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The For Efficient Distribution Of The European Commission Has Altered Its Interpretation Of Article 81 Overtime

Decent Essays
1) Briefly summarise the main points of the case

Verboven’s (2009) discusses vertical restraints, concluding their necessity for efficient distribution, discussing how the European Commission has altered its interpretation of Article 81 overtime. Three types of restraint are highlighted: Selective distribution, Exclusive distribution and Exclusive dealing, and that restraint adoption depended on current levels of regulation. Verboven (2009) explains that vertical restraints became subjected to EU Competition Laws and due to ‘cumulative anti-competitive effects ’ were reformed, becoming stricter. By 2002, new block exemptions aimed to increase flexibility on acceptable agreements and that only Selective or Exclusive distribution can be applied, not both. Black clauses including Retail Price Maintenance (RPM) and passive selling outside of territories were listed. Nevertheless, post-2002 manufacturers were now allowed to make certain vertical agreements (excluding black clauses), assuring their market share was within the newly defined thresholds (in general 30%).

Overall, Verboven (2009) emphasised three main issues. Firstly, double marginalisation occurring when both manufacturer and dealer apply separate profit incentivised mark-ups. Secondly, vertical externalities result in dealers having no incentive to provide sale and after-sale services, as the dealer ultimately provides the manufacturer with increased profits. Finally, competing dealerships may freeride on
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