Catering agreements

Mr MSJ Steenhuis, Ludwig – Franchise lawyer 

The Netherlands Competition Authority (NMa) recently made a decision regarding the beer supply agreements submitted by Heineken for exemption. In this decision, the NMa ruled that so-called beer supply agreements do not fall under the cartel prohibition of Article 6 of the Competition Act (Mw). In the following, this will be explained. It should be noted that Heineken’s agreements relate exclusively to the purchase of draft beer and can also be terminated with due observance of a notice period of two months. Partly because Heineken is the largest supplier on the market and controls 50% to 60% of the market, it has notified the relevant agreements to the NMa. Under the Block Exemption Regulation of the European Commission on vertical agreements discussed earlier in this series of articles, agreements such as the present one may only be entered into for a maximum period of five years. Until now, most beer brewers still used the option, under the regime of the old Block Exemption Regulation 1984 / 1983, to enter into an agreement for five or ten years, Heineken has now amended its agreements in such a way that they can be canceled at any time , of course with due observance of the aforementioned notice period of two months. On this basis, the NMa is of the opinion that competition will increase now that the average binding period will decrease. 

Relevant Market 

The so-called relevant market is important in determining whether there are anti-competitive agreements. In the present case, the NMa is of the opinion that the relevant market encompasses the entire Dutch market for the sale of beer in catering establishments. In view of Heineken’s strong market position, as noted earlier, this means that there is a considerable chance of anti-competitive agreements in the agreements, which is why the NMa has subjected this agreement to a strict review. 

Exclusivity 

In view of the fact, as already stated, that catering companies can terminate the beer supply agreement with Heineken with due observance of a notice period of two months, the NMa has ruled that this has a pro-competitive effect on the market. After all, according to the reasoning of the NMa, Heineken offers hospitality entrepreneurs the opportunity to inquire elsewhere about similar contracts. The catering entrepreneurs involved also have the concrete option, if they wish, to conclude agreements with other suppliers. The agreements submitted by Heineken to the NMa include a provision from which Heineken undertakes to approach its contracting parties every year and point out the possibility of terminating the agreement with Heineken. The NMa has also concluded that the agreements that Heineken enters into simultaneously with the beer supply agreements, namely a deed of loan, a suretyship agreement and a so-called cellar beer installation agreement, do not contain any provisions that make it impossible for the catering company to terminate the agreement prematurely. 

Heineken has included exclusivity in the beer supply agreements with regard to the sale of draft beer. The catering entrepreneur is committed to selling only one brand of draft beer. In the opinion of the NMa, this so-called in-store inter-brand competition is permitted as it will not have a foreclosure effect.

NMa conclusion 

Based on the above, the NMa has concluded that Heineken’s request for exemption from the Block Exemption Regulation will be rejected, as the notified agreements do not fall under the scope of Article 6 of the Competition Act. This is therefore a positive decision by the NMa for Heineken, now that the NMa actually indicates that Heineken did not have to submit its beer supply agreements and related agreements to the NMa for exemption, since they do not fall under the regime of Article 6 Mw and therefore nor under the Block Exemption Regulation.

The above is only a brief explanation of the decision of the NMa dated 28 May 2002. If you would like to know more about this, please refer to the magazine Markt en Mededing 2003 / number 2, in which magazine an extensive annotation has been written by Mr LYJM Parret.

Ludwig & Van Dam franchise attorneys, franchise legal advice