Advertisement

European Journal of Law and Economics

, Volume 38, Issue 2, pp 317–342 | Cite as

Prohibition of parallel imports as a vertical restraint: per se approach or a misunderstanding?

  • Nikolaos E. Zevgolis
  • Panagiotis N. Fotis
Article

Abstract

This paper attempts, on the one hand, to reveal the main principles of Competition Law (regulatory and case law framework) covering the prevention of parallel trade, mainly the prohibition of parallel imports, and on the other hand to cast light on the main effects of parallel imports prohibition imposed by an upstream supplier on the competitive structure of the downstream market. Especially, the regulatory framework that relates to Block Exemption Regulation 330/2010, (ex Block Exemption Regulation 2790/99), with Block Exemption Regulation 461/2010 (ex Block Exemption Regulation 1400/2002) in order to determine whether prohibition of parallel imports constitutes a hardcore restriction or not, while the economic analysis evaluates it in a geographical vertical market with upstream suppliers and downstream buyers which sell goods to the final (domestic) consumers. Administrative anticompetitive measures are considered as well. The results indicate that the prohibition of parallel imports by upstream firms cause vertical restraints to the domestic customers of the buyers.

Keywords

Antitrust law Vertical restraints Block Exemption Regulation Case law Market imperfection Repeated games of oligopoly theory 

JEL Classification

D43 K21 L13 L43 L67 

Notes

Acknowledgments

The authors wish to thank two anonymous referees for their helpful and constructive comments. Warm thanks are also expressed to Mrs Danielle Apostolatos. Usual disclaimer applies.

