Alemania y Austria

An agent is defined by the European Commission’s Vertical Guidelines as a legal or physical person appointed by another person, usually referred to as ‘the principal’, with the power to negotiate and/or conclude contracts on behalf of the latter, which involve either the purchase of goods or services by the principal, or the sale of goods or services

135 Ibid, 461-462.

136 HN Butler and BD Baysinger, supra n 112, 1083.

137 Ibid, 1084. Naturally, the same applies also to vertical territorial restraints.

167 supplied by it.¹³⁸ As remuneration for its services, the agent typically receives either a salary or a commission on the contracts concluded. For the purposes of the application of Article 101 TFEU, the functions performed by the agent are considered as forming part of the principal’s activities, insofar as the agent

does not bear any, or bears only insignificant, [financial or commercial] risks in relation to the contracts concluded and/or negotiated on behalf of the principal, in relation to market-specific investments for that field of activity, and in relation to other activities required by the principal to be undertaken on the same product market.¹³⁹

Where this requirement is met, the prohibition of Article 101(1) will be declared inapplicable, even if the agreement at issue contains clauses that are typically classified as hardcore restraints, including export bans and vertical price restraints. In the context of commercial agency, such restraints are deemed essential in light of the risks assumed by the principal, who accordingly needs to be in a position to determine the appropriate commercial strategy.¹⁴⁰

The origins of the public policy towards commercial agency can be traced in the US Supreme Court's decision in General Electric.¹⁴¹ As was seen earlier,¹⁴² the

‘consignment exception’ introduced in General Electric was effectively based on the property logic underpinning the earlier Dr Miles case. According to Mr Justice Taft, who delivered the opinion of the Court,

there is nothing as a matter of principle or in the authorities which requires us to hold that genuine contracts of agency like those before us, however comprehensive as a mass or whole in their effect, are violations of the Anti-Trust Act. The owner of an article, patented or otherwise, is not violating the common law or the Anti-Trust Act by seeking to dispose of his articles directly to the consumer and fixing the price by which his agents transfer the title from him directly to such consumer.¹⁴³

138 Vertical Guidelines, para 12. Compare the distinction between ‘genuine’ and ‘non-genuine’ agency agreements under the preceding regime; Commission Notice – Guidelines on Vertical Restraints [2000] OJ C291/1, paras 13-15.

139 Ibid, para 15.

140 Vertical Guidelines, para 18.

141 United States v General Electric Co, 272 US 476 (1926).

142 See supra ch 1.

143 272 US 476, 488.

168 In Simpson v Union Oil Co, the Supreme Court limited the scope of the consignment exception by ruling that the determining factor when assessing the compatibility of a relevant agreement with Section 1 of the Sherman Act is the allocation of risks between the principal and the consignee.¹⁴⁴ The case concerned an agreement between an oil refiner and its gasoline retailer whereby the former retained title to the consigned goods, while fixing the retail price to be observed by Simpson. In condemning the RPM scheme at issue, the Court noted that the risk of loss was entirely on Simpson, who bore personal liability and property damage insurance by reason of the contract goods, while also being responsible for all losses in the consigned gasoline in his possession.

Simpson thus essentially operated as an independent businessman and, in that sense, formalistic reliance on the transfer of ownership requirement would allow potentially harmful arrangements to escape the antitrust laws merely by means of a ‘clever manipulation of words’.¹⁴⁵ The fact that the price-maintained gasoline was distributed through a vast and established distribution network was an additional consideration:¹⁴⁶ according to Mr Justice Douglas, for the purposes of the application of the Section 1 prohibition, a consignment agreement cannot amount to commercial agency where its ultimate effect is equivalent to a horizontal price fixing conspiracy.¹⁴⁷

The European Commission outlined the public policy towards commercial agency for the first time in a relevant Notice published as early as 1962.¹⁴⁸ While neither the 1962 Notice nor the 2000 Vertical Guidelines¹⁴⁹ left any doubts as to the constituent elements of commercial agency, significant controversy nonetheless emerged in that regard from the Commission and European Courts’ decision-making practice.¹⁵⁰ In Pittsburgh Corning, the Commission, citing the judgment of the CJEU in Consten and Grundig¹⁵¹ as an authority,

144 Simpson v Union Oil Co of California, 377 US 13 (1964).

145 Ibid, 22.

146 Ibid, 21-22. See, however, Illinois Corporate Travel, Inc v American Airlines, Inc, 806 F2d 722 (7th Cir 1986), where the Court of Appeals for the Seventh Circuit declared the exception applicable despite a travel agent's broad metwork.

