The exchange of information is, in commercial practice, a physiological element of the relationship between supplier and distributor. However, when it concerns future prices or identifiable end-customers, the antitrust framework may change radically when operating in the context of dual distribution. Such information may give the supplier a competitive advantage potentially affecting the distributor's decision-making autonomy in the downstream market, transforming a genuinely vertical relationship into one with clear horizontal relevance.

Regulation (EU) 2022/720 allows exchanges of information only if they are strictly necessary for the implementation of the vertical agreement or the improvement of distribution. If this threshold is exceeded - in particular in cases of combined exchange of future prices and customer data - the block exemption no longer applies, and the conduct falls under the prohibition of Article 101(1) TFEU. In specific circumstances, as confirmed by more recent case law, such conduct may be qualified as restrictive by object.

The individual exemption under Art. 101(3) TFEU is a theoretically viable option, but one that is complex to implement: it requires not only the demonstration of real and verifiable efficiencies, but also proof that there are no less competition-restrictive alternatives and that the benefits accrue to the end users. This is a significant burden of proof, which in most cases limits its practicability. 

Per le imprese che operano (anche solo potenzialmente) in un contesto di duplice distribuzione, la strategia più efficace è progettare sin dall’origine sistemi informativi e processi di comunicazione proporzionati, segmentati e desensibilizzati, in linea con le tecniche e le misure suggerite dalla Commissione.

 

1. What is dual distribution.

The theme of the dual distribution è già stata oggetto di approfondimento in un precedente contributo pubblicato sul presente blog. Il presente articolo ha invece il focus di analizzare to what extent information exchanges - typical in distribution relations - may affect the antitrust qualification of the agreement, with particular reference to the names of end customers and the future resale prices. Si tratta, infatti, delle categorie informative che più frequentemente emergono nella prassi commerciale e che la normativa europea considera tra le più sensibili, poiché potenzialmente idonee a restringere la concorrenza negli scenari di duplice distribuzione.

Regulation (EU) 2022/720 identifies dual distribution as the situation where an undertaking active in the production or supply of a good or service also sells directly on the downstream market, thereby competing with its independent distributors.[1] In these cases, the supplier does not merely serve the distribution network, but markets itself products to end customers, creating a mixed distribution structure.

This set-up generates a dual competitive relationship: vertical (between supplier and distributor, located at different levels of the chain) and horizontal (since, in the downstream market, they can address the same customers).

The Regulation considers competition in a broad sense, including not only the effective competition - i.e. when the parties are already active in the same relevant product and geographic market - but also the potential competitionwhich occurs when the supplier would realistically be able, in the absence of the agreement, to enter the distributor's market in a relatively short period of time and without incurring disproportionate investments.[2]

In this context, vertical agreements concluded between undertakings that are competitors only on the downstream market may nevertheless benefit from the block exemption, provided that the relationship remains genuinely vertical and that there is not also competition upstream in the production or supply of the good/service (Article 2(4), Reg. 2022/720).

However, it remains that, in these hypotheses, the exemption does not automatically extend to exchanges of information between the parties: such exchanges are permitted only if directly related the execution of the agreement and necessary to improve the production or distribution of the contract goods or services (Art. 2(5)).

If the information exchanged exceeds these limits, only this specific aspect of the agreement must be assessed in the light of Article 101(1) TFEU. This is because the infringement does not incorporate a fundamental restriction pursuant to Article 4 of Regulation 2022/720 and does not automatically entail the loss of the block exemption of the entire contract, which remains applicable to the remaining provisions complying with the Regulation.[3]

La ratio of this approach is to prevent the privileged information position of the supplier - resulting from vertical collaboration - from being used to take unfair advantage of it in the downstream market, distorting competition with distributors who remain independent companies.

In order to establish whether the supplier and the buyer are competitors on the downstream market, it is necessary to precisely define the relevant market - which is the subject of the following paragraph.

 

2. How Relevant Market is Defined.

The verification of the existence of a restriction of competition within the meaning of Article 101 TFEU and the application of the exemption thresholds under Regulation (EU) 2022/720 (in particular the 30% market share threshold, Art. 3) first require the identification of the relevant market.

