Dual Distribution Agreements

The BSR has stated so far that new differentiation rules are needed to take into account the potential competitive effects of vertical agreements related to alternating distribution systems (i.e. anti-competitive horizontal coordination between product manufacturers and their distributors), which are increasingly important in the market. Under the current VBER, restrictions on active selling (i.e. sales to certain customers proactively) are only excluded if (1) a territory or group of customers is allocated to only one trader or (2) under a selective distribution system in which sales to unauthorized distributors is limited. In particular, it is not possible to create a system of common exclusivity (with two or more distributors for the same territory) or to sell outside the «selective territory» (i.e. if the products are sold `openly` or through distributors alone) to unauthorized traders in a «selective area» (i.e. where the products are sold only through selected resellers who must meet certain criteria and do not may not be sold to unauthorized distributors). The Commission proposes two options (which can in turn be combined): in most mature legal systems, horizontal restrictions are probably assessed according to the `per se` rule2 and vertical restraints, as they are often used for legitimate commercial practices and are therefore assessed according to the `rule of reason` approach that leads to an investigation of anti-competitive harm. The European Commission (`the EC`) assesses double distribution agreements according to the `Rule of Reason` approach, unlike the assessment of vertical agreements between competitors, which are examined in accordance with the Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal cooperation agreements. The European Commission`s Guidelines on Vertical Restraints (`the EC Vertical Guidelines`) recognise that the assessment of a `model of alternating sales, i.e. the producer of certain products, is also in competition with independent distributors of its products, but that it is possible to have an impact on the competitive relationship between the producer and the retailer at retail level in less importance than the potential effects of the products. Effects of the vertical supply agreement on competition. In general, at the level of manufacturing or retail trade. Dual and multi-channel distribution models are becoming more common in Indian markets and CCI has already received several complaints6 from distributors of manufacturers who sell their products through online channels and through independent distributors.

The ICC is likely to face potential anti-competitive issues arising from these agreements and will need to take an objective approach in assessing dual distribution agreements. Taking into account the case law on more mature anti-cartel legislation and the range of pro-competitive effects resulting from dual distribution agreements, the ICC should also take a similar approach in assessing such agreements under the Rule of Reason approach. The treatment of dual distribution agreements as horizontal agreements could have the effect of treating as a horizontal agreement a legitimate vertical agreement with pro-competitive advantages, which could have negative consequences for undertakings. However, the ICC rejected these arguments and found that the parties had participated in a price cartel. To that end, the CCI found that, from a demand perspective, Panasonic and Godrej`s sales arm was horizontal and that it acted as an independent competitor with separate brands, although the products were manufactured by the same party (i.e. Panasonic India). Therefore, psa, which created price parity between two different brands, could not be regarded as a vertical fixing of the resale price between a buyer and a seller….