Firms attack new vertical restraint rules

Date: 27/04/2000

By Peter Chapman

HUNDREDS of engineering firms risk being punished for their success if new EU rules governing the way their products are sold are adopted, claims an industry lobby group.

The warning comes as European Commission competition officials are completing work on new guidelines setting out how the institution will apply new rules on 'vertical restraints', in a bid to eliminate legal uncertainty among firms.

The draft guidelines, which are expected to be approved by the full Commission before the summer, will outline which agreements between manufacturers and firms such as retailers further down the distribution chain will be deemed to harm competition in the EU's single market and should be forbidden.

The guidelines will explain how the Union executive plans to apply a broad exception from the rules for firms whose market share in a particular sector is below 30%. However, industry lobby group Orgalime has warned that a narrow definition of a particular market could put hundreds of firms above this threshold and result in them falling foul of the new rules.

Secretary-general Adrian Harris says many of the firms in his organisation, which employ a total of 7.7 million people, achieve market shares way beyond 30% in niche areas because they have succeeded in developing innovative new products which have no natural competitor in a particular sector.

He argues that the Commission should therefore draw up a broader definition of the 'relevant market', covering various types of related products, 'in order not to penalise innovative companies.'

He has also attacked other requirements in the draft guidelines which would virtually outlaw the use of exclusive 'agency' agreements with the companies which sell his member firms' goods to customers.

Hundreds of engineering firms risk being punished for their success if new EU rules governing the way their products are sold are adopted, claims an industry lobby group.