The Amsterdam District Court has issued an interesting ruling on the tension between selective distribution and the cartel prohibition. It was prompted by a long-running dispute between printer and cartridge seller 123inkt and manufacturer Hewlett-Packard (HP). One of the proceedings centres on the selective distribution system used by HP to sell printers and cartridges. A selective distribution system means that a supplier selects its distributors on the basis of certain criteria.
According to 123inkt, HP is prohibited under competition law from operating a selective distribution system, due to the nature of its products and its strong market position. 123inkt relied in this regard on, among other things, the cartel prohibition set out in Article 101 TFEU. HP in its turn argued that its distribution system falls outside the scope of the cartel prohibition on the grounds of the 'Metro criteria’ set out in European case law, or is individually exempted on the basis of the Block Exemption on Vertical Agreements or Article 101(3) TFEU. This exemption implies the existence of efficiencies that outweigh the restriction of competition, do not go beyond what is necessary, and do not entirely eliminate competition.
The court’s ruling is an interesting read, as it addresses in detail all the steps in the analysis of a selective distribution system on the basis of legislation and case law. The court agreed with 123inkt that a selective distribution system by its nature restricts competition. The court also agreed with 123inkt that printers and cartridges do not meet the ‘Metro criteria’, since they are not high-quality or high-technology products, luxury products or products that otherwise necessitate selective distribution. In the court’s opinion, the Block Exemption is also of no avail to HP because its market share in the HP cartridges market is greater than 30%, based on separate markets for printers and cartridges in accordance with an earlier market definition by the European Commission. The court could not conclude that there is one single system market for the sale of both printers and cartridges. It had been insufficiently established that consumers have sufficient insight into the total printing costs over the lifetime of a printer.
The court then assessed whether HP’s distribution system qualified for an individual exemption. Since the debate had not yet focused on the possibility or impossibility of an individual exemption, both parties were given the opportunity to present their views on that point. In anticipation of those views, the court noted that the distribution system might on the face of it meet the cumulative requirements of Article 101(3) TFEU, but that it wondered whether some of the criteria applied by HP could be considered indispensable, or whether they might have been formulated too broadly or too vaguely. HP and 123inkt will have to comment on this. The court reserved any further decision until that time. To be continued!
This blog was also published in the Snelrecht section of professional journal Mr Online.
Information on dawn raids by ACM and the European Commission can be found at invalacm.nl.
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