147 In that regard, Mr Justice Douglas made specific reference to the Court's earlier decision in United States v Socony-Vacuum Oil Co, 310 US 150 (1940).

148 European Commission, Notice on exclusive dealing contracts with commercial agents [1962] OJ C139/2921.

149 Supra n 138, paras 12-20. Note that the 1962 Notice cites the assumption of ‘financial risks’ as the determining factor, while the 2000 Vertical Guidelines make reference to ‘the financial or commercial risk borne by the agent’.

150 See generally I Lianos, ‘Commercial Agency Agreements, Vertical Restraints, and the Limits of Article 81(1) EC: Between Hierarchies and Networks’ [2007] 3 J Comp L & Econ 625, 631-635; F Wijckmans and F Tuytschaever, Vertical Agreements in EU Competition Law (2nd edn, Oxford University Press 2011), paras 6.104-6.106.

151 Joined Cases 56 and 58/64, supra n 2, 340 (‘The wording of Article [101] causes the prohibition to apply, provided that the other conditions are met, to an agreement between several undertakings. Thus it does not apply where a sole undertaking integrates its own distribution network into its business organization’).

169 refrained from examining any possible allocation of risks between the parties involved in the agreement and relied solely on degree of the agent’s economic dependence on the supplier. In that regard, the Commission took the position that the agent was not performing the functions of an auxiliary organ, nor was it integrated into the principal’s distribution system. Instead, the agent was simultaneously the subsidiary of other powerful undertakings and enjoyed in itself a degree of market power sufficient to allow it to deviate from the principal’s directions, while sales of its own products accounted for a substantial part of its turnover.¹⁵² The ‘integration criterion’ was further clarified in Vereniging Vlaamse Reisbureaus, where the Court of Justice held that agreements whereby travel agents in Belgium were obliged to observe the prices of tours stipulated by tour operators could not benefit from the immunity from antitrust liability conferred on commercial agency. In holding that the price fixing schemes at hand fell within the scope of Article 101(1), the Court noted that travel agents could not qualify as auxiliary organs forming an integral part of a tour operator’s undertaking in light of the network of relationships between the upstream and downstream firms: each travel agent ‘sells travel organized by a large number of different tour operators and a tour operator sells travel through a very large number of agents’.¹⁵³

In Mercedes-Benz, the Commission categorically rejected the assertion that the criterion of integration is relevant to the distinction between a commercial agent and an independent dealer.¹⁵⁴ On appeal, however, the General Court drew a clear analogy between commercial agency and the single economic entity doctrine:

In so far as application of Article [101 TFEU] is concerned, the question whether a principal and its agent or ‘commercial representative’ form a single economic unit, the agent being an auxiliary body forming part of the principal’s undertaking, is an important one for the purposes of establishing whether given conduct falls within the scope of that article.¹⁵⁵

Effectively transplanting the analytical framework associated with the single economic entity doctrine into the public policy towards commercial agency, the Court pointed out that immunity from antitrust liability is contingent upon a showing that the agent does not

152 Pittsburgh Corning Europe - Formica Belgium - Hertel [1972] OJ L272/35. See also European Sugar Industry [1973] OJ L140/17, upheld on appeal by the CJEU in Joined Cases 40-48, 50, 54-56, 111, 113 and 114/73, Coöperatieve Verenigning ‘Suiker Unie’ UA and Others v Commission [1975] ECR-1663.

153 Case 311/85, ASBL Vereniging van Vlaamse Reisbureaus v ASBL Sociale Dienst van de Plaatselijke en Gewestelijke Overheidsdiensten [1987] ECR 3801, para 20.

154 Mercedes-Benz [2001] OJ L257/1, para 163.

155 Case T-325/01, DaimlerChrysler AG v Commission [2005] ECR II-3319, para 86.

170 determine independently its own conduct in the marketplace, but merely complies with the instructions given to it by the principal.¹⁵⁶ The Court further emphasised that an additional relevant element is the exercise of authority over the agent’s marketing strategy.¹⁵⁷

Eventually, in both editions of its Vertical Guidelines, the Commission appears to have dismissed the integration criterion, citing two only relevant factors which delineate the concept of agency: the agent’s function as an organ negotiating and/or concluding sale or purchase transactions on behalf of the principal, and the level of risks assumed by the agent in relation to the fulfilment of its duties. In effect, by conceding that it is irrelevant for the purposes of defining an agency agreement whether the agent acts for one or several principals,¹⁵⁸ the Commission distances itself from the CJEU’s judgment in Vereniging Vlaamse Reisbureaus and implicitly rejects the criterion of economic dependence.¹⁵⁹

