In an Order of 4 December 2014, the Court of Justice provided guidance on the  compliance of long-term exclusive purchasing or "single branding"  clauses in distribution agreements on the basis of preliminary questions  from a Spanish civil court. The Court of Justice decided that long-term  exclusivity clauses may not have the effect of restricting competition  if the parties to the agreement have a limited market share and the  duration of the exclusivity clause is not manifestly excessive of what  is common in the relevant market.
 
The case concerned a supply  agreement between oil supplier Galp and gas station operator Estación de  Servicio Pozuelo, which included a single branding clause on the basis  of which Estación de Servicio Pozuelo was bound to exclusively purchase  oil products from Galp for a period of at least 30 years.
 
As  already established in previous case law, the court noted that exclusive  purchasing clauses cannot have the object to restrict competition but  that the effects of the clauses need to be verified. The effects of the  clause should not be assessed in isolation but account has to be taken  of the legal and economic context, including similar contracts in the  relevant market. If the market is not easily accessible as a result of a  cumulation of long-term exclusivity clauses in the relevant market, it  should be assessed whether the contract at stake significantly  contributes to this foreclosure effect, taking into account the market  position of the contract parties and the duration of the exclusivity. If  the duration of the exclusivity is manifestly excessive of what is  common on the relevant market, the clause will in principle be in  violation of Article 101 TFEU. This will be a question to be decided by  the referring court.
 
The Court of Justice continued and made an  interesting addition by also considering that if the market share of  GALP was only 3%, as stated by the referring court, it would be contrary  to the purpose of free competition to declare a long-term exclusivity  clause void, as this would make it more difficult for GALP to penetrate  the market in favor of other parties with a stronger market position (in  the case at hand 70% of the market was controlled by three  competitors).
 
The case confirms that exclusive purchasing  clauses with a duration that extends beyond the five year exemption for  parties with a market share of 30% or less under Article 5 of the Block  Exemption Regulation for vertical agreements, may very well still comply  with competition law. Such clauses should be assessed on the basis of  an effects-based approach, taking into account particularly the market  position and relative duration of the clauses in the market context.
 
See for a more extensive analysis of the legal framework for exclusivity clauses in distribution agreements (in Dutch) S. Tuinenga, "Gas terug bij exclusiviteitsbedingen in de brandstofsector",  M&M 2014-4.
 
                    