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Competition Law

Analysis - debate - current awareness

10 JAN 2014

Outside the EU

The EU competition rules can apply to agreements which have an actual or potential effect on trade between EU Member States. This means that it must be possible to foresee with a sufficient degree of probability that the agreement may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States.

Agreements relating to supply of products outside the EU, but which include provisions preventing re-selling into the EU, can fall foul of the EU rules. For example, Yves Saint Laurent appointed an EU-based distributor for Russia and Ukraine pursuant to an agreement which stated that its products must only be sold in Russia and Ukraine and under no circumstances should they leave the territories of those countries, i.e. there should be no re-selling into the EU. The distributor challenged the agreement as contrary to EU competition law prohibiting agreements which restrict or distort competition.

The EU Court held that the agreement could in principle have an effect on trade in the EU and be caught by the competition rules. Whether or not it would have such an effect would depend on the structure of the market in question (i.e. is it oligopolistic), the price difference for the products outside the EU and inside the EU, and the likelihood and volume of re-importation into the EU.

The car maker Honda is currently facing a challenge to a ban it operates on the importation of trademarked spare parts from Thailand into Greece. The court in Athens seeks guidance from the EU Court on the extent to which a trademark own can prohibit parallel imports into the EU of its products first marketed outside the EU in the case of products with large profit margin and price squeezing and where parallel imports may result in considerable reductions in prices to end consumers, for their benefit and for the benefit of competition, as in the case of all spare parts for motor vehicles.

It should not be assumed that agreements covering territories outside the EU cannot fall foul of EU law.

If you would like to discuss these issues, please do not hesitate to contact John Cassels at john.cassels@ffw.com

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