European Commission Proposes Further Prohibitions of Territorial Restrictions on Branded Products
Future prohibition on territorial supply constraints would expand EU law to prohibit certain unilateral conduct by large manufacturers.
On May 21, 2025, the European Commission ("EC") published a strategy paper discussing proposals to strengthen the European Union's so-called single market, which promotes the free movement of goods, services, people, and capital. One proposal is to go beyond current EU competition law to prohibit "territorial supply constraints," i.e., "limitations imposed by certain large manufacturers that make it very difficult or impossible for retailers to buy products in one Member State and resell them in another."
According to the EC, the purpose of this proposal is to facilitate cross-border arbitrage. The paper offers an example involving a "large manufacturer of branded foods" that sells the same product in several countries, where "in some countries the product is a lot cheaper than in others." In this example, the manufacturer stops selling to a grocery chain in a country with a lower price because the chain wanted to undercut higher prices in a different country. The goal is to "maintain the artificial price difference between the countries." Such conduct would not violate existing EU competition law if it were purely unilateral and the manufacturer was not dominant, yet would run afoul of the proposed restriction on territorial supply constraints.
This proposal raises a number of questions, including:
- The proposal does not specify how the EC will define "large manufacturers."
- The proposal does not explain why its scope is limited to manufacturers, as opposed to retailers.
- The paper notes a concern about "unjustified price differences," but the EC offers little insight into when price differences are "justified" or not, apart from suggesting that a price difference is justified when it is "explained by objective factors such as regulatory or cost differences between Member States." This suggests that any future articles implementing this proposal will require a complex analysis before businesses charge different prices for the same products in different EU countries.
The strategy paper states that the EC intends to make a more developed proposal to prohibit territorial supply constraints by the end of 2026. Any company that is active in more than one EU Member State should follow this development closely.
