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Territorial supply constraints and the EU internal market: A call for action

Territorial supply constraints (“TSCs”) are supplier or manufacturer-imposed restrictions on the distribution of goods or services which aim to segment markets by territory (usually by country or region). On 26 September 2025, the Council of the European Union published a call for action, requesting that the European Commission (the “Commission”) take speedier action to address one of the “most pressing structural barriers to a functioning Single Market”.

TSCs can take the form of restrictions on sourcing or on the resale of products outside of given territories, effectively preventing parallel trade: the practice of purchasing of goods in one market to sell in another, drawing profit from differences in prices or demand. TSCs are particularly prevalent in the daily consumer goods sector where manufacturers are often accused of applying restrictions that prevent a product sourced from one Member State (where it is cheaper) from being sold in another. A usual symptom of TSCs is the variable pricing of different items across Member States for reasons not attributable to variable costs.

As TSCs typically seek to prevent the influx of cheaper goods into markets, these practices in effect carve up the European Union and are accordingly incompatible with key objectives of EU integration and the Single Market. However, it has been argued that current EU regulation may not capture all possible instances of TSCs, such that certain practices could fall outside the scope of the Commission and Member State authorities’ current enforcement powers or require a novel application of those powers.

The Commission has recently come under further pressure to bring forward a targeted legislative proposal by a variety of stakeholders, including consumer associations, trade associations, major retailers, and Member States. Indeed, major retailer associations EuroCommerce and Independent Retail Europe – which represent Rewe, Spar, Ikea, Amazon, Carrefour, and Tesco, amongst other – have asked the Commission to take a stronger stand and expressly prohibit TSCs.

The Commission’s 2025 internal market strategy designated TSCs as one of the “Terrible Ten” most harmful practices to the functioning of the internal market and announced that a proposal for enforcement tools would be forthcoming in late 2026.

EU competition law as applied to TSCs

EU competition law prohibits TSCs where they are implemented via agreements between undertakings, or by a dominant undertaking. This includes:

  • An agreement between undertakings to divide territories, or a restrictive clause in a vertical supply agreement (such as between a distributor and its retailers), which would constitute an infringement of Article 101 of the Treaty on the Functioning of the European Union (the “TFEU”); and
  • Restrictions on supply linked to the place of resale, imposed by a dominant undertaking, would constitute an abuse of dominance, contrary to Article 102 of the TFEU.

The Commission has in recent years imposed significant fines in relation to such infringements. On 23 May 2024, the EC fined Mondelez €337.5 million for engaging in practices aimed at restricting cross-border trade of various chocolate, biscuit and coffee products. The infringement included both concerted practices – restrictions within supply contracts with traders and wholesalers – and abuses of a dominant position in some national markets.

Earlier, in 2019, AB InBev were fined €200 million for restricting the cross-border sale of beer, and in particular, imports to Belgium from the Netherlands. AB InBev was found to have abused its dominant position through several practices including (i) labelling changes, (ii) limits to supply, (iii) refusals to supply “must stock” products unless imports were limited, and (iv) ensuring certain customer promotions were available only in the Netherlands and not in Belgium.

An issue may arise, however, where a TSC is implemented without an agreement, by a non-dominant undertaking. This could occur, for example, where a large (but non-dominant) undertaking with its own in-house distribution channels maintains internal policies prohibiting its distribution teams from engaging in cross-border supply. Such a conduct would be unlikely to be captured by the restrictions imposed by Articles 101 and 102 TFEU. The current competition law toolkit is accordingly constrained to tackle different instances of TSCs.

Recent EU action to tackle TSCs

EU institutions have been monitoring and investigating the impact of TSCs on the Single Market for a number of years, including through the establishment of Single Market Enforcement Taskforce and stakeholder consultations, which have highlighted the concerns raised by the industry. Former Italian Prime Minister Enrico Letta’s Report on the Future of the Single Market of 10 April 2024 highlights the harmful effects of TSCs and refers to reports of wholesalers and retailers facing deliberate hindrances to parallel trade – for example, compulsory referrals to national manufacturer brands.

The Commission’s 2025 internal market strategy announced that a proposal for tools to prohibit TSCs would be forthcoming at the end of 2026. This timeline was criticised by the Competitiveness Council of the Council of the European Union on 26 September 2025, and TSCs were described as “a political challenge at the core of European integration”. In addition to presenting the proposal significantly earlier, the Commission was invited to:

  • Step up enforcement of competition law against TSCs;
  • Discuss TSCs within the European Competition Network of national competition authorities; 
  • Clarify competition law, in particular Regulation 1/2003, to ensure quicker investigations and better enforcement against TSCs; 
  • Remove barriers that contribute to TSCs (e.g. labelling requirements); and 
  • Update the Unfair Trading Practices Directive (EU) 2019/633 to address TSCs.

In parallel, the European Parliament is working on a proposed fix for TSCs linked to labelling requirements, consisting in the implementation of a digital labelling system where information would be accessible via language neutral QR codes. That is because differentiated labelling on products is sometimes used as an indirect TSC.

Future enforcement against TSCs

If the Commission follows suit on the above demands, European businesses may expect further enforcement against TSCs as well as a legislative proposal to more clearly and specifically target TSCs. Considering the significant impact of TSCs on the Single Market and particularly on consumers, it is possible that the Commission’s proposal may be expedited and finalised prior to Q4 2026.

As with any competition law infringement, it is possible for undertakings or individuals affected by TSCs that fulfil the requirements for the application of Articles 101 or 102 TFEU to seek redress. Indeed, those harmed by such practices may bring an action requiring that it ceases and to claim damages with respect to any losses suffered as a result of the infringing conduct.