Monti to unveil new rules for supply deals

Date: 23/09/1999

By Peter Chapman

NEW Competition Commissioner Mario Monti has put the finishing touches to plans for a new leaner, broad-brush regime for investigating distribution agreements between firms.

Five months after EU industry ministers endorsed the strategy devised by Monti's predecessor Karel van Miert for policing such deals, known as 'vertical restraints', the new competition chief is preparing to unveil details of the new rules.

The linchpin of the Monti plan will be a general block exemption from EU competition rules for companies with a market share below a "safe harbour" of 30%. This will be accompanied by a 'hardcore' black list of practices which would not be allowed even if firms were below this threshold.

"Basically, we have decided on the one-threshold approach, which means that companies whose aggregate market share is below 30% can do anything in their 'vertical agreements' - mainly distribution, purchasing and licences," said a competition official.

Under Monti's plan, brewers would, for example, still be allowed to conclude exclusive deals with public houses - requiring landlords to sell only their products and not those of rivals - as long as their market share fell below the 30% ceiling and they did not commit any of the 'offences' on the blacklist. Officials say these will include fixing the price at which goods can be sold or preventing retailers granted exclusive rights to sell a company's products in one member states from selling them to consumers from other countries.

The regime soon to be unveiled by Monti would replace the current block exemption scheme, which critics claim is overly legalistic and too tough for many smaller firms with low market shares and yet still allows many anti-competitive deals to slip through the net.

Critics also complain that because the existing block exemptions only cover 'final goods' sold to consumers, there are hundreds of other deals concerning the supply of services or parts which must be notified to the Commission - adding to the red tape faced by industry.

Under the current regime, there are complex rules governing specific block exemptions for firms operating exclusive distribution, purchasing and franchising deals, and car industry distribution.

The Commission is preparing to review the block exemption enjoyed by the EU car industry, which expires in 2002. Experts predict it will not be renewed and that car firms will in the future be forced to abide by the new general block exemption.

As EU governments have already endorsed the Commission's general approach to dealing with vertical restraints, the institution can introduce the new regulation without seeking further approval.

European employers' federation UNICE is, however, expected to reiterate its concerns over the proposals before they are adopted later this year. It has called for a 40% threshold and a narrower 'black list' of outlawed practices.

New Competition Commissioner Mario Monti has put the finishing touches to plans for a new leaner, broad-brush regime for investigating distribution agreements between firms.