European Commission adopts new Vertical Block Exemption Regulation and Vertical Guidelines | Bryan Cave Leighton Paisner

Summary

On May 10, 2022, the European Commission adopted the new Vertical Block Exemption Regulation and the Vertical Guidelines. The settlement includes several important new developments, including readjusting the Safe Harbor and providing stakeholders with clearer rules.

The European Commission (EC) has been reviewing and consulting its Regulation No 330/2010 on vertical agreements and concerted practices for about three years. While adapting to the changing e-commerce landscape was an important driver in revising the rules, the EC also wanted to take sustainability into account in the new rules.

On 10 May 2022, the Commission adopted the new Vertical Block Exemption Regulation (the “new VBER”) and the Vertical Guidelines.

The new VBER has retained several key provisions of the previous VBER, such as the 30% market share threshold to benefit from Safe Harbor and most of the fundamental restrictions (the provisions of an agreement that prevent it from benefiting from block exemption). However, the new rules also include important developments to readjust the safe harbor and provide stakeholders with less uncertainty.

Which is new?

1. Enhanced protection is granted to exclusive and selective distribution networks

In exclusive distributionthe new VBER first introduces the possibility of setting up shared exclusivity, allowing a supplier to select up to 5 distributors in a given territory or for a particular group of consumers.

It also gives the possibility of restricting the active or passive sales of the exclusive distributor in another exclusive territory.

In selective distributionit is now possible to restrict active or passive sales outside the selective distributor’s network to unauthorized distributors located in the territory of the selective distribution system.

2. In the event of free distribution, the authorized restrictions are specified

For the first time, the new VBER addresses the situation where the supplier does not operate an exclusive distribution system nor a selective distribution system.

In particular, Article 4(d) of the Regulation grants the possibility to restrict the place of establishment of the buyer and active or passive sales to end users by a buyer acting as a wholesaler.

3. The rules on double distribution are more flexible than envisaged in the Commission’s initial plan

Dual distribution refers to the situation where a supplier sells its goods or services through independent distributors, but also directly to end customers.

In this respect, the Commission’s initial plan provided for a particularly strict regime, since it provided for a derogation from the agreement (I) in the event of market shares below a threshold of 10% on the downstream market, and (ii) in the absence of any restriction by purpose. These two cumulative conditions are waived.

The new VBER excludes from the benefit of the exemption any exchange of information which is not directly related to the implementation of the vertical agreement or which is not necessary to improve the production or the distribution of the goods or services. subject to the contract.

The exemption is extended to wholesalers and importers.

4. Online sales are now taken into account in the same way as physical sales

The new VBER intends to take into account the growth of e-commerce and online sales and thus soften the existing border with physical sales.

Thus, a company which provides online intermediation services qualifies as a supplier within the meaning of the regulation. On the other hand, the regulation does not apply when the supplier of the online intermediation services is a competitor on the relevant market for the sale of the intermediated goods or services.

Certain measures restricting online sales and new market players are amended in the new VBER, including:

  • Dual price display – which occurs when a distributor is charged a higher price for products sold online rather than in physical outlets – would no longer be a fundamental restriction and could therefore be exempted under the new VBER. For the rapidly changing e-commerce ecosystem, this will be a welcome change as it provides businesses with more flexibility to charge different prices to online channels versus physical channels.
  • Equivalence – the imposition of criteria for online sales that are not equivalent to the criteria imposed on physical sales outlets in a selective distribution system would no longer be a hardcore restriction either.

5. A welcome clarification of the operating rules of distribution networks is provided

  • “Wide” retail parity clauses become hard restrictions.

“Extended” parity clauses require one party to an agreement to offer goods or services to the other party on terms no worse than those offered to third parties. Clauses are considered “broad” obligations when they specify that a product or service cannot be offered under better conditions on any other channel.

These are now hardcore restrictions and will have to be analyzed on a case-by-case basis on the basis of Article 101 TFEU.

In contrast, “narrow” clauses only require that better terms not be offered through a party’s own sales channels and do not set terms for sales through other channels. “Narrow” retail parity clauses, and all B2B parity clauses, could still benefit from the block exemption.

  • Tacitly renewable non-competition obligations may be agreed upon under certain conditions

The new VBER allows such non-competition clauses to be agreed provided that the non-competition obligation does not extend beyond the period of occupation of the premises and land by the purchaser.

The current VBER regulations and guidelines expire on May 31 and the new VBER and vertical guidelines will come into effect June 1, 2022.

See the final versions of new vertical block exemption regulation and Vertical guidelines.

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