exempted the exclusive distribution agreements con- cluded by a large chocolate manufacturer with an important national retail player, because irrespective of the buyer’s market share, the relevant market was a competitive one (Competition Council Deci- sion No. 12/2009 concerning the individual exemption granted to different exclusive distribution agreements on the sugar products market – Cadbury Romania).
Regarding the assessment of restrictions widely agreed to by buy- ers in the market please see above the details on the 2009 sector inquiry on the retail food market.
Block exemption and safe harbour
Market-entry barriers, the reduction of intra-brand and inter- brand competition or the maturity of the relevant market may also be relevant factors. In an individual exemption decision (Competition Council Decision No. 95/2008 concerning the exclusive distribution system used by Kraft on the Romanian market), the Competition Council had to assess the impact of an exclusive distribution system combined with trademark exclusivity on the chocolate market. Even
- Is there a block exemption or safe harbour that provides certainty to companies as to the legality of vertical restraints under certain conditions? If so, please explain how this block exemption or safe harbour
The new rules on vertical restraints now provide that agreements and concerted practices satisfying the benefit conditions listed in article 5(2) of the Competition Law are considered legal without any notification or decision from the Competition Council. Under the Competition Law, vertical agreements falling under the scope of article 5(1) are exempted on the basis of the VBER and the other block exemption regulations adopted by the European Commission. Companies will therefore have to self-assess the effects of the respec- tive vertical agreements by applying the EU principles. The VBER provides that in order for the block exemption to apply, the market share held by each of the undertakings party to the agreement must not exceed 30 per cent.
though the Romanian chocolate production market is highly concentrated with three producers (including Kraft) holding more than 60
Types of restraint
per cent, the authority found that the exclusive distribution system would not have negative effects outweighing the positive ones, as the system included a large number of distributors that were allowed to supply non-authorised distributors within their territory and whose passive sales to other exclusive territories were not restricted. Even though a non-compete obligation and acquisition targets were imposed, it was concluded that inter-brand and intra-brand competition was not negatively affected and the large number of distributors existing on the market (around 200) would ensure that no entry barriers exist on the chocolate distribution market.
So far the Competition Council has not performed any analysis on the extensive use on the market of certain types of agreements or restrictions in individual decisions. Such an assessment has been carried out only within the framework of market research investigations, the equivalent of EU-level sector inquiries. In the 2009 sector inquiry on the retail food market, the Competition Council assessed the impact on the market of several vertical restraints extensively used in the agreements concluded between retailers and their suppliers – the most-favoured client clause, several types of shelf taxes perceived by retailers (eg, for the extension and modernisation of retail chains, for promotion campaigns, for covering the risk of unsold products) and category management. The sector inquiry report includes a more in-depth assessment of the notions of buyer market power and the subsequent negotiation power in the conclusion of agreements, particularly in the case of large retailers of fast-moving consumer goods (FMCG).
- How is restricting the buyer’s ability to determine its resale price assessed under antitrust law?
Resale price maintenance, as a general principle, is one of the hard- core restrictions and was so far considered to be a per se infringement irrespective of parties’ turnover or market shares.
A recommended resale price or a maximum resale price will be regarded as legal, in so far as it will not lead in practice, due to the supplier’s market position and power, to the setting of a fixed or minimum resale price. Accordingly, the Competition Council found that the maximum prices recommended by Wrigley Romania to its exclusive distributors, combined with the existence of a recommended discount list to be applied by the latter, were actually functioning like fixed prices. This was the consequence of the large market power and market share held by Wrigley in Romania, with more than 90 per cent of the chewing gum market (Competition Council Decision No. 224/2005).
Also, in the 2011 decision already mentioned, the Competition Council identified the existence of a resale price-fixing practice as the parties agreed that the resale price of the products at stake had to be equal to the purchase price and the retailers would receive from the supplier a monthly discount applied as a percentage to the volume of sales. The practice was qualified as RPM leaving no profit margin to the retailers (Competition Council Decision No. 18/ 2011, Interfruct, Albinuta and Profi).
- Have the authorities considered in their decisions or guidelines resale
price maintenance restrictions that apply for a limited period to the launch of a new product or brand, or to a specific promotion or sales campaign; or specifically to prevent a retailer using a brand as a ‘loss leader’?
