5
The Advent of the Block Exemption

1. Early Cases on Distribution Systems

While the Grundig case had been on appeal to the Court, DG IV began to issue a number of decisions which illustrated its developing approach to the interpretation of the conditions for exemption set out in Article 85(3). The first two cases were relatively straightforward and dealt with bilateral distribution arrangements. The first, a decision issued on 22 September 1965, related to an exclusive distribution agreement covering Belgium granted by a German company. Hummel, to a Belgian enterprise, Isbecque, for the sale of small tractors, power-driven cultivators, and accessories.1 Negative clearance was not possible because there was a restriction preventing Hummel from selling to anyone in Belgium other than Isbecque, and Belgian undertakings other than Isbecque were unable to buy the products direct from Hummel. The importing of such products from Germany to Belgium was therefore clearly affected by the terms of this agreement.

Nevertheless, the Commission decided that the conditions set out in 85(3) were satisfied. The manufacturer found that it had only to deal with a single purchaser for a given territory. Belgium, and this enabled it to deal more easily with legal, linguistic, and other commercial difficulties in that country. It also gave the distributor an incentive to expend time and money on adapting goods to local conditions and to provide an adequate after-sales service and stock of spare parts. The requirement in 85(3) for an improvement in the distribution of goods was therefore satisfied. The Commission also found on this occasion that consumers benefited from the agreement because they could more easily obtain agricultural machinery adapted to the Belgian market. Isbecque had no opportunity to increase prices as a result of the exclusive distribution arrangements because of the continuing possibility of the parallel import of goods from Germany. Having thus dealt with the two positive requirements of 85(3). little difficulty was encountered by DG IV with the two negative conditions: it held that no more restraints had been imposed on Isbecque than were necessary for the economic benefit of exclusive distribution to be obtained, and in particular the parties had not sought to grant absolute territorial protection making parallel imports impossible.

____________________
1
JO 2581/65:[ 1965] CMLR 242.

-55-

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