Vertical Restraints On E-Commerce And Selective Distribution

This paper discusses whether, when manufacturers choose to adopt a selective distribution system, vertical restraints imposed on electronic commerce (e-commerce) may work in the interest of consumers or have anticompetitive consequences that require an antitrust intervention. The paper presents the basic economic concepts that apply to vertical restraints, and identifies the efficiency reasons and the anticompetitive effects that may motivate their adoption. Then, the relevant economic literature is surveyed in order to understand how e-commerce influences retail competition, taking into account its impact on search costs, distribution costs, and information asymmetry. The paper examines the legal treatment of vertical restraints on e-commerce in the case of selective distribution; it summarizes the position expressed by the European Commission in the Block Exemption Regulation and the accompanying guidelines, and then discusses some cases decided by National Competition Authorities, National Courts, and the European Courts. From this overview emerges the risk that the antitrust analysis of vertical restraints on e-commerce in selective distribution systems may be guided by presumptions that do not have solid economic grounds. The paper argues that it is unwise to adopt a formal approach for the legal assessment of these vertical restraints and calls for a more economic effect-based approach.