There has been no decision issued by the Competition Council allowing a manufacturer to fix resale prices even for a limited period of time. Informally, the Competition Council has not expressed either a fully flexible approach related to the efficiencies that resale price maintenance can occasionally bring.
- Have decisions or guidelines relating to resale price maintenance addressed the possible links between such conduct and other forms of restraint?
In the Wrigley Romania decision, the Competition Council was also called upon to decide on the distribution system used. While the agreements did not contain client or territory allocations, in practice the parties applied an exclusive distribution system, with sanctions applied when sales were made to non-allocated clients. The competition authority did not establish clear connections between the price- fixing and the client allocation and assessed them as two non-related practices. It implied, however, that territorial exclusivity coupled with resale price-fixing eliminated the competition on price. Even though not analysed in strict connection, the above-mentioned vertical restraints were cumulatively assessed by the authority as ‘medium- core’ infringements. The Council further implied that even if generally efficiencies could result from the allocation of clients between distributors, this was not the case for the system applied by Wrigley Romania, as no investments in specific equipment, skills or know-how were proved. Nonetheless, in some cases, vertical agreements providing interlinked territorial restrictions, minimum acquisitions and even resale price recommendations may be perceived as indispensable for gaining economic effectiveness of one distribution system.
The Competition Council has not issued any particular guide- lines on possible links between resale price maintenance and other forms of vertical restraints, but instead it is competent to directly apply relevant EU regulations and guidelines addressing such types of vertical restraints.
- Have decisions or guidelines relating to resale price maintenance addressed the efficiencies that can arguably arise out of such restrictions?
The Competition Council has not yet issued any guidelines nor individually addressed efficiencies that could arise out of resale price maintenance restrictions. Such restrictions have so far been consid- ered as hard-core restrictions not subject to individual exemptions. It has, however, noted in the Interfruct decision that where no block exemption was available for RPM clauses, parties could try to make an individual exemption case based on efficiencies defence.
- How is restricting the territory into which a buyer may resell contract products assessed? In what circumstances may a supplier require a buyer of its products not to resell the products in certain territories?
Within an exclusive distribution system, the distributor’s active sales in the territories exclusively allocated to other distributors or retained by the supplier can be legally restricted. The Competition Council issued two decisions in 2011 related to the restriction of a buyer’s ability to resell in certain territories certain pharmaceutical products (Competition Council Decision No. 52/2011 Baxter and its distribu- tors and Competition Council Decision No. 51/2011 Belupo and its distributors).
Both suppliers sold their products on the Romanian territory based on an exclusive distribution system, which restricted both
active and passive sales of the products outside the territory exclusively allocated to each distributor.
The parallel trade restriction has been qualified as an infringe- ment by object. The Competition Council found also that the restric- tion of passive sales could not increase the efficiency of the exclusive distribution system and consequently the parties to the agreement could not claim the benefit of an individual exemption.
- Explain how restricting the customers to whom a buyer may resell contract products is In what circumstances may a supplier require a buyer not to resell products to certain resellers or end- consumers?
The restrictions of sales to specific customer categories are prohib- ited, with the following exceptions: within an exclusive distribution, the supplier can restrict sales to categories of customers that have been exclusively allocated to other distributors or retained by it; within the selective distribution, it is legal to restrict sales by mem- bers of the system to non-authorised distributors; and the ability of a distributor acting at wholesale level to sell the products to end- consumers may also be restricted.
- How is restricting the uses to which a buyer puts the contract products assessed?
A supplier could be specifically allowed to limit the buyer’s ability to resell spare parts to clients that might use them for the manufacturing of similar products competing with the supplier’s.
- How is restricting the buyer’s ability to generate or effect sales via the internet assessed?
Internet sales are generally qualified as passive sales and the buyer should be free to use the internet for sale or advertising. Restrictions on internet advertising or sales could be acceptable only to the extent that the use of the internet would lead to passive sales in territories or to client categories exclusively allocated to the supplier or other distributors. Examples of such acceptable restrictions include bans on hyperlinks dedicated to customers located in other territories and unsolicited emails.
