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On 18 June 2012, the European Commission (EC) provided guidance
on how it treats non-compete covenants entered into in the context
of a joint venture (JV). JV arrangements between Areva and Siemens
concerning nuclear technologies had included non-compete
obligations on the parents that would apply for up to 11 years
after the end of the JV. Following an investigation, the EC found
that one element of this, a restriction on Siemens from competing
on markets on which the joint venture had acted only as re-seller
of Siemens' products, could not be justified post-termination.
For markets on which the JV had sold its own products, the EC found
that the non-compete clause was acceptable, but only for three
years post-termination. The same applied to related confidentiality
clauses insofar as they had the same effects as the non-competes.
The case was closed after Areva and Siemens agreed to change the
arrangements to reflect these concerns.
The acceptable period for a JV non-compete (as with all similar
clauses) is dependent on the facts of the case, but this
investigation nevertheless provides useful guidance as to the
EC's thinking on this issue.
Guidance on Operation of Selective Distribution Systems
On 14 June 2012, the EU's highest court (the Court of
Justice (ECJ)) handed down a judgment which considered the
operation of selection criteria in selective distribution systems.
There are two basic types of selective distribution systems:
quantitative, in which, in order to select distributors, the
supplier uses criteria which directly limit their number; and
qualitative, in which the supplier uses purely qualitative criteria
for the selection of distributors. The judgment concerned
quantitative selection only and in particular the question of the
definition of "specified criteria". The case related to
motor vehicles (to which a special regime applies), but the same
phrase is used in the general vertical restraints block exemption
regulation (VRBER) to define when a selective distribution
agreement can fall within the VRBER. The VRBER provides for an
automatic exemption from EU competition law for certain vertical
agreements, including distribution agreements, outside the motor
vehicle sector.
The ECJ held that this phrase simply refers to criteria whose
precise content can be verified. It is not necessary for the
criteria to be objectively justified and applied in a uniform and
non-differentiated manner or for the criteria to be published. This
issue had been uncertain and the judgment means that suppliers have
significant flexibility in choosing how to operate a quantitative
selective distribution system in the EU.
European Commission Investigates Discriminatory Pricing
The EC announced on 13 June 2012 that it is investigating the
German railway incumbent Deutsche Bahn group for alleged
discriminatory pricing, which could amount to an abuse of the
company's dominant position and therefore be illegal. The case
is relevant to companies with significant market positions in the
EU and companies competing with or buying from such companies.
One of the companies within the Deutsche Bahn group is the only
supplier of traction current on the German market. Traction current
is a particular type of electricity needed to move electric
locomotives and trains on the railway network. The allegation is
that this group company, through its discount structure,
discriminated against competitors of the railway operating business
of Deutsche Bahn group by requiring them to pay higher prices. This
could ultimately lead to a requirement that the group changes its
practices and a fine could be imposed.
Additional EU/UK competition law news coverage can be found in
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