The relevant market is the economic space in which undertakings exert competitive pressure on each other and in which the effects of the agreement are to be assessed. The relevant market has two dimensions:

  • relevance of the product/servicewhich includes the goods or services considered exchangeable by the consumer on the basis of their characteristics, price and use;
  • geographical relevancelimited to the area where the conditions of competition are homogeneousdistinguishable from neighbouring territories where these conditions are significantly different.[4]

The definition of the relevant market has an eminently practical function: to verify whether, against a hypothetical and non-transitory price increase (the hypothetical monopolist testreferred to in the Notice on the definition of the relevant market, OJ C 372/1997), customers would turn to alternative products or suppliers located in other areas. If such a shift is likely, these alternatives must be included in the same relevant market.

Once the relevant market has been defined, the next step is to check whether between supplier and distributor there is a at least potential competition in the downstream market. This assessment is essential to determine whether one is in a dual distribution context within the meaning of Regulation (EU) 2022/720.

La potential competition rilevante ai fini dell’art. 101 TFUE, e così come definita dall’art. 1 lett. c) del Regolamento, sussiste only if the potential entrant company is capable of exerting competitive pressure on the operator already active in the relevant market. Thus, an abstract possibility of entry is not enough: it must be an entry:

  1. realistic (not merely hypothetical)
  2. temporally circumscribed (normally within one year)
  3. economically sustainable
  4. capable of affecting strategies of the company in the market.[5]

A mere theoretical possibility of entry would not suffice. It is necessary that the potential entrant represents, by the mere prospect of its entry, a real competitive constraint in the relevant market. For there to be potential competition - and thus dual distribution - it is not sufficient that the supplier also sells downstream or, in theory, could do so. It must be verified whether its possible entry into the distributor's market is likely to affect the latter's competitive behaviour.[6]

This assessment depends on a number of objective factors related to the relevant market:

  • the structure of the downstream market (level of concentration, number of operators, barriers to entry);
  • the economic and commercial credibility of direct supplier entry in the short to medium term;
  • the perception, on the part of the operators already presentthat the supplier can actually take over with a competing bid.

If the supplier's potential input alone can restrict the distributor's competitive freedom - e.g. in terms of prices, investments, sales strategies - competitive pressure is considered sufficient to integrate a potential competitive relationship within the meaning of Regulation (EU) 2022/720).

Once the existence of a competitive overlap has been verified, the focus shifts to the nature of the information exchanged within the vertical relationship.

 

3. What one can (and cannot) share.

In the case of dual distribution, it must be verified whether the exchange of information between supplier and distributor may benefit from the exemption provided for in Article 2(5) of Regulation (EU) 2022/720. The rule clarifies that when the parties are competitors - actual or potential - on the downstream market, the exchange of information is not automatically exempt for antitrust purposes.

The exemption continues to apply only if the information shared is:

  • directly related the implementation of the vertical agreement (e.g. for the purposes of order management, traceability, guarantees, product safety or distribution network compliance); or
  • necessary to improve the production or distribution of the contract goods or services, contributing to an actual and verifiable increase in efficiency.

In summary, the exchange of information is permitted and covered by the exemption only when it is functional to the proper conduct of the vertical relationshipwithout affecting competitive play in the downstream market.

The Vertical Guidelines identify with particular clarity the categories of information that pose the greatest anti-competitive risks in dual distribution relationships. Among the most frequently requested or exchanged information in business practice are:

  • future resale prices (para. 100(a)), the sharing of which reduces competitive uncertainty and allows the supplier to anticipate or influence the pricing strategies of the distributor;
  • data on identifiable end customers (para. 100(b)), which - except for limited and specifically justified needs - allow the supplier to intervene in the customer portfolio of distributors, directly affecting downstream competition.

The Guidelines themselves specify that:

  • information on customers' purchases and preferences can be shared only if not linked to future prices (paragraph 99(c));
  • actual prices charged by distributors can be communicated provided that they are not used to monitor or direct their commercial policy, nor combined with named customer data (para. 99(e)).

In summary, when it comes to future prices or identifiable customers, la normativa europea presume un rischio concorrenziale elevato, perché tali informazioni attribuiscono al fornitore un vantaggio strategico che normalmente esula dalle esigenze fisiologiche della relazione verticale e può alterare la concorrenza nel mercato a valle.