References

  1. Acutt, M., & Elliott, C. (2001). Threat-based competition policy. European Journal of Law and Competition, 11(3), 309–317.CrossRefGoogle Scholar
  2. Armstrong, M. (2008). Price discrimination. Working Paper No. 14500. University College London, http://www.discovery.ucl.ac.uk/14500/1/14500.pdf.
  3. Asplund, M., Eriksson, R., & Strand, N. (2008). Price discrimination in oligopoly: Evidence from Swedish newspapers. Journal of Industrial Economics, 56(2), 333–346.CrossRefGoogle Scholar
  4. Barnard, C. (2010). The substantive law of the EU. The four freedoms (3rd edn). Oxford: Oxford University Press.Google Scholar
  5. C-413/06 P, Bertelsmann AG & Sony Corporation of America v. Independent Music Publishers and Labels Association (Impala) & Commission. (2008). ECR 4951.Google Scholar
  6. Case 319/82. (1983). Société de vente de ciments et bétons de l’Est. ECR 4173. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:61982J0319:EN:HTML.
  7. Case C-338/00 P, Volkswagen/Commission. (2003). ECR I-9189. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62000J0338:EN:HTML.
  8. Case C-551/03 P, General Motors. (2006). ECR I-3173. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62003J0551:EN:HTML.
  9. Cases 25 and 26/84 Ford-Werke AG and Ford of Europe Inc. v Commission. (1985). ECR 2725. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:61984J0025:EN:HTML.
  10. Cases 96-102, 104, 105, 108 and 110/82, NV IAZ International Belgium and others v Commission of the European Communities. (1983). ECR 3369, [1984] 3 CMLR 276. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:61982J0096:EN:HTML.
  11. Clark, J., & Simon, S. (2010). The new legal framework for motor vehicle distribution: A toolkit to deal with real competition breakdowns. Journal of European Competition Law & Practice, 1(2), 478–490.Google Scholar
  12. COM(2009) 388, COMMUNICATION FROM THE COMMISSION, The Future Competition Law Framework applicable to the motor vehicle sector, {SEC(2009) 1052}, {SEC(2009) 1053}, Brussels, 22.7.2009. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2009:0388:FIN:EN:PDF.
  13. Commission Decision 1999/C 137/04 of 7 May 1999 in Case IV/M.1541-Kingfisher/ASDA. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:1999:137:0004:0004:EN:PDF.
  14. Commission Decision 2001/146/EC of 20 September 2000 in Case COMP/36.653—Opel. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2001:059:0001:0042:EN:PDF.
  15. Commission Decision 2002/758/EC of 10 October 2001 in Case COMP/36.264—Mercedes-Benz. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2002:257:0001:0047:EN:PDF.
  16. Commission Decision 2006/431/EC of 5 October 2005 in Cases F-2/36.623/36.820/37.275—SEP et autres/Peugeot SA. http://ec.europa.eu/competition/antitrust/cases/dec_docs/36820/36820_191_1.pdf.
  17. Commission Decision 97/277/EC of 20 November 1996 in case No IV/M.784—Kesko/Tuko). http://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg=EN&numdoc=31997D0277&model=guichett.
  18. Commission Decision 98/273/EC of 28 January 1998 in Case IV/35.733—VW. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:l:1998:124:0060:0108:en:PDF.
  19. Commission Decision 98/C 272/02 of 25 August 1998 in Case IV/M. 1221-Rewe/Meinl. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:1998:272:0002:0002:EN:PDF.
  20. Commission Evaluation Report on the Operation of Regulation (EC) No 1400/2002 concerning motor vehicle distribution and servicing. (2008). http://ec.europa.eu/competition/sectors/motor_vehicles/documents/evaluation_report_en.pdf.
  21. Competition Commission of India. (2010). A study of parallel trade through the lens of competition law—lessons from India. http://www.cci.gov.in/images/media/ResearchReports/AvinashBAmarnath.pdf.
  22. Crampes, C., Hollander A., & Macdissi, C. (2007). Parallel trade, bundling and abuse of dominance. In Y. Katsoulacos (Ed.), Abuse of dominance proceedings of the 1st European conference in competition and regulation (pp. 2–25). Athens: Athens University of Economics and Business.Google Scholar
  23. Danzon, P. (1997). Price discrimination for pharmaceuticals: Welfare effects in the US and the EU. International Journal of the Economics of Business, 4(3), 301–321.CrossRefGoogle Scholar
  24. Danzon, P., & Towse, A. (2003). Differential pricing for pharmaceuticals: Reconciling access, R&D and patents. International Journal of Health Care Finance and Economics, 3(3), 183–205.CrossRefGoogle Scholar
  25. Dethmers, F., Posthuma, Pier., & de Boer, P. (2009). Ten years on: Vertical agreements under article 81. European Competition Law Review, 30(9), 424–439.Google Scholar
