A principal often makes use of an extensive network of carefully selected agents. The principal therefore regularly imposes a number of obligations on an agent with regard to prices, the territory in which activities may be carried out and whether or not it is allowed to compete with the principal’s own activities. In some cases, competition law and more specifically the prohibition of cartels must be taken into account.

The prohibition of cartels forbids agreements between companies that may appreciably restrict competition. Acting in breach of this prohibition may have far-reaching consequences. For example, if a provision is in contravention of the prohibition of cartels, this may cause the specific provision or even the entire agency agreement to be declared null and void. High fines may also be imposed on both the principal and the agent.

The prohibition of cartels is set out in section 6 of the Competition Act and in article 101 (1) of the Treaty on the Functioning of the European Union (the Treaty) and prohibits agreements or contacts between two or more undertakings that may appreciably restrict competition.

In principle, agency agreements are wholly or partially outside the scope of the prohibition of cartels, whereby it is noted that it should concern an agency agreement that qualifies as an agency agreement according to the criteria of Regulation (EU) 2022/270 (Block Exemption Regulation). This is also referred to as ‘pure agency’ or ‘genuine agency’. Genuine agency is distinguished from non-genuine agency. This is an important distinction.

The prohibition of cartels concerns agreements between two or more undertakings; two independent market parties. In an agency relationship, it may be the case that the agent may not act as an independent market party in relation to the principal. The buying or selling function of the agent is in that case considered to form part of the principal’s activities. If such is the case, the agency agreement will either in whole or in part[1] fall outside the scope of the prohibition of cartels, insofar as it concerns the agent’s obligations in relation to the contracts that the agent negotiates and/or concludes on behalf of the principal.

Genuine or pure agency, as the case may be, means that certain obligations may be imposed on an agent in the context of his sales function that may not, or not always, be imposed on a ‘normal distributor’. Examples of this are:

• restrictions regarding the territory in which the agent may sell the goods or services;
• restrictions regarding the customers to whom the agent may sell the goods or services;
• restrictions regarding the price at which and the conditions under which the agent may sell the goods or services.

In short, to qualify as a genuine agency agreement, it is required that the agent does not bear any (significant) commercial or financial risks in respect of the contracts he negotiates.

The test of whether an agency agreement falls within the scope of article 101 (1) of the Treaty is very factual in nature, in which context the economic reality should be considered. On this point, we limit ourselves to making a reference to par. 3.2 of the Guidelines and, more specifically, to numbers 31 to 40 for specific circumstances that may or may not give rise to ‘genuine agency’. Number 33 contains a non-exhaustive list of conditions. If all these conditions are met, the agency agreement will as a rule be regarded as an agency agreement that falls outside the scope of the prohibition of cartels.

An agency agreement usually contains not only obligations that relate to the agent’s purchasing or sales function, but also provisions that concern the relationship between the agent and the principal. An example of this is a non-compete clause, post-contractual or otherwise. Such agreements in principle fall within the scope of the prohibition of cartels, including in the case of genuine agency.

In the event that the agent bears a significant commercial or financial risk, the agent is regarded as an independent distributor under the Treaty and the prohibition of cartels applies to all arrangements between agent and principal, as to any other vertical agreement.

If the entire agency agreement or certain provisions thereof do fall under article 101 (1) of the Treaty, it may be possible to rely on the generic block exemption from the prohibition of cartels regarding vertical agreements (the Block Exemption), as laid down in the Vertical Block Exemption Regulation (VBER).

The Block Exemption provides a ‘safe harbour’ for some vertical agreements. This safe harbour is subject to two conditions. First, the market share on the relevant market(s) of both the principal and the agent must not exceed 30%. Second, the agency agreement must not contain any hardcore restrictions.

In the section on genuine agency, we already mentioned the example of the non-compete clause, which in principle falls under the prohibition of cartels. A clause of that nature may also fall under the Block Exemption. In that context, we refer to article 5 of the VBER.

If the Block Exemption does not apply, provisions must be reviewed individually in the light of, in particular, the anticompetitive effects.

In practice, discussions regularly arise between suppliers and resellers about pricing policy. The supplier as a rule has certain views about the price at which its products may best be marketed, but will be faced with the prohibition of cartels in the event that it wants to impose this pricing policy on its resellers as well. This is particularly an issue with online sales. If a particular product is sold at a discount, this will be visible to all sales and marketing channels and may give rise to quite a lot of discussions.

In such a case, the genuine agency provides a solution. After all, in the case of a genuine agency, the principal determines the price at which his products are offered. For example, a change may be seen in the car industry. Whereas previously dealers as a rule sold cars for their own account and risk, an increasing number is switching to an agency model. The same applies to the travel industry. In the travel industry, employing non-genuine agents used to be a common phenomenon, but most of the tour operators have now switched to the genuine agency model, which enables the tour operator to determine the price.

[1] See para. 3.2.2 of the Guidelines for the provisions of an agency agreement that may still fall within the scope of article 101 (1) of the Treaty.