Moreover, when future prices e data on identifiable end customers are exchanged jointly - an assumption that is far from rare in practice - the competitive risk is significantly intensified: knowing who are the customers, what they buy, with which preferences e at what prices they will be served crea un livello di trasparenza tra fornitore e distributore che può non riflette le normali condizioni concorrenziali. Tale combinazione informativa può agevolare forme di coordinamento sulle politiche commerciali nel mercato a valle e fa venire meno l’esenzione prevista dall’art. 2, § 5 del Regolamento (UE) 2022/720.

As clarified by the Court of Justice in recent judgments Super Bock Bebidas SA et al. v Autoridade da Concorrência[7] e Banco BPN/BIC Português SA et al,[8] the sharing of strategic information - such as future prices or data on identifiable end customers - can eliminate competitive uncertainty that characterises the behaviour of independent operators, facilitating even implicit forms of coordination on commercial policies in the downstream market.

La Corte, nella pronuncia Super Bock Bebidas SA, ha inoltre precisato che, in determinati contesti di mercato — in particolare quando si opera in settori altamente concentrati, caratterizzati da elevata trasparenza e forti barriere all’ingresso e in cui la concorrenza è strutturalmente più fragile — la comunicazione di prezzi futuri o di clienti finali può essere, per la sua stessa natura, intrinsecamente idonea a restringere la concorrenza “per oggetto”.

La qualificazione per oggetto rileva perché, in tali ipotesi, non è necessario provare che lo scambio informativo abbia prodotto effetti concreti sul mercato (come aumenti di prezzo o riduzione della scelta). È sufficiente constatare che l’accordo, per natura e contesto economico, elimina quella incertezza strategica che normalmente guida il comportamento di operatori indipendenti. In altre parole, lo scambio è talmente sensibile da essere considerato di per sé capace di incidere negativamente sulla concorrenza, senza attendere la prova di un danno effettivo.

Ciò non significa, neppure in caso di restrizione per oggetto, che l’illiceità sia automatica. Significa però che il parametro di valutazione cambia: lo scambio è presunto anticompetitivo e spetta alle parti dimostrare, con elementi rigorosi e documentati, che esso fosse indispensabile e proporzionato per generare efficienze reali ai sensi dell’art. 101, § 3 TFUE. In assenza di questa prova positiva, la condotta è qualificata come restrittiva.

This form of exemption is however exceptional and subject to strict proof that the agreement generates verifiable efficienciessuch as to offset the anti-competitive effects. The burden of proof rests entirely on the undertakings wishing to avail themselves of it.

 

4. When an individual exemption is needed 

Article 101(3) TFEU provides for four conditions cumulative:

 i. Objective benefits for the market

The agreement must help improve production or distribution, or promote technical or economic innovation. It must therefore be demonstrated - with concrete evidence - that the information exchange is necessary to generate efficiency gains along the distribution chain.

ii. Indispensability of the restriction

The positive effects must depend from the contested restriction: if there are realistically practicable, less restrictive alternatives (e.g. historical or anonymised data only), the exemption does not apply. The guiding principle is that the restrictive measure must be proportionate to the benefit sought.

iii. Passing on benefits to consumers

A fair share of the benefits must be passed on to the end users (direct or indirect customers), so as to offset any negative effects on price, quality or choice.

iv. Preservation of an adequate level of residual competition

The agreement must not give undertakings the possibility of eliminate competition in a substantial part of the market concerned. In other words, it cannot turn into a market control mechanism, especially in the presence of significant power of the upstream company.

This is a far from easy path: the application of Art. 101(3) requires an structured documentation, a clear causal connection between information exchange and efficiency benefits and the demonstration that there are no less restrictive solutions capable of achieving the same result. In the absence of such elements, the conduct inevitably falls under the prohibition of Article 101(1) TFEU.

 

5. How to reduce antitrust risks.

The indications concerning the tools to be adopted to reduce the risks arising from the exchange of sensitive information - in particular to avoid classification as "restriction for object' and to ensure compliance with the indispensability (through proportionality and desensitisation) - are contained, firstly, in the points 96 and 103 of the Guidelines verticalsgoverning information exchanges in situations of dual distributionand later explored in the Communication from the Commission.[9]

Below are the main reference points (numbered according to the paragraphs of the Guidelines) that address these aspects.

