News Update Competition Litigation
24 November 2020
The European Commission (the "Commission") has recently taken a significant step towards revising the Vertical Block Exemption Regulation ("VBER"), which provides a safe harbour for specific types of vertical agreements by exempting those agreements from the cartel prohibition. The revised VBER is likely to have far-reaching implications for businesses from mid-2022, when it will enter into force. On 23 October 2020, the Commission published its 'Inception Impact Assessment' (the "IIA") providing its plans to reform the VBER together with the vertical guidelines to address the problems identified during the VBER evaluation, which was published on 8 September 2020.
Suggestions for new VBER rulesIn the IIA, the Commission indicates that it aims to clarify and simplify the rules contained in the VBER, including incorporating recent case law and filling in gaps that presently create scope for divergent interpretations. More specifically, the Commission proposes changes to the current rules in relation to the following areas: (1) resale price maintenance (2) non-compete obligations (3) dual distribution (4) active sales restrictions (5) indirect measures restricting online sales and (6) parity obligations:
- 1. Resale price maintenance (RPM) (IIA, under A(B)(a))
The Commission proposes clarifying the treatment of possible efficiencies arising from RPM. This includes exploring the conditions under which efficiencies for RPM can be claimed and suppliers can establish a fixed or minimum resale price.
- 2. Non-compete obligations (IIA, under A(B)(b))
- 3. Dual distribution (IIA, under A(C)(a) and under (B)(a))
For these potential issues, the Commission is considering new rules such as (1) limiting the scope of the exception to scenarios that are unlikely to raise horizontal concerns by introducing a threshold based on the parties' market shares in the downstream retail market or alternatively (2) extending the dual distribution exception to wholesalers and importers. The Commission indicated that both options may be introduced cumulatively. Lastly, the Commission is proposing a rather far-reaching option, namely removing the exception for dual distribution from the VBER entirely, so that an individual assessment would be required in all distribution cases.
- 4. Active sales restrictions (IIA, under A(C)(b) and under (B)(b)
Firstly, the Commission is proposing to expand the exceptions for active sales restrictions to offer suppliers more flexibility to design their distribution systems according to their needs. Secondly, the Commission is considering allowing restrictions on sales from outside a selective distribution system's territory to unauthorised distributors inside that territory to more effectively protect selective distribution systems.
- 5. Indirect measures restricting online sales (IIA, under A (C)(c) and under B(c))
During the VBER evaluation, the Commission identified that the current approach to these types of restrictive measures creates adverse effects in practice, as well as unclear provisions. One of the identified issues is that over the last decade, online sales have developed into well-functioning sales channels, while physical stores are experiencing more challenges as a consequence of this development. Suppliers and hybrid retailers believe that the prohibition on dual pricing has made it more difficult to stimulate associated investments in physical stores.
Additionally, the Commission noted that, given the inherent differences between online and "brick-and-mortar" sales, there is a lack of legal certainty in the assessment under what conditions the criteria for online sales are equivalent. In light of these identified problems, the Commission is currently considering allowing these types of restrictive measures to be defined in case law under certain conditions (safeguards).
- 6. Parity obligations (IIA, under A(C)(d) and under B(d))
Therefore, the Commission is considering adding wide parity clauses to the list of excluded restrictions (Article 5 VBER), which would require an individual effects-based assessment of each of these obligations. Conversely, parity obligations relating to other types of sales channels – namely sales channels other than the channel of the counterparty – would continue to benefit from the block exemption, as they are likely to create efficiencies. Alternatively, the Commission is considering excluding all types of parity obligations from the benefit of the block exemption.