In the previous countdown it was highlighted that EU competition law applies a particular definition of agency. Not every agent in the sense of commercial or business law will be treated as an agent for EU competition law purposes.
The agency test under EU competition law is met if the agent assumes no or only insignificant risks associated with the agreements concluded or negotiated on behalf of the principal. If the agency test is met, the agent will be deemed an integral part of the principal and the rules of EU competition law will not apply to agreements between the principal and the agent relating to the transactions negotiated for the principal. If the agency test is not met, the rules governing independent distributors will have to be adhered to. This will imply, for instance, that the agent cannot be compelled to apply a particular fixed price level or cannot be forbidden to deal with certain customers or in certain territories.
A typical feature of the commercial or business law concept of agency is that the agent does not acquire the ownership of the relevant products. Ownership will pass directly from the principal to the customer and will not transit via the agent. Otherwise, a resale transaction between the principal and the agent is involved which is typically incompatible with agency in the commercial or business law sense.
According to the current Vertical Guidelines, an agent is a legal or physical person having the power to negotiate and/or conclude agreements on behalf of a principal, either in the agent’s own name or in the name of that principal, for the purchase of goods or services by the principal, or the sale of goods or services supplied by the principal.
This definition covers a number of important features that are unique to the agency concept:
It has become apparent over the years that, for reasons having nothing to do with EU competition law, the temporary acquisition of ownership of the contract goods by the agent may be needed or desirable. The relevant reasons are typically related to tax or accounting laws, local regulations or the wish of the customer to have the agent, rather than the principal as his counterpart.
The current Commission proposals address this particular need. If the agent acquires the ownership of the goods temporarily, i.e. for a very brief period of time, while selling them on behalf of the principal, this does not necessarily preclude the agreement from being qualified as an agency for EU competition law purposes. In such a case the agency qualification is preserved as long as the agent does not incur any or only insignificant costs or risks related to such transfer of property and the agency in general.
The current proposals of the Vertical Guidelines do not eliminate the agency treatment for EU competition law purposes in the case of a brief transfer of ownership of the goods by the principal to the agent prior to such goods being sold to the customer.
The possibility to acquire the goods for a very brief period of time provides additional and useful flexibility for agents in the performance of their activities. Such a temporary acquisition may serve useful purposes in a commercial context, without endangering the application of the agency test (no or only de minimis risks) under EU competition law.
It is however not clear why the current proposals of the Vertical Guidelines are limited to sales scenarios and do not extend to purchasing scenarios. From an EU competition law perspective (coherent application of the agency test), there is no obvious reason for such a difference in treatment. The failure to amend the proposals on this point may entail the risk of an a contrario interpretation.
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If you need more information or our assistance with setting up the distribution system, please contact Robert Neruda or Štěpán Štarha, who are the firm’s partners responsible for this area.
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Counting down towards 1 June 2022, we aim to provide you with regular updates and the necessary legal knowhow in order to fully prepare your business for the future. Please also check out the Distribution Law Center platform (www.distributionlawcenter.com) and our LinkedIn page for much more information on the laws governing vertical agreements, covering both competition and commercial law. 27 specialized teams from all over the EEA are working hard to turn the platform into your favourite source of guidance and information.