5.1. Limit data to what is strictly necessary.

La desensitisation and the proportionality are central concepts for demonstrating the indispensability of a restriction under Article 101(3) TFEU.

  • Point 426 - This is the main reference for the indispensability criterion. The Commission requires the parties to demonstrate that the nature and characteristics of the exchange represent the least restrictive means to generate the increments of declared efficiencies. The exchange must not include any information that goes beyond the variables relevant to achieve these benefits. By way of example, for the purposes of benchmarking (benchmarking), the sharing of individualised data is normally not considered indispensable, as aggregated information (e.g. in the form of industry rankings) can produce the same efficiency effects with a lower risk of collusion.

5.2. Using aggregated data and controlling access.

In order to minimise anti-competitive risks - in particular the risk of qualification as a 'restriction by object' - the Commission encourages the adoption of desensitisation (A) and measures of segregation and control (B) of information.

1. Desensitisation Techniques (Aggregation and Historicity)

  • Point 372 - It is recommended to reduce the frequency of information exchange and, where possible, to use aggregated data or ranges of valuesin order to avoid the exchange of detailed information or attributable to individual companies.
  • Point 391 - The exchange of aggregated information is less likely to restrict competition, especially when the attribution of data to individual companies is difficult or uncertain.
  • Point 393 - The exchange of historical information is generally less likely to produce collusive effects, as such information quickly loses its strategic relevance.
  • Point 394 - The 'historical' character has to be assessed according to the characteristics of the relevant market, taking into account, for example, the average length of pricing or contract cycles.
  • Point 411 - Companies should reduce the risk of disclosure of sensitive information by focusing on data aggregates and historianswhich are generally less strategic.

2. Segregation and Control Measures (Clean Teams, Fiduciaries, Firewalls)

  • Point 406 - Companies should implement control and restriction measures of access information, in order to prevent the misuse of shared data.
  • Point 407 - The use of clean teams (internal core groups not involved in commercial activities) or of independent trustees for data management, in in accordance with the principle of need to know (need to know basis) and in the form aggregated.
  • Point 408 - In the data pooleach participant should only have access to its own information and the aggregated data of others, ensuring that only data strictly necessary for the legitimate purpose pursued are collected.
  • Point 418 - To avoid qualification as a restriction 'by object' in data sharing agreements between competitors, the parties should rely as much as possible on data aggregates and historiansreduce the frequency of exchange and limit access to the sensitive information.

 

6. Conclusions

The regulation of information exchange in dual distribution relationships confirms how this is a terrain sensitive and high antitrust risk. This is, however, a risk often not fully perceived by companiesas it is based on potential competition: a competitive threat that may exist even when the supplier does not yet actually operate on the distributor's market.

The same information flows that make vertical collaboration efficient can in fact turn - if not properly managed - into instruments that can distort competition in the downstream market.

Companies must therefore approach these relationships with utmost cautionavoiding automatisms and generalisations: each exchange requires a careful assessment of the nature of the data, of the aim pursued and the competitive environment in which it takes place.

The correct application of the European regulatory framework ultimately requires an approach conscious, documented and proportionatein which the principles of necessity and minimisation guide the design of information systems and interactions between supplier and distributor.

____________________________

 

[1] Recital 12, Reg. 2022/720.

[2] Guidelines 2022, paras. 89-90: "normally not more than one year".

[3] Art. 2, § 5 Reg. (EU) 2022/720; Guidelines 2022, paras. 96-103).

[4] Vertical Guidelines 2022, § 5.1.

[5] CJEU, Glaxo, paras. 42-43; Commission Notice 2023/C 259/01, para. 13; Guidelines on Vertical Restraints 2022, paras. 89-90.

[6] CJEU, Glaxoparagraphs 42-43; Communication 2023/C 259/01, § 13.

[7] (C-211/22, § 51)

[8] (C-298/22, §§ 63-71)

[9] Chapter 6 of the Guidelines on the applicability of Article 101 TFEU to cooperation agreements

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