Global menu

Our global pages

Close
The French Competition Authority (FCA) closes an investigation into exclusivities for the distribution of the agricultural tractors

The French Competition Authority (FCA) closes an investigation into exclusivities for the distribution of the agricultural tractors

  • Global
  • France
  • Competition, EU and Trade - Competition e-briefings

10-04-2018

On 7 March 2018, the French Competition Authority (the FCA) announced its decision to close an investigation initiated against the agricultural tractor manufacturers John Deere and AGCO. Both companies were suspected of restricting their dealers from selling outside their exclusive territories.[1] The investigation was opened on the basis of pieces of evidence transmitted by the Directorate-General for Competition, Consumer Affairs and Prevention of Fraud (the so-called “DGCCRF”).

Background

John Deere and AGCO distribute their tractors through a network of dealers, most of which are granted an exclusive territory. According to the FCA, the manufacturers’ dealership contracts and general terms and conditions of sale were drafted in such a way as to cause uncertainty about the possibility for the dealers to sell the products outside their exclusive territory. In practice, several dealers were said to have refrained from responding to requests from clients outside their territory or to have requested prior approval from the manufacturer.

Territorial restrictions

Exclusive distribution mat fall within the prohibition of anticompetitive agreements under art 101 TFEU and art. L. 420-1 of the French Commercial Code, in particular depending on their duration and scope. Subject to certain conditions, distribution agreements granting exclusive territories to certain dealers may however benefit from an exemption under Article 4(b) of the European Vertical Block Exemption Regulation[2] (“VBER”).

Under the VBER, distributors may be contractually prohibited from “actively” selling to customers located in another dealer’s exclusive territory. It means that exclusive distribution agreements may include clauses prohibiting dealers from visiting or sending advertising e-mails to customers located in another dealer’s exclusive territory are not considered as anticompetitive restrictions.

Nevertheless, territorial exclusivities cannot be absolute. In particular, dealers cannot be prevented to respond to unsolicited requests from customers located outside their own exclusive territory, e.g. through the Internet (so-called “passive” sales). Any contractual clauses or practices restricting such passive sales would be hardcore restrictions of competition, which would remove the benefit of any exemption, in particular under the VBER[3]. As a consequence, the corresponding exclusive distribution agreements would be deemed as anticompetitive regardless of their actual effect on intra-brand competition.

John Deere and AGCO’s distribution practices may have been seen as restrictions of passive sales, as their exclusive dealers were refrained from responding to unsolicited requests from clients located outside their territory, or needed to obtain prior approval from their manufacturer. The FCA might therefore have had good arguments to consider that the distribution agreements at stake were anticompetitive. Subject to further investigation and evidence, John Deere and AGCCO may have been liable to fines for up to 10 % of their group turnover.

Closure of the FCA investigation

In the course of the FCA investigation, John Deere and AGCO decided to clarify distribution policy  with their dealers. AGCO indeed amended its dealership contracts and its general terms and conditions of sale, while John Deere ran an information campaign with its dealers to remind their freeness to respond to requests from customers which are based outside of their territory.

In light of these initiatives, the FCA decided to close the investigation considering, according to its press release, these new practices will foster competition on the market. The FCA however also indicates that it will keep a close eye and check that the dealers are actually being allowed to market their tractors in compliance with competition rules.

Such an early closing of the FCA’s investigation is not very common in practice, whereas French law provides for distinct settlement formal routes with the FCA[4]. This case may however illustrates the potential benefits for companies involved to adopt a proactive approach during an investigation in order to avoid fines, in particular regarding their distribution agrements.



[1] FCA, Press release, 7 March 2018, Sale of agricultural tractors, [online] available at:       http://www.autoritedelaconcurrence.fr/user/standard.php?id_rub=684&id_article=3135&lang=en

[2] Commission Regulation No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices

[3] Para. 50 and 51 of the Commission Guidelines on Vertical Restraints (C 130/1, 2010)

[4] As a recent example, the FCA had decided to put an end to is investigation into Adidas selective distribution agreements prohibiting selected distributors to sell the Adidas products on third-party platforms. Further to the decision made by the German Cartel Office for the same clauses (Bundeskartellamt) Adidas had removed the ban imposed on sales on third-party platforms, so that the FCA closed its investigation in turn. (‘FCA press relase 18 November 2015)

For more information contact

< Go back

Print Friendly and PDF
Subscribe to e-briefings