In two subsequent decisions, however, the Court of Justice also embraced the criterion of risk allocation as the distinctive element of commercial agency. In CEEES, despite observing that the relationship between a principal and its agent may be indistinguishable from the interactions between the various constituent parts of an economic unit within the meaning of Article 101,¹⁶⁰ the Court conceded that agents may lose their character as independent traders where do not bear any of the risks associated with the negotiation of contracts on behalf of the principal:¹⁶¹

It follows that the decisive factor for the purposes of determining whether a service station operator is an independent economic operator is to be found in the agreement concluded with the principal and, in particular, in the clauses of that agreement, implied or express, relating to the assumption of the financial and commercial risks linked to sales of goods to third parties. ... [T]he question of risk must be analysed on a case-by-case basis, taking account of the real economic situation rather than the legal classification of the contractual relationship in national law.¹⁶²

156 Ibid, para 88.

157 Ibid, para 94.

158 Vertical Guidelines, para 13; see also 2000 Vertical Guidelines, para 13.

159 See I Lianos, supra n 150, 638.

160 Case C-217/05, Confederación Española de Empresarios de Estaciones de Servicio v Compañía Española de Petróleos SA [2006] ECR I-11987, paras 39-42.

161 Ibid, para 43.

162 Ibid, para 46.

171 This approach was later re-iterated and confirmed by the Court in CEPSA.¹⁶³

It is important to note that, unlike EU competition law, which is naturally concerned with the likely adverse effects of restricted dealing on trade between Member States, under US antitrust law the significance of the consignment-agency exception has been limited to the field of vertical price restraints.¹⁶⁴ Whether the distinction between independent distributorship agreements and commercial agency for antitrust purposes can be defended on efficiency grounds is questionable. Theories of harm associated with the implementation of RPM schemes, such as the facilitation of manufacturer or dealer cartels, are equally applicable to agency relationships. Posner observes that, if Dr Miles is to be interpreted as proscribing vertical restraints which have the same adverse competitive impact as horizontal collusion, then the consignment exception as applied in General Electric is in sharp contrast with this precedent. And, inversely, if the consignment exception, along with the Colgate doctrine, stand for the proposition that the manufacturer may, under certain circumstances, have legitimate reasons for imposing minimum resale prices, then the per se treatment of RPM is rather unwarranted.¹⁶⁵

That said, the consignment exception is consistent with the idea that the risk bearer is in a better position to determine its own profit-maximising price.¹⁶⁶ Additionally, by fixing the agent’s mark-up, which in this way serves as a commission on sales made, the principal may be seeking to incentivise the dealer to increase its sales efforts in the face of any fluctuations in the retail market price relative to the wholesale price paid at the time of consignment.¹⁶⁷ The lenient public policy towards commercial agency can also be explained in light of new institutional economics: Lianos sees agency as an organisational structure similar to a situation of hierarchy. The fact that the principal retains property rights over the contract goods makes it susceptible to possible post-contractual opportunistic behaviour on the part of its agents. Against this background, antitrust immunity is deemed necessary to encourage the supplier to incur the administrative costs of establishing the form of organisation that best serves its commercial interests.¹⁶⁸

163 Case C-279/06, CEPSA Estaciones de Servicio SA v LV Tobar e Hijos SL [2008] ECR I-6681, paras 35-36.

164 H Hovenkamp, supra n 51, p 520

165 RA Posner, Antitrust Law (2nd edn, The University of Chicago Press 2001), pp 178-179. See also KN Hylton, Antitrust Law: Economic Theory and Common Law Evolution (Cambridge University Press 2003), p 268.

166 LA Sullivan and WJ Grimes, The Law of Antitrust: An Integrated Handbook (2nd edn, West 2006), p 404.

167 H Hovenkamp, supra n 51, p 519.

168 I Lianos, supra n 150, 663-664.

172 As a general proposition, the economic notion of agency refers to an agreement whereby the principal delegates a specific task to a different party and, accordingly, it is considerably broader that the respective antitrust definition.¹⁶⁹ In other words, a member of a distribution network is automatically classified as an agent in the above sense, regardless of whether it assumes financial or commercial risks of any degree. As has already been explained, it is in the context of such relationships that information asymmetry gives rise to agency problems which may expose the principal to post-contractual opportunistic behavior on the part of the agent. In the face of a possible conflict of interests, the principal is presented with two options; it can either adopt a monitoring mechanism, by entering into a form of hierarchical relationship with the agent,¹⁷⁰ or align the parties’ interests by creating outcome-based agent incentives.¹⁷¹ An outcome-based contract, however, entails the transfer of risk to the agent, whose performance may be determined by a number of contingencies which are independent of its own efforts. Against this background, the greater the agent’s risk aversion, the greater the likelihood that it will demand a premium for bearing compensation risk and, in turn, the greater the costs incurred by the principal for the conclusion of an outcome-based contract.¹⁷²

Naturally, both polar extremes may be prohibitively costly for a manufacturer.

