European Commission adopts new regulation and guidelines on vertical block exemption | News
Following a thorough assessment and review and on the expiry of the current version of the law, the European Commission has adopted the new Vertical Block Exemption Regulation (VBER) together with detailed guidelines (VGL ), which will take effect today and expire again after 12 years. VBER and VGL have been modified and modernized with a focus on digital markets and to reflect structural changes in the market, such as the growth of e-commerce and online platforms.
The general framework of VBER applicability, such as vertical agreements, i.e. between suppliers/service providers and buyers/customers, and 30% market share thresholds at both market levels remain unchanged.
The following paragraphs briefly summarize the most important VBER changes for your overview. As often, the devil is in the detail, which is especially true in vertical competition rules. Please contact us if you need advice on the details of the new restrictions.
1. Its scope has been widened: Exemption from double distribution
- The double distribution exemption now extends to wholesalers and importers (Article 2(4) RVEB)
- However: Hybrid platforms are excluded safe harbor
- Exchange of auxiliary information between supplier and buyer in dