A recent opinion of the Advocate General of the ECJ concerning agreements between oil giant 'Cepsa' and certain Spanish service stations provides advice on how to distinguish between exclusive contracts and agency relationships for the purpose of EC competition law.
On 13 July 2006, Advocate General Kokott handed down her opinion on questions referred from a Spanish court about the application of Article 81(1) of the EC Treaty to exclusive agreements for the supply of fuel to Spanish service stations. The agreements contained provisions fixing resale prices.
The Advocate General first assessed whether the contracts between Cepsa and the service stations fell within the scope of Article 81(1). For these purposes, they must amount to agreements between undertakings at least two undertakings. If the relationship between Cepsa and the service stations however was judged to be that of a principal and an agent, there was no agreement and therefore Article 81(1) could not be breached.
To determine whether an agent is acting as an agent or as an independent economic undertaking for these purposes it is necessary to consider its activities on the retail market. A key factor in determining whether the agent is acting independently on the retail market is the allocation of risk between the principal and agent. If an agent does not bear any risk then it can be seen to be acting as a true agent. Where the agent assumes the risks relating to the sale of the products, however, it should be regarded as an independent economic undertaking. If so, any restrictions imposed on its activities in this market must be assessed under Article 81.
The Advocate General held that the national court should assess in particular:
- The product-specific risk - These include the risks relating to transport costs, storage, damage and sales. If the ownership of the products is transferred to the agent before they are sold on to a third party, this implies that the risk rests with the agent.
- The transaction-specific investment risk - These include the risks relating to the necessary sales infrastructure (fuel tanks) and also advertising costs. If these costs are borne by the agent, this indicates that the risk rests with him/her.
The judgement is a useful reminder of the importance of being aware of how the notion of agency fits within the framework of competition law and the fact that an agency agreement, if properly drafted, will bring the business relationship out-with the scope of Article 81 of the EC Treaty.