For the second time in one month, the French Competition Authority (the "Authority") has launched investigations into the mass retail distribution sector.

At the end of February, the Authority decided to examine the contractual provisions between affiliated retailers and the companies at the head of their distribution network, as well as the policy of distribution groups owning unused commercial real estate (see Community Week issue 461). This investigation is ongoing.

The Authority now intends to focus on "category management" contracts, under which a supplier (the "category captain") gives commercial advice to one or more of its distributors concerning a specific category of product.

In practice, the advice from the category captain will vary depending on the contract. In some cases, it may only entail reviewing the quality and presentation of the products, whereas in others the category captain may influence the distributor's commercial strategy, such as its pricing policy, the products' location, the introduction of new products, etc.

"Category management" contracts may therefore raise competition issues: the category captain and its distributors may exchange strategic information, and the category captain may also influence its distributors and prevent them from choosing its competitors' products.

In this respect, the Authority now intends to review the various existing agreements between category captains and distributors, the parties' motivation to enter into such contracts and the influence of the category captain on distributors. It will also examine the criteria for being a category captain, the possibility for them to advise various distributors and the effect of such contracts on the commercial strategy of the parties.

To view Community Week, Issue 464 – 26 March 2010 in full, Click here.

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