The parallel imposition requirement in exclusive distribution systems: key takeaways from the CJEU’s ruling in Beevers Kaas

Background

The case stems from a legal action brought by Beevers Kaas against the supermarket chain Albert Heijn for selling Beemster cheese in Belgium, where Beevers Kaas has an exclusive distribution agreement with Cono, the supplier of Beemster cheese. The Antwerp Business Court dismissed Beevers Kaas’ claim that Albert Heijn had breached the exclusive distribution agreement, holding that there was no contractual or legislative provision preventing Albert Heijn from obtaining supplies directly from Cono and distributing them in Belgium. 

Beevers Kaas appealed the judgment before the Antwerp Court of Appeal (the Referring Court), claiming that the parallel imposition requirement laid down in Article 4(b)(i) of the 2010 VBER had been fulfilled. The Referring Court found that Beevers Kaas had demonstrated that Albert Heijn had, at least tacitly, acquiesced to an active sales ban. However, the court required Beevers Kaas to also show that all other resellers supplied by Cono accepted the ban, as there was no evidence of their express acceptance. Beevers Kaas and the Belgian competition authority, which intervened as amicus curiae, argued that tacit acquiescence could be inferred from the resellers’ current lack of sales of Beemster cheese in Belgium. In contrast, Albert Heijn contended that, for there to be tacit acquiescence, Beevers Kaas must show that Cono’s strategy to prohibit active sales of Beemster cheese in Belgium was communicated to all authorized resellers and that each of them was required to comply with it.

Noting that the 2010 VBER and guidelines on vertical restraints do not specify how a supplier should protect its exclusive distributors from active sales by its other buyers, the Referring Court decided to stay the proceedings and request a preliminary ruling from the CJEU. The questions before the CJEU were (1) whether the parallel imposition requirement can be fulfilled where a supplier has not expressly imposed active sales bans on its other buyers, but those buyers nevertheless refrain from making active sales in the exclusive territory; and (2) whether it is sufficient for the supplier to show that its other buyers accepted the active sales ban only if and when those buyers show signs of actively selling into the exclusive territory.

CJEUs ruling

The CJEU began its analysis by reaffirming Advocate General’s view that, for an exclusive distribution agreement to benefit from the block exemption, the agreement must be accompanied by an active sales ban imposed by the supplier on its other buyers to protect the exclusive distributor in that territory from encroachment by the other buyers. 

As to how to determine whether the supplier has successfully imposed an active sales ban on its other buyers, the CJEU held that direct evidence, such as an explicit clause in the distribution agreement prohibiting active sales in exclusive territories, or objective and consistent indicators showing that those buyers acquiesced to the invitation by the supplier not to make such active sales, can serve as proof. 

In this case, there was no explicit clause or invitation not to engage in active sales in the exclusive territory allocated to Beevers Kaas. Nevertheless, no buyer of Cono engaged in active sales in Belgium, except for Albert Heijn. The CJEU held that such a circumstance does not allow, in the absence of a specific communication addressed to the buyers, to conclude that Cono invited them not to engage in such active sales. 

The court further stated that the absence of active sales in the exclusive territory by the supplier’s other buyers does not, by itself, allow to conclude that this behavior results from their will to comply with a possible invitation from the supplier not to engage in such sales, as opposed to an independent business decision not to sell in that territory. Nevertheless, it may constitute proof of tacit acquiescence, where an explicit invitation from the supplier not to actively sell into the exclusive territory is combined with mechanisms that enable the supplier to enforce the ban in practice, such as a system for monitoring and penalizing distributors who fail to comply.

In response to the second question, the CJEU noted that a ban on active sales falls within the scope of Article 4(b)(i) of the 2010 VBER where, first, the supplier has invited its buyers to abstain from making active sales in the exclusive territory and, secondly, the buyers concerned have acquiesced to that invitation. Thus, the benefit of the block exemption is only granted for the period for which it can be shown that these two elements are fulfilled.

Key takeaways

The Ruling offers much-needed guidance on how the parallel imposition requirement – which is now embedded in the definition of an exclusive distribution system under the current VBER – can be fulfilled to ensure the exclusive distribution agreement benefits from the block exemption. 

This is particularly important for long-standing exclusive distribution arrangements that lack an explicit prohibition on active sales into territories exclusively allocated to other buyers/distributors. In such cases, suppliers should proactively exchange communications with their buyers (through emails, letters, formal notices, etc.) and obtain clear consent from them not to make active sales in exclusive territories. Alternatively, suppliers can invite their buyers to abstain from active sales in other ways, for example by including specific mentions or conditions in their general terms and conditions.

For newly negotiated agreements with distributors outside the exclusive territory, the most straightforward and legally certain approach to meet the parallel imposition requirement would be to include an explicit clause prohibiting such distributors from actively selling in exclusive territories. This is even more important under the current VBER, as a territory or group of customers can exclusively be allocated to up to five distributors. 

As noted above, failure to comply with the parallel imposition requirement may jeopardize the advantages provided by the VBER. While this would not automatically render an exclusive distribution agreement unlawful, it will require an individual assessment pursuant to Article 101(3) TFEU, which is more difficult to satisfy. 

The authors wish to thank Aliriza Ozturk, Norton Rose Fulbright LLP Brussels, for his contribution.