In an interesting and well-written opinion, Advocate General Medina provides useful insights relevant to the protection of allocated exclusive territories in an exclusive distribution setup. 

On 9 January 2025, Advocate General Medina ("AG Medina") delivered her opinion in Case C‑581/23 Beevers Kaas, which arose from a request for a preliminary ruling from the Antwerp Court of Appeal (Belgium). 

The case involves Beevers Kaas, a Belgian company that is an exclusive distributor of Beemster cheese in Belgium and Luxembourg, which it purchases from the Dutch manufacturer Cono. The parties have had an exclusive distribution agreement in place since 1993. In parallel, Cono has also concluded distribution agreements with other distributors outside of Belgium and Luxembourg, including a large supermarket chain in the Netherlands. 

As the supermarket chain is also actively selling Beemster cheese in Belgium, Beevers Kaas claimed that the supermarket chain carried out activities in violation of its exclusivity rights. 

The dispute before the national Belgian courts revolved around whether the exclusive distribution agreement complied with the conditions laid down in the Vertical Block Exemption Regulation No 330/2010 (the Old VBER) [1]. Consequently, the Antwerp Court of Appeal referred two questions to the European Court of Justice (CJEU) in a request for a preliminary ruling. 

Exclusive distribution systems under the EU competition rules

Exclusive distribution systems are widely used in different markets and are designed to maintain control over product distribution, enhance brand image, incentivize distributor investments, reduce costs and optimize sales.

To achieve these benefits, a supplier can impose certain restrictions on its distributors without violating competition rules. More specifically, a supplier can exclusively allocate a territory or a customer group to a buyer/distributor (referred to hereafter as distributor), while prohibiting all other distributors within the EU from actively selling into the exclusive territory or to the customer group. Provided neither of the parties’ respective market shares on the relevant markets exceed 30%, the territorial/customer restrictions imposed on other distributors are covered by the safe harbour provision in Article 4(b)(i) of the Old VBER, exempting them from the prohibition on anti-competitive agreements in Article 101(1) TFEU. However, restrictions on passive sales in an exclusive distribution system are categorized as hardcore restrictions and cannot benefit from the safe harbour.[2]

The central question in the case at hand was whether the exclusive distribution agreement between Beevers Kaas and Cono met the conditions for the safe harbour under the Old VBER. Although no explicit evidence indicated other distributors agreed to an active sales ban in Belgium, these distributors had in practice refrained from selling Beemster cheese in Belgium. Beevers Kaas argued that this was sufficient to infer tacit acceptance of the ban as it showed that all of Cono’s other distributors had accepted the ban. On the other hand, the Dutch supermarket chain argued that in order for there to be a tacit acceptance, Beevers Kaas first had to show that the active sales ban in Belgium was communicated by Cono to all its distributors. 

AG Medina argued that in order for exclusivity to be meaningful, the enjoyment of the right granted to a distributor must be protected against potential harm. Therefore, if a supplier decides to make use of the exception provided by the VBER safe harbour rules, such as imposing a ban on active sales into an exclusive territory, that supplier is under an obligation to ensure the effectiveness of the exclusive territorial allocation. This includes doing so by protecting the exclusive distributor against active sales in the territory by all the supplier’s other distributors. 

The essence of such block exemptions would be undermined if it was not accompanied by a corresponding obligation on the supplier to guarantee that the restriction of active sales is observed by other distributors. 

This is the core of the dispute at hand, reflecting the so-called “parallel imposition requirement”. AG Medina delivers some insights – for the first time in case-law - as to when this requirement is deemed satisfied. 

The parallel imposition requirement

The parallel imposition requirement dictates that if a supplier with an exclusive distribution system allows distributors in the EU to freely sell wherever they want, including into territories exclusively allocated to other distributors, this risks rendering the entire distribution system non-compliant with competition rules, or at least harder to enforce and associated with legal uncertainty, as it would not benefit from the safe harbour in the Old VBER.[3] 

In her opinion, AG Medina confirmed that the Old VBER and accompanying Vertical Guidelines (2010/C 130/01) implicitly require the “parallel imposition requirement” to be met to grant protection against active sales, although it does not explicitly say so. In particular, neither the Old VBER or Vertical Guidelines outline how a supplier should communicate an active sales ban to its other distributors, or how those distributors are to accept that ban.

AG Medina’s views somewhat align with the New VBER and accompanying new Vertical Guidelines (2022/C 248/01), which entered into force on 1 June 2022[4] and now include the “parallel imposition requirement” as an explicit requirement to benefit from the block exemption.[5] Although AG Medina’s opinion is primarily relevant to the enforcement and interpretation of distribution agreements under the Old VBER, it also serves as a pertinent reminder for agreements covered by the New VBER - should her views be upheld by the CJEU. 

