Suppliers and distributors; what information are they allowed to exchange?

Suppliers who sell their products or services directly on the Internet are often in competition with other distributors to whom they supply their products.
14 Apr 23 | France
Retail and Consumer
Cornet Vincent Segurel
Clémence Boissonnet

With the strong development of online sales, suppliers who sell their products or services directly on the Internet often find themselves in a competitive situation with the distributors to whom they supply their products or services elsewhere. Guidelines published on June 28, 2022 have provided welcome clarification as to the nature of the sensitive information that they may exchange with each other with respect to competition law and the risk of classification as a cartel.

Based on the twofold observation of the development of dual distribution – in particular with online sales – and of the insufficient legal framework of horizontal competition between the supplier, present on the downstream market, and its distributors who are active on the same market, the European Exemption Regulation applicable to vertical agreements n°2022/720 of May 10, 2022 has clarified a few points on dual distribution, and in particular on the sharing of information between the supplier and its distributors when the supplier sells goods or services not only upstream to its independent distributors, but also downstream.

Danger zone
This situation is inevitably challenging since it is a balancing act for the supplier: reconciling the need to obtain market feedback from its distributors, in order to improve the production and distribution of goods and services, while being careful not to solicit strategic, confidential, precise and current information, in order to avoid any classification as an anti-competitive agreement.

While regulation 2022/720 now states that exchanges of information are only exempted “where the exchange of information is both directly related to the implementation of the vertical agreement and necessary to improve production or distribution”, it is the Guidelines on Vertical Restraints of June 28, 2022 that the supplier should refer to for clarification of this formulation. They propose non-exhaustive lists of examples of information that may or may not benefit from the exemption, depending on the circumstances.

Necessary clarifications
Thus, the following could benefit from the exemption:

  1. technical information related to the contractual goods or services
  2. logistical information related to the production and distribution of the contractual goods or services, such as inventory or stock information
  3. to some extent, information relating to customer purchases of the contractual goods or services such as customer preferences, customer feedback, to the extent necessary to enable the supplier or buyer to meet the requirements of a particular end-user, or to provide special terms to the end-user, or to provide pre-sales or after-sales services, or to implement or monitor compliance with a selective distribution agreement or an exclusive distribution agreement
  4. information relating to the supplier’s selling prices to the buyer
  5. to a certain extent, information relating to the supplier’s recommended or maximum selling prices, provided that it does not relate to future prices at which the supplier and/or the buyer intend to sell
  6. to a certain extent, information relating to the marketing of the contractual goods or services, such as promotional campaigns or information on new goods or services
  7. information relating to the performance of the contract, such as information aggregated by the supplier about the marketing and sales activities of other buyers, provided that this does not enable the buyer to identify the activities of competing buyers.

On the contrary, the following would not benefit from the exemption:

  1. information about the supplier’s or buyer’s future prices
  2. to a certain extent, detailed information identifying end users
  3. information relating to goods sold by a buyer under its own brand.

Pending issues
While these lists have the merit of presenting different types of information and their sensitive nature, they nevertheless present the pitfall of not offering market players sufficient security. Therefore, they will not be able to dispense with a case-by-case analysis, the conclusion of which will also depend on the distribution system put in place.

Finally, while the issue of information exchange in the context of dual distribution is now addressed, it is regrettable that neither the regulation nor the guidelines on vertical restraints address other issues related to dual distribution, such as free competition on the downstream market, which can be undermined by a supplier’s duty of loyalty towards its distributor. What will happen when a distributor seeks compensation from its supplier who has succeeded in attracting customers by purchasing directly from the supplier?