Does Your Exclusive Distribution System Meet the Beemster Cheese Standard?

A recent opinion highlights the strict conditions for exclusive distribution agreements under EU competition law. Suppliers must ensure all buyers agree to active sales bans to benefit from the VBER exemption. Our Competition, Antitrust & Foreign Investment explores the legal and practical implications for distributors.

In a recent Opinion[1] Advocate General (AG) Medina analyses how EU competition law applies to exclusive distribution agreements. The Opinion arose from a request for preliminary ruling regarding whether an exclusive agreement for the sale of Beemster cheese complies with the conditions laid down under the EU’s vertical block exemption regulation (VBER). The Opinion confirms that an exclusive distribution arrangement will not benefit from the EU competition law safe harbour unless the supplier protects the exclusive distributor from active sales. The exemption does not apply during any period when the supplier lacks agreement from all buyers to abide by an active sales ban in territories exclusively allocated to other buyers. This development may have far-reaching legal and practical implications for suppliers operating exclusive distribution systems in the food sector and beyond.

Background

Dutch cheese producer, Cono, appointed Beevers Kaas as the exclusive distributor of Beemster cheese in Belgium. Meanwhile, Cono also sold Beemster cheese to a large supermarket chain, Albert Heijn, for distribution outside of Belgium. Beever Kaas sued Albert Heijn in the Belgian courts for selling Beemster cheese in Belgium. Beever Kaas claimed that the sales infringed its exclusive rights.

A key question that arose before the Belgian courts was whether the exclusive distribution agreement between Beevers Kaas and Cono complied with the conditions laid down in Regulation 330/2010 (Old VBER). In particular, the Belgian court was required to consider the parallel imposition requirement, which requires that the supplier must protect its exclusive distributor from active sales into the exclusive territory by all other distributors and buyers. This condition was implied in the Old VBER but is now expressly referred to in Regulation 2022/720 (New VBER).

The Belgian court referred to the European Court of Justice (CJEU) the question of how and when the parallel imposition requirement is met.

Agreement of all other distributors required

AG Medina confirmed that for the parallel imposition requirement to be met, there must be an agreement between the supplier and all other buyers to comply with an active sales ban in the exclusive territory. Implicit in the Opinion is that the question of whether, or not, an agreement exists is not a matter of national law. Instead, this should be assessed according to the Article 101(1) TFEU standard for establishing whether an agreement between undertakings exists.

AG Medina states that, in the absence of an express contractual provision imposing an active sales ban or giving the supplier the power to impose an active sales ban, an agreement may be established in other ways. For example, consistent with the Super Bock judgment[2] an agreement may be found if “consistent coincidences and indicia” give rise to an inference that there was an invitation by the supplier to follow an active sales ban and the distributor, in practice, complied with the ban. However, AG Medina clearly states that an agreement cannot be established by a mere finding that other buyers do not engage in active sales in a territory allocated exclusively to another buyer.

Agreement required for the entire period

AG Medina’s Opinion provides that the passive inference requirement is only fulfilled from the point in time when the other buyers have agreed to the active sales ban, but not before that time. She states that it is not sufficient for the supplier to show that other buyers agreed to the active sales ban only when they were about to make sales in the exclusive territories. As a result, a supplier cannot claim the benefit of the VBER during any period when all other buyers have not accepted or acquiesced to a sales ban in the exclusive territories.

Hard-core restriction of EU competition law

If AG Medina’s Opinion is followed by the EU Court of Justice, the result is that it is practically difficult for suppliers to build exclusive distribution systems in the EU that fulfil the conditions of the VBER. However, the risks of not fulfilling these conditions are potentially serious and could result in a finding that the supplier has committed a hardcore restriction of EU competition law.

To mitigate this risk, we suggest that suppliers consult external counsel to:

• Ensure that all distributors have agreed to an active sales ban in territories allocated exclusively to other buyers.
• Review existing exclusive distribution agreements to ensure that they meet the conditions under the VBER.
• Carefully monitor changes to exclusive distribution networks to ensure compliance on an ongoing basis.

If you have any queries, please contact a member of our Competition, Antitrust & Foreign Investment team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] Case C‑581/23

[2] Case C-211/22