Page 5 - Vertical Agreements
P. 5
ICO [ Exclusively for: León Ricardo Elizondo | 23-Apr-15, 04:38 PM ] ©LGeetgtailnagndThEecDoenaolmTihcrAouvgahntgarde SC

21 Have decisions or guidelines relating to resale price 26 Explain how a supplier preventing a buyer from advertising
maintenance addressed the possible links between such its products for sale below a certain price (but allowing that
conduct and other forms of restraint? buyer subsequently to offer discounts to its customers) is
There are no guidelines for vertical agreements, restrictions or resale price
maintenance. This scenario should be assessed in the same way as the minimum resale
price maintenances (see question 19). The fact that the supplier prevents
22 Have decisions or guidelines relating to resale price the buyer from advertising its products for sale below a certain price but
maintenance addressed the efficiencies that can arguably allows the buyer to offer subsequent discounts entails a real possibility of
arise out of such restrictions? competing through the price factor, making the alleged minimum price
innocuous. The discount may be a turning point for making the buying
There are no guidelines issued by the Commission; however, the decision as a result of competition regardless of the original price adver-
Competition Law provides a list of efficiencies that can be assessed when tised. In conclusion, setting a minimum price for advertising may not be
analysing a vertical restriction, including resale price maintenance. Among illegal but it is ineffective anyway due to the subsequent discount.
such efficiencies are the following:
• the introduction of new products; 27 Explain how a buyer’s warranting to the supplier that it
• the profitable use of remnant, defective or perishable products; will purchase the contract products on terms applied to the
• cost reductions from the creation of new production techniques and buyer’s most-favoured supplier, or that it will not purchase
the contract products on more favourable terms from other
methods, from the integration of assets, from increases in production suppliers, is assessed.
scale or the production of different goods or services with the same
production factors; The scenario in question 24 should apply, but switching the roles and
• the introduction of technological advances producing new or considering that the supplier is now the one who has the market power.
improved goods or services; However it seems unlikely that the buyer would accept such a condition
• the combination of productive assets or investments and their recov- even when the supplier has market power. In any case, the conduct it will
ery, improving the quality or expanding the features of the goods or be assessed as an RMP, subject to a balancing analysis.
services; and
• the improvements in the quality, investments and their recovery, time- 28 How is restricting the territory into which a buyer may resell
liness and service that have a favourable impact on the chain of distri- contract products assessed? In what circumstances may
bution, which do not cause significant price increases, or a significant a supplier require a buyer of its products not to resell the
reduction in the level of innovation in the relevant market; products in certain territories?

Any other efficiency producing net contribution to the welfare of consum- Vertical market allocation may be a legitimate business practice, provided
ers, overcoming any anti-competitive effects resulting from the vertical the rest of the required elements for engaging in an RMP are not met.
restriction, can be proposed and demonstrated. Having a well-structured distribution system may entail efficiencies and
benefits resulting from the order or discipline observed by its members,
23 Explain how a buyer agreeing to set its retail price for supplier making them focus and concentrate on the service level for the clients
A’s products by reference to its retail price for supplier B’s located in the assigned territory, and avoiding wearing off themselves by
equivalent products is assessed. disputing the clients.

Most of the RMP defined in the Competition Law refers to a vertical down- When it comes to the issue as to whether there is a difference in mak-
stream relationship, except for market allocation, boycott, refusal to deal ing the restriction applicable to active sales or passive sales, if the analysis
or discrimination, which may take place upstream. So the unilateral deci- leads to the assumption that the restriction could be illegal, it would seem
sion of the buyer of setting the prices by reference may not entail a vio- reasonable for the Commission not to extend the restriction to the passive
lation. However, imposition of the price for supplier A’s products and not sales.
allowing the buyer to independently move the price of the competing sup-
plier B’s products, avoiding competition for itself by using the buyer as an Finally, if the distribution chain downstream for a particular market
instrument to achieve it, may be considered as an infringement. Of course, or product/service has more than two levels (manufacturer, wholesaler,
it will be illegal as long as the rest of the required elements are met, holding retailer, end-client/customer), the legality of extending the restriction to
market power and having an illegal purpose or effect. the customer for not making onward sales outside the territory will depend
on how well grounded are the business reasons supporting the territory
24 Explain how a supplier warranting to the buyer that it will allocation at the first level. In addition, of course, the rest of the factors
supply the contract products on the terms applied to the required to make the conduct illegal must not be met, namely market
supplier’s most-favoured customer, or that it will not supply power and an infringing purpose or effect. However, in any case the con-
the contract products on more favourable terms to other duct will be assessed as an RMP, subject to a balancing analysis.
buyers, is assessed.
29 Explain how restricting the customers to whom a buyer may
Most-favoured-customer scenarios normally respond more to bargain- resell contract products is assessed. In what circumstances
ing power than to market power itself. At the end of the day the particu- may a supplier require a buyer not to resell products to certain
lar customer bargaining for such condition will be the beneficiary thereof. resellers or end-consumers?
Fortunately competition takes place not only for prices, but for the rest of
the deals the buyer may be able or willing to offer to its customers, such Following the rationale in question 28, market allocation may take place
as discounts, financial terms, promotions and rebates, among others. for territories, clients and customers, products and specifications, time
Therefore, should the buyer have market power he may be able to force the periods, etc, among others. Therefore in this particular case referring to
supplier to discriminate against another buyer’s competitor; however, if a customers instead of territories should make no difference to the analysis,
supplier does not have similar market power illegal discrimination will not as long as the business reason is sound.
occur. In any case, the conduct it will be assessed as an RMP, subject to a
balancing analysis. 30 How is restricting the uses to which a buyer puts the contract
products assessed?
25 Explain how a supplier agreeing to sell a product via internet
platform A at the same price as it sells the product via internet This scenario may be the case when the specific product has different uses,
platform B is assessed. but the whole marketing, image, brand name and trademark have been
promoted for some specific use. Therefore it seems very reasonable for the
There are no precedents regarding this scenario. However, if it were to supplier to restrict downwards the use of the product consistent with the
occur, the analysis should be the same as if the market were not via the investment behind it. It is important to keep in mind that in order for an
internet. RMP to take place, in addition to market power, the purpose or effect must
be the improper exclusion of other agents from the market; substantial
hindrance of agent access to the market; or the establishment of exclusive
advantages in favour of one or several entities or individuals.

150 Getting the Deal Through – Vertical Agreements 2015
© Law Business Research Ltd 2015
   1   2   3   4   5   6   7   8   9