  26. Fotis, P., & Polemis, M. (2011). The use of economic tools in merger analysis: Lessons from US & EU experience. European Competition Journal, 7(2), 323–347.CrossRefGoogle Scholar
  27. Fotis, P., & Polemis, M. (2012). The Short-run competitive effects of merger enforcement. European Competition Journal (forthcoming, April issue).Google Scholar
  28. Fotis, P., Polemis, M., & Zevgolis, N. (2009). Stock price performance as an argument for derogation from suspension of concentrations: Reality or a myth? European Competition Law Review, 30(5), 216–222.Google Scholar
  29. Fotis, P., Polemis, M., & Zevgolis, N. (2011). Robust event studies from derogation from suspension of concentrations in Greece during the period 1995–2008. Journal of Industry Competition and Trade, 11, 67–89.CrossRefGoogle Scholar
  30. Gallini, N., & Hollis, A. (1999). A contractual approach to the gray market. International Review of Law and Economics, 19(1), 1–21.CrossRefGoogle Scholar
  31. Ganslandt, M., & Maskus E. K. (2005). Vertical distribution, parallel trade, and price divergence in integrated markets. Working Paper No. 639, IUI, The Research Institute of Industrial Economics, http://www.ifn.se/Wfiles/wp/WP639.pdf.
  32. Geradin, D., & Petit, N. (2006). Price discrimination under EC competition law: Another antitrust doctrine in search of limiting principles? Journal of Competition Law and Economics, 2(3), 479–531.CrossRefGoogle Scholar
  33. Goyder, D. G. (2004). EC Competition Law (4th edn). Oxford: Oxford University Press.Google Scholar
  34. Grossman, M. G., & Lai, E. L.-C. (2008). Parallel imports and price controls. RAND Journal of Economics, 39(2), 378–402.CrossRefGoogle Scholar
  35. Intellectual Property and Competition Review Committee Review of Intellectual Property legislation under the Competition Principles Agreement. (2000). http://www.ipaustralia.gov.au/pdfs/ipcr/finalreport.pdf.
  36. Jelovac, I., & Bordoy, C. (2005). Pricing and welfare implications of parallel imports in the pharmaceutical industry. International Journal of Health Care Finance and Economics, 5(1), 5–21.CrossRefGoogle Scholar
  37. Joined Cases C468/06 to C478/06 [Sot. Lélos kai Sia]. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62006C0468:EN:NOT.
  38. Karydis, G., & Zevgolis, N. (2009). Regulation 1400/2002 and access to technical information: Necessity of convergent interpretation with the principles established by the relevant case law. European Competition Law Review, 30(2), 95–101.Google Scholar
  39. Korah, V., & O’Sullivan, D. (2002). Distribution agreements under the EC competition rules. Oxford: Hart Publishing.Google Scholar
  40. Li, C., & Maskus, K. (2004). Parallel imports and cost reducing research and development. mimeo. Colorado: University of Colorado.Google Scholar
  41. Malueg, A. D., & Schwartz, M. (1994). Parallel imports, demand dispersion, and international price discrimination. Journal of International Economics, 37(3–4), 167–195.CrossRefGoogle Scholar
  42. Maskus, K., & Chen, Y. (2004). Vertical price control and parallel imports: Theory and evidence. Review of International Economics, 12(4), 551–570.CrossRefGoogle Scholar
  43. Motta, M. (2009). Competition policy theory and practice. Cambridge: Cambridge University Press.Google Scholar
  44. Motta, M., Rey, P., Verboven, F., & Vettas, N. (2009). Hardcore restrictions under the block exemption regulation on vertical agreements: An economic view. http://ec.europa.eu/dgs/competition/economist/hardcore_restrictions_under_BER.pdf.
  45. NERA., Berwin & Co., IFF Reasearch. (1999). The Economic Consequences of the choice of regime of exhaustion in the area of trademarkas. Executive Summary, Final Report for DG XV of the European Commission. http://ec.europa.eu/internal_market/indprop/docs/tm/summary_en.pdf.
  46. OECD. (2002). Synthesis report on parallel imports. Directorate for financial, fiscal and enterprise affairs, joint group on trade and competition. http://www.olis.oecd.org/olis/2002doc.nsf/43bb6130e5e86e5fc12569fa005d004c/9dc5047a2329c883c1256be400510e2f/$FILE/JT00128903.PDF.
  47. O.J. L 129/52, 28.05.2010, Commission Regulation (EU) No 461/2010, of 27 May 2010 on the application of Article 101(3) of the treaty on the functioning of the European Union to categories of vertical agreements and concerted practices in the motor vehicle sector. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:129:0052:0057:EN:PDF.