No national competition practice or case law has been developed so far with respect to internet sales restrictions.
- Have decisions or guidelines on vertical restraints distinguished in any way between different types of internet sales channel?
There are no guidelines or other rules issued by the Competition Council that distinguish between different types of internet sales channel. In such a case, relevant EU provisions and case law should further be applied.
- Briefly explain how agreements establishing ‘selective’ distribution systems are Must the criteria for selection be published?
The Competition Council directly applies to selective distribution systems in Romania the conditions established at EU level. In prin- ciple, these agreements could benefit from the block exemption if the market share threshold of the parties does not exceed 30 per cent and -provided that agreements do not include hard-core restric- tions (resale price maintenance, restriction of active or passive sales to end-consumers of members of the system acting at retail level and restrictions of supply between the members of the system). The presence of these vertical restraints would affect the validity of the agreement as a whole.
When put into practice, the selective distribution must rely on sufficiently impartial and non-discriminatory selection criteria. In relation to all distributors, suppliers are bound to transparently
provide (eg, through periodical written communications containing the same conditions applied to all distributors) all terms and condi- tions of the distribution system. Whenever a selective distribution system exceeds the legal antitrust requirements, any affected distributor or competing entity may submit a claim to the Competition Council or directly to national courts.
- Are selective distribution systems more likely to be lawful where they relate to certain types of product? If so, which types of product and why?
By definition, selective distribution is used to limit the number of dis- tributors based on criteria determined by the nature of the product. Selective distribution is usually used for the sale of luxury products, which benefit from a certain image, a brand, a specific type of cli- entele or the sale of technical products that require specific skills or know-how (cars, IT retail, etc).
For this type of product, it is generally considered legitimate to impose selection criteria for distributors, necessary for the preservation of the brand’s image or required objectively by the technical nature of the products.
- How is restricting the buyer’s ability to obtain the supplier’s products from alternative sources assessed?
The obligation for the buyer to buy the contract products only from the supplier or a source designated by it is considered a non-compete obligation, which can be exempted under the VBER if is not assumed for more than five years or for an indefinite period, and all other conditions are fulfilled.
The Competition Council has paid more attention to this restric- tion in the 2011 Decision regarding Belupo and its distributors. The exclusive distribution agreement in place was combined with an exclusive sourcing obligation. The Council found that the combina- tion of exclusive distribution with exclusive sourcing increases the risks of reduced intra-brand competition and market partitioning, which may in particular facilitate price discrimination; however, due to the reduced market shares of both parties while also taking into account the high number of players on the relevant market, it concluded that this vertical restraint did not have anti-competitive effects on the market.
30 In selective distribution systems, what kinds of restrictions on internet sales by approved distributors are permitted and in what circumstances? To what extent must internet sales criteria mirror offline sales criteria?
The members of a selective distribution system acting at retail level cannot be restricted to make active or passive sales to end-consumers, including via the internet. Nevertheless, a member can be restricted from carrying on its activity outside the authorised commercial areas. As to our knowledge, national courts have not so far issued a decision dealing with internet sales restrictions imposed on approved buyers.
- How is restricting the buyer’s ability to sell non-competing products that the supplier deems ‘inappropriate’ assessed?
There is no practice available so far, but such a restriction could be seen as justified if it is part of the conditions defining a selective distribution. Otherwise, the restriction imposed by a supplier on its distributor of selling non-competing products could fall under the prohibition within Competition Law of anti-competitive agreements carried out through conditioning the conclusion of a contract of the acceptance by the contracting party of clauses which, neither by their nature nor according to commercial practice, are related to the agree- ment’s objective.
- Has the authority taken any decisions in relation to actions by suppliers to enforce the terms of selective distribution agreements where such actions are aimed at preventing sales by unauthorised buyers or sales by authorised buyers in an unauthorised manner?
To our knowledge, the Competition Council has not issued such decisions.
- Does the relevant authority take into account the possible cumulative restrictive effects of multiple selective distribution systems operating in the same market?
The Competition Council may envisage the withdrawal of the block exemption in case of cumulative effects (eg, the market share of those using the selective distribution exceeds 50 per cent).
