1. A ‘back to basics’ approach to online markets Pablo Ibáñez Colomo London School of Economics 18 April 2016

2. Vertical restraints: ‘back to basics’ Stable principles apply to the analysis of vertical restraints under Article 101(1) TFEU The fundamental principles include the following: 1.It is necessary to consider the counterfactual 2.Qualitative conditions for the resale of the products are not as such restrictive 3.Restraints that are a plausible means to address free riding concerns are not restrictive by object 2

3. ‘Back to basics’ and online markets The analysis of the counterfactual is useful to examine concerns about geo-blocking The counterfactual is relevant in the following three scenarios: The agreement is necessary to attain the aims sought by the parties (STM, Nungesser) The restraints are ancillary to a main transaction (Metro I, Pronuptia) The regulatory framework prevents intra- brand competition (Coditel II) 3

4. ‘Back to basics’ and online markets ‘If such clauses did not exist, broadcasters would no longer be contractually prevented from responding to unsolicited requests coming from consumers from other countries. At the same time, broadcasters also have to take account of the applicable regulatory framework, such as, for online services, relevant national copyright laws. These aspects may need to be tackled by changes to copyright rules, for example as part of the copyright initiatives included in the Commission’s Digital Single Market Strategy’. Commissioner Vestager, 19th IBA Competition Conference 4

5. ‘Back to basics’ and online markets The Court of Justice has never disputed the use of qualitative criteria in distribution: It is expressly acknowledged that these criteria limit price competition (Pierre Fabre, Metro l) The loss of price competition is compensated by other gains (Metro II) Is there a reason that justifies departing from this principle in the online world? Why would the use of qualitative criteria be unjustified in the online world? Why would a supplier limit online access to its goods? 5

6. ‘Back to basics’ and online markets Vertical restraints often seek to address free-riding concerns In principle, restraints that address free-riding are not restrictive by object It is part of the assessment of the ‘nature and context’ of the agreement (Cartes Bancaires) The Court laid down a plausibility test Implications for the online world: What is the nature of free-riding in online distribution? Is there a valid reason to ignore free-riding concerns? 6