  48. O.J. C130/01, 19.05.2010, European Commission, Guidelines on vertical restraints. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:130:0001:0046:EN:PDF.
  49. O.J. L102/1, 23.4.2010, Commission Regulation (EU) No 330/2010, of 20 April 2010, on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:102:0001:0007:EN:PDF.
  50. OJ L168/05, 21.06.2006. Commission Regulation (EC) No 907/2006 of 20 June 2006 amending Regulation (EC) No 648/2004 of the European Parliament and of the Council on detergents, in order to adapt Annexes III and VII thereto. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:168:0005:0010:en:PDF.
  51. OJ L104/01, 08.04.2004. Regulation (EC) No 648/2004 of The European Parliament and of the Council of 31 March 2004 on detergents. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2004:104:0001:0035:en:PDF.
  52. O.J. L 203/30, 1.8.2002, Commission Regulation (EC) No 1400/2002, of 31 July 2002 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices in the motor vehicle sector. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:l:2002:203:0030:0041:en:PDF.
  53. O.J. L336/21, 29.12.1999, Commission Regulation (EC) No 2790/1999, of 22 December 1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:l:1999:336:0021:0025:en:PDF .
  54. OJ L 200/1, 30.07.1999. Directive 1999/45/EC of the European Parliament and of the Council of 31 May 1999 concerning the approximation of the laws, regulations and administrative provisions of the Member States relating to the classification, packaging and labelling of dangerous preparations. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31999L0045:en:NOT.
  55. OJ 196/1, 16.08.1967. Council Directive 67/548/EEC of 27 June 1967 on the approximation of laws, regulations and administrative provisions relating to the classification, packaging and labelling of dangerous substances. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31967L0548:en:NOT.
  56. Opinion of Advocate General Jacobs in case C-53/03 Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and Others v. Glaxosmithkline AEVE. http://curia.europa.eu/jurisp/cgi-bin/gettext.pl?lang=en&num=79958971C19030053&doc=T&ouvert=T&seance=CONCL.
  57. Overvest, M. B. (2010). A note on collusion and resale price maintenance. European Journal of Law and Competition. doi: 10.1007/s1065701091480.
  58. Posner, R. (2001). Antitrust law (2nd ed.). Chicago: University of Chicago Press.Google Scholar
  59. Ramsey, F. (1927). A contribution to the theory of taxation. Economic Journal, 37(145), 47–61.CrossRefGoogle Scholar
  60. Rey, P. (2003). The Impact of Parallel Imports on Prescription Medicines. mimeo, IDEI, University of Toulouse.Google Scholar
  61. Rey, P., & Stiglitz, J. (1995). The role of exclusive territories in producers’ competition. Rand Journal of Economics, 26(3), 431–451.CrossRefGoogle Scholar
  62. Richardson, M. (2002). An elementary proposition concerning parallel imports. Journal of International Economics, 56(1), 233–245.CrossRefGoogle Scholar
  63. Simon, S. (2010). Die neue Kfz-GVO 461/2010, ÖZK (Österreichische Zeitschrift Fur Kartellrecht). Austrian Competition Journal, 3, 83–91.Google Scholar
  64. Stothers, C. (2007). Parallel Trade in Europe, Intellectual Property. Competition and Regulatory Law: Hart Publishing.Google Scholar
  65. Szymanski, S., & Valletti, T. (2005). Parallel trade, price discrimination and price gaps. Economic Policy, 20(44), 705–749.CrossRefGoogle Scholar
  66. Τ-168/01 (GlaxoSmitheKline Services Unlimited v. Commission). http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2001:275:0017:0017:EL:PDF.
  67. Tirole, J. (1998). The theory of industrial organization. Cambridge: The MIT Press.Google Scholar
  68. Tzouganatos, D. (2001). Exclusive and selective distribution agreements in antitrust and unfair competition law. Nomiki Bibliothiki (in Greek).Google Scholar
  69. Varian, H. (1985). Price discrimination and social welfare. American Economic Review, 75(4), 870–875.Google Scholar
  70. Vezzoso, S. (2004). On the antitrust remedies to promote retail innovation in the EU car sector. European Competition Law Review, 25(4), 190–204.Google Scholar
  71. Zevgolis, N., & Fotis, P. (2009). Prohibition of parallel imports and application of regulation on vertical agreements in the sector of detergents for domestic use. Business and Company Law, 11, 1184–1190. (in Greek).Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Hellenic Competition CommissionAthens University of Economics and BusinessAthensGreece
  2. 2.Hellenic Competition CommissionUniversity of Central GreecePeristeri, AthensGreece

Personalised recommendations