AG Medina’s opinion contains some discussion and insights regarding whether the “parallel imposition requirement” can be satisfied in the absence of a specific agreement between the supplier and all its distributors. 

The AG argued that the fact that none of the supplier’s other distributors engaged in active sales in Beevers Kaas’ exclusive territory was not sufficient to meet the "parallel imposition requirement" and prove that they were subject to an active sales restriction. In order to establish an agreement between the supplier and other distributors within the meaning of Article 101(1) TFEU, inactivity from the other distributors was not sufficient. Instead, what should be demonstrated is the distributors’ will to accept such a restriction. Given that the supplier did not obtain acceptance from the other distributors, the conditions at Article 4(b)(i) of the Old VBER were not met.

In order to meet these, AG Medina concluded that the supplier must have explicitly or implicitly invited those other distributors to behave in a clearly defined manner, i.e. not to engage in active sales in Beevers Kaas’ exclusive territory, and the distributors must at the same time have expressed their will to accept that ban (at least tacitly).

Lessons learned and practical points following the opinion

AG Medina’s opinion serves as a stark reminder to all suppliers wanting to operate an exclusive distribution system to ensure that their distribution agreements meet the requirements laid down in the Old VBER/New VBER, respectively, including the "parallel imposition requirement". 

While the opinion contains an interesting (though more theoretical) discussion of when there can be tacit acceptance, reliance on this in practice is ill-advised when operating an exclusive distribution setup – either as a supplier or distributor. 

From a practical perspective and to ensure legal certainty, it is recommended for active sales bans to be explicitly stipulated and enforced in relation to all distribution agreements. Distributors that have been allocated an exclusive territory or customer group could also insist on their suppliers including an active sales ban in their other distribution agreements, and should not merely rely on the distribution network acting as if a ban was in place. Allowing distributors around the EU to freely sell wherever they like could put the entire distribution system at risk from both a competition law and a commercial perspective.

Key takeaways and learning points from AG Medina's opinion (unless the CJEU rejects her views, against our expectations) include: 

1. The “parallel imposition requirement” applies to all exclusive distribution agreements: Both the Old and the New VBER include a “parallel imposition requirement”, which aims to ensure that suppliers take steps to protect exclusive distributors against active selling between their exclusive territories/customer groups.
2. Ensuring an effective ban on active sales: The “parallel imposition requirement” entails that suppliers – as well as exclusive distributors wanting protection in their allocated territory/customer group - must ensure that all distributors agree to and comply with an active sales ban. This can be ensured both explicitly, by including an active sales ban in all distribution agreements (recommended), or through tacit acceptance (not recommended, as it comes with legal uncertainty). 
3. Getting it right from beginning to end: The “parallel imposition requirement” must be met throughout the entire period for which the block exemption is claimed by the parties. In other words, it is important to get it right from the very beginning when concluding exclusive distribution agreements, and to maintain the requirement through the lifetime of the exclusive distribution system. In addition, if territories/customers are re-allocated at some point, this should be reflected in all agreements. 

It will be interesting to see whether the CJEU confirms the views expressed in AG Medina’s opinion and thus aligns the Old VBER and Vertical Guidelines with the New VBER and Guidelines. In any case, it is advisable for both suppliers and distributors in an exclusive distribution system to revisit their agreements and ensure that the “parallel imposition requirement” is adequately reflected. 

For more information, please contact Morten Nissen or Stefan Brkic.  

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[1] The Old VBER expired on 31 May 2022, and was succeeded by the Vertical Block Exemption No 2022/720 that entered into force on 1 June 2022 (the New VBER). 

[2] Active sales are categorized as proactive targeting of customers through direct approaches or targeted advertising, while passive sales are responses to unsolicited orders from customers.

[3] The New VBER provided for a one-year transitional period to adapt vertical agreements already in force on 31 May 2022 that satisfied the conditions for exemption provided for in the Old VBER, but not the conditions of the New VBER. Such agreements would continue to be exempted until 31 May 2023. 

[4] See our former newsletter in this regard here 

[5] See e.g. para 122 of the new Vertical Guidelines, where it is stated that: “For the exclusive distribution system to benefit from the exemption provided by Article 2(1) of [the New VBER], the appointed distributors must be protected from active sales into the exclusive territory or to the exclusive customer group by all the supplier’s other buyers. Where a supplier appoints more than one distributor for an exclusive territory or customer group, all these distributors must likewise be protected from active sales into the exclusive territory or to the exclusive customer group by all the supplier’s other buyers, but active and passive sales by these distributors within the exclusive territory or customer group cannot be restricted” (our emphasis)