Industry fears Commission plan to probe supply chain

Date: 29/01/1998

By Peter Chapman

EU COMPANIES are calling on competition officials to abandon a key part of their approach to anti-trust rulings on exclusive agreements between suppliers and distributors.

The business lobby UNICE and brewers warn that the current proposals would place a very heavy burden on the industries involved.

Their warning comes as the European Commission prepares to unveil a follow-up to last year's Green Paper on 'vertical restraints', which promised an overhaul of the way the institution regulates deals such as those between brewers and pubs or petrol firms and filling stations.

At issue is the way industry expects the Commission to use the market share of companies involved in such agreements as a key criterion when deciding whether to offer them 'block exemptions' from anti-trust rules or force them to make alterations to the deals.

UNICE competition expert Fiona Marcq warned that such a plan would force companies to make complex calculations and estimates based on their own and other firms' overall positions in the market.

She said this would not give companies the legal certainty they wanted and would also add to the industry's costs because expensive economists and lawyers would be needed to work out the figures.

"Defining market share in a way that is going to imply legal certainty is going to imply very heavy burdens on industry," she said. "Industry has always had a preference for figures such as turnover. These statistics are easier to produce and you don't need to produce a guestimate."

A legal expert at a large UK-based brewing group said his industry was also lobbying the Commission to drop its support for criteria based mainly on arbitrary market share thresholds.

"The Commission is still trying to find a formula with a crude market share rule of thumb - and industry is opposing it, " he said. "It can't be fair if you are a company below the threshold and then grow, that at some magic point all of your contractual agreements could be illegal and open to challenge."

He added that the industry's practice of signing exclusive agreements between big brewers and public houses - known as 'tied houses' - could be hit by any ruling which relied heavily on a crude market share figure.

Instead, he urged the Commission to follow a system which took other considerations into account, such as the market behaviour of the companies involved, before launching full-scale anti-trust inquiries.

"The point we would make is that if a company had a market share above the threshold and was not doing anything untoward, it should not be put at a disadvantage," he said.

"Big operations should be able to operate in the same way as companies below the threshold. If this were not the case, then big companies would very quickly go out of business."

UNICE is concerned at Commission's plans following Green Paper on 'vertical restraints'.