Hierarchical organization, on the one hand, although maximising control over distribution, requires a significant commitment of resources and exposes the manufacturer to an unfamiliar business environment, while considerably limiting its flexibility.¹⁷³ At the same time, arm’s length transactions may give rise to the problems of moral hazard and adverse selection.¹⁷⁴ On the basis of this analysis, and contrary to Lianos’s assertion, Zhang¹⁷⁵ takes the view that commercial agency is a hybrid form of organisation, which essentially constitutes ‘a middle ground between vertical integration and outsourced distribution’.¹⁷⁶

Zhang further justifies the lenient approach taken to commercial agency as reflecting the authorities’ lack of concern as to its effects on competition. While Zhang’s argument that agency agreements may have practically no contribution to the facilitation of

169 AH Zhang, ‘Toward an Economic Approach to Agency Agreements’ [2013] 9 J Comp L & Econ 553, 576-577.

170 See EF Fama, ‘Agency Problems and the Theory of the Firm’ [1980] 88 J Pol Econ 288.

171 MC Jensen and WH Meckling, ‘Theory of the Firm: Managerial Bahavior, Agency Costs and Ownership Structure’ [1976] 3 J Fin Econ 305.

172 WM Lassar and JL Kerr, ‘Strategy and Control in Supplier-Distributor Relationships: An Agency Perspective [1996] 17 Strategic Mgmt 613, 614-615.

173 Ibid, 615.

174 Ibid.

175 Zhang, supra n 169, 577-580.

176 Ibid, 579.

173 a downstream cartel is indeed convincing, as the manufacturer remains the residual control rights holder,¹⁷⁷ her comparative analysis of the possible impact of RPM and commercial agency on the stabilisation of upstream cartels should rather be dismissed:

Of course, if multiple competing manufacturers appoint the same agent and use that agent as a conduit for exchanging price information, this amounts to horizontal price fixing, in violation of antitrust law. In such a case, however, it is not the vertical restraint that makes the cartel possible – the manufacturers in question are able to fix prices on their own in the first place. Resale price maintenance might have the effect of facilitating such a cartel, though, as the manufacturers would not be able to easily fix retail prices in the absence of restraints imposed on the downstream retailers.¹⁷⁸

First of all, horizontal collusion is exactly that; horizontal. As will be argued in Chapter 6, whether the parties to a collusive arrangement implement a vertical restraint of any sort as a facilitating mechanism, the loss in allocative efficiency which will trigger the application of the antitrust laws will be caused by the horizontal coordination, not by the vertical restraint. Second, Zhang appears to be confusing the ability to collude with the ability to monitor compliance with the rules of the cartel. More specifically, whether upstream firms are indeed ‘able to fix prices on their own’ is an issue which has nothing to do with the vertical relationship, but with other factors such as the structure of the relevant market, the availability of sensitive information on prices and cost structures, or the degree of product differentiation, none of which is in any way affected by RPM. In other words, RPM may be designed to ensure compliance with the cartel, not to create it. There can be no misunderstanding that RPM may indeed facilitate the maintenance of the collusive equilibrium, but this does not entail, as Zhang appears to imply, that RPM is a necessary condition of successful cartelisation. The European Commission and Courts’ decision-making practice is particularly instructive in that regard. In no cartel case brought by the Commission under Article 101 was there any evidence of a parallel implementation of price floors and, inversely, in no vertical price fixing case did the Commission rely on an individual RPM scheme in order to infer the existence of a cartel. If Zhang’s assertion was correct and collusion was indeed difficult in the absence of RPM, then one would expect to encounter not only at least some, but in fact an overwhelming number of cases combining horizontal and vertical price fixing. In light of the foregoing, the facilitation of the

177 Ibid, 575.

178 Ibid, 574-575.

174 exchange of sensitive information on prices through a common agent, which Zhang quickly dismisses as a purely horizontal matter – and rightly so – could in reality be described as greater threat from a welfare perspective, since it is effectively a constitutive element of a cartel.¹⁷⁹