- Has the authority taken decisions dealing with the possible links between selective distribution systems and resale price maintenance policies? If so, what are the key principles in such decisions?
To our knowledge, the Competition Council has not issued such decisions.
- Has the authority taken decisions (or is there guidance) concerning distribution arrangements that combine selective distribution with restrictions on the territory into which approved buyers may resell the contract products?
To our knowledge, the Competition Council has not issued such deci- sions; however, in such a case, the authority will most likely apply the principles applicable at EU level in similar situations.
- Explain how restricting the buyer’s ability to stock products competing with those supplied by the supplier under the agreement is
The analysis of buyer’s ability to stock products competing with those sold by the supplier is carried out in the light of the relevant EU rules. Generally, a ban on stocking products competing with those bought from the supplier is an indirect non-compete obligation. Such an obligation is not exempted under the VBER if it is applicable for an indefinite period or for more than five years and whenever it involves the members of a selective distribution system and it concerns prod- ucts of particular suppliers; the effects of such an obligation on the market would have to be assessed on a case-by-case basis.
- How is requiring the buyer to purchase from the supplier a certain amount or minimum percentage of the contract products or a full range of the supplier’s products assessed?
The assessment of such restriction is now performed in accordance with the EU rules. As a general rule, the obligation to achieve a cer- tain acquisition target (fixed amount, minimum percentage) will be assessed differently, depending on the value of the target and whether it is connected with the grant of a discount or rebate.
If the target represents more than 80 per cent of the buyer’s total acquisition of the said products, then the clause will be assessed as a non-compete obligation.
If it cannot be qualified as a non-compete obligation, the effects of such clause will be assessed on a case-by-case basis (ie, in verti- cal agreements concluded by dominant suppliers, this type of clause combined with discounts or rebates could have foreclosing effects). If the buyer is required to purchase a full range of the supplier’s products, such restriction may be assessed as implying tying or quan- tity forcing (or both), but it will not be seen as a hard-core restriction. Therefore, to the extent that all the conditions are met, this restriction may be susceptible of benefiting from category or individual exemption.
- Explain how restricting the supplier’s ability to supply to other
resellers, or sell directly to consumers, is assessed.
The restrictions concerning the supplier’s freedom to sell are subject to assessment under the EU rules on vertical restraints. Such restric- tions would be exempt under the VBER provided that the buyer and the supplier have each less than 30 per cent market share.
- To what extent are franchise agreements incorporating licences of IPRs relating to trademarks or signs and know-how for the use and distribution of products assessed differently from ‘simple’ distribution agreements?
The franchise agreement having as its main or sole object the licens- ing of IPRs will not be covered by the VBER.
If, however, the transfer of IPRs does not represent the core of the vertical agreement, the franchise agreement benefits from the exemption and the vertical restraints related to the protection of IPRs (eg, non-compete obligations, obligations imposed for the protection of know-how) will be covered by the block exemption and vertical restraints related to sale or other distribution conditions will also be assessed under the VBER.
When the agreement will be assessed for individual exemption, the rules provided by the block exemption will be used for evaluation of both the IPR-related restrictions and the vertical restraints related to sale, resale or other distribution conditions. The restrictions will be more easily accepted if (i) the know-how transfer is more substantial and (ii) the restraints are necessary for the preservation of the fran- chise network’s common identity and reputation.
obligation and, by increase of market transparency, may facilitate
collusion. Thus, it will be assessed on a case-by-case basis.
- Outline any formal procedure for notifying agreements containing vertical restraints to the authority responsible for antitrust
Following the amendment of the Competition Law in 2010 there is no formal notification procedure mandatory or available for the clearance of vertical restraints. The parties must perform a self- assessment on the availability of individual or block exemption to their arrangements.
- If there is no formal procedure for notification, is it possible to obtain guidance from the authority responsible for antitrust enforcement
or a declaratory judgment from a court as to the assessment of a particular agreement in certain circumstances?
The Competition Council can issue guidance letters concerning new issues raised by the application of articles 5 and 6 of the Competi- tion Law. When there is sufficient guidance under the EU regula- tions, communications or practice of the EU courts, the Competition Council is likely to refuse to give any formal guidance to the parties. The Council may be available, however, for informal consultations on more complex matters.
41 Explain how a supplier’s warranting to the buyer that it will supply the contract products on the terms applied to the supplier’s most-favoured
Complaints procedure for private parties
customer or that it will not supply the contract products on more favourable terms to other buyers is assessed.
There are currently no specific national guidelines in this regard and the Competition Council will assess such restrictions as per the rel- evant EU rules. Nonetheless, in its 2009 sector inquiry report on retail food market, the Competition Council observed that the first restric- tion mentioned, qualified as the most-favoured-client clause, is com- mon in supply agreements of large retailers of fast-moving consumer goods (FMCG). The Competition Council carried out an assessment of its impact on the retail market for FMCG, concluding that even though it is not regarded as anti-competitive per se, this clause can have negative horizontal effects of coordinating competitors’ behav- iour and setting the prices at a higher threshold than a normal one. Therefore, a detailed assessment of the clause should be made when it is susceptible to distorting competition. The Competition Council found in the sector inquiry that, even if positive effects can be gener- ated by the clause, due to its combination with shelf taxes, the most- favoured-client clause should be excluded from the supply agreements concluded on the FMCG retail market.
- Is there a procedure whereby private parties can complain to the authority responsible for antitrust enforcement about alleged unlawful vertical restraints?
Private parties having a legitimate interest can submit complaints to the Competition Council. The claimant must prove its direct or indirect legitimate interest. The Competition Council can disre- gard a complaint filed by a party that cannot prove its interest. The council requests substantial information from the complainant and there is a special complaint form to be used. The claimant must sub- mit evidence (ie, reasonably obtainable documents) to support its allegations.
The Competition Council responds within 60 days from the date when the claimant receives confirmation that his complaint is com- plete, either by issuing a reasoned decision rejecting the complaint or deciding to initiate an investigation for a potential breach of article 5 of the Competition Law. When deciding that a vertical agreement does not infringe competition rules or falls outside the scope of the Competition Law, the Competition Council is bound to take into consideration all circumstances addressed by the complainant in its complaint. The decision to dismiss the complaint will prevent the
42 Explain how a buyer’s warranting to the supplier that it will purchase the contract products on terms applied to the buyer’s most-favoured supplier or that it will not purchase the contract products on more favourable terms from other suppliers is assessed.
Similar to the most-favoured-client clause, such a warranty can have horizontal effects, coordinating competitors’ behaviour on the upstream (supply) market. At the same time, positive effects seem less likely, as the buyer undertakes not to make acquisitions under more favourable terms and, therefore, the purchase price and costs tend to align towards the higher end. An assessment should be made tak- ing into account the actual economic, commercial and legal context. The clause obliging the buyer to report better terms obtained from other suppliers may have the same effect as a non-compete
claimant from filing the same file with the Competition Council, unless additional evidence or information is brought.
The Competition Council’s decision to reject the complaint can be challenged, within 30 days of its communication date, before the Bucharest Court of Appeal.
- How frequently is antitrust law applied to vertical restraints by the authority responsible for antitrust enforcement? What are the main enforcement priorities regarding vertical restraints?
Until the abolition of the individual exemption procedure the Com- petition Council’s activity in the application of article 5(1) to vertical restraints varied. For example, in 2008, out of 102 decisions issued by the authority, only three concerned vertical agreements: one was a sanctioning decision, one an individual exemption decision and one a negative clearance. In 2009, out of 67 decisions issued by the authority, only one individual exemption decision concerned vertical agreements, while in 2010 there was no individual exemption deci- sion concerning vertical restraints. Nonetheless, the authority initi- ated several investigations on markets where the presence of vertical restraints cannot be excluded (eg, the retail food market, the mobile telephony market, the pharmaceutical sector and the energy sector). In 2011 the Competition Council’s activity in this area increased.
Out of 11 sanctioning decisions issued, four concerned vertical agreements between suppliers and retailers. The authority opened also sector inquiries (on the banking market, beer market, the mar- ket for distribution through online shops of appliances and ready-to- wear clothes) in areas where potential vertical restraints may appear.
- What are the consequences of an infringement of antitrust law for the validity or enforceability of a contract containing prohibited vertical restraints?
All agreements or contractual clauses infringing article 5 of the Com- petition Law are null and void. The nullity is ascertained by the Com- petition Council through the sanctioning decision or by the relevant court of law. The regime of the nullity is the one provided by national law, according to which an agreement shall survive the invalidity of the clause, if the annulled clause is not essential for the agreement according to the parties’ understanding. Agreements often contain a reinforcement of this principle. Consequently, an agreement contain- ing a vertical restraint may survive, while the illegal clause contained therein is declared null and void.
- May the authority responsible for antitrust enforcement directly impose penalties or must it petition another entity? What sanctions and remedies can the authorities impose? What notable sanctions or remedies have been imposed? Can any trends be identified in this regard?
For infringement of article 5(1) the Competition Council may apply fines ranging from 0.5 per cent up to 10 per cent of the undertaking’s turnover during the financial year preceding the sanctioning decision. Further details are provided under secondary legislation issued by the Competition Council: vertical restrictions may be fined with a basic level fine of up to 4 per cent of the turnover during the year preced- ing the sanctioning.
The refusal to answer information requests or the transmission of incomplete or inaccurate data may incur a fine ranging from 0.1 per cent up to 1 per cent of the turnover during the previous year to the sanctioning decision. Additionally, the authority may apply time-based penalties of up to 5 per cent of the average daily turno- ver from the previous year until the undertaking complies with the authority’s request. The Competition Council can also ascertain the nullity of the anti-competitive clauses or agreements, may order the seizure of the profits and revenues resulting from the infringement and may request that the parties comply with certain conditions or obligations. In its decisions relating to vertical agreements the Com- petition Council can include an obligation for the companies to sup- ply on given terms. Such obligations have been imposed only in abuse of dominant position cases.
For participation in a vertical agreement consisting in shar- ing the diabetes products portfolio of the producer Eli Lilly, the supplier (Eli Lilly Export SA) and three distributors were fined E22.6 million in total in 2008. Mediplus Exim SRL, one of the dis- tributors, was fined E13 million, one of the largest individual fines in the history of the Competition Council (Competition Council Decision No. 15/2008). Some of these fines were reduced by the Bucharest Court of Appeal after a number of firms challenged the Competition Council’s decision. The fines applied in 2011 for verti- cal restrictions are not as impressive, as they depended largely of the level of turnover of the companies sanctioned (eg, three companies were fined a total of E4 million for RPM restrictions); however, at the beginning of 2012, the Competition Council fined six companies in the oil industry with a total amount of around 880 million lei for having breached competition law in a horizontal arrangement.
Investigative powers of the authority
- What investigative powers does the authority responsible for antitrust enforcement have when enforcing the prohibition of vertical restraints?
After opening an investigation, the Competition Council is entitled to request documents or information, to carry out inspections on notice and dawn raids, to obtain statements from the undertaking’s manage- ment or employees, to seal documents or premises for the time and to the extent necessary for the investigation, and based on judicial authorisation, to inspect the domicile, transport vehicles or any other private premises belonging to management representatives or other employees. The authority is entitled to demand information from
any undertaking whose actions may have anti-competitive effects on the Romanian market, irrespective of its domicile. In practice, the Competition Council would require cooperation from the rel- evant authority in the jurisdiction where the supplier is domiciled. The Competition Law now limits Competition Council investigative powers by defining the documents that cannot be taken during an inspection (ie, preparatory documents and documents subject to legal professional privilege). In 2011, the Competition Council exercised its inspection powers during dawn raids carried out in the context of 18 investigations and inspected 125 companies.
- To what extent is private enforcement possible? Can non-parties to agreements containing vertical restraints obtain declaratory
judgments or injunctions and bring damages claims? Can the parties to agreements themselves bring damages claims? What remedies are available? How long should a company expect a private enforcement action to take?
Any party having suffered loss as a result of an anti-competitive practice has the right to be indemnified for such loss following a private damages claim. The courts may also declare vertical restraints clauses null and void. Under Romanian law a claimant must prove its interest in the specific case.
- Is there any unique point relating to the assessment of vertical restraints in your jurisdiction that is not covered above?
Under Romanian Competition Law, leniency is also available in cases of serious anti-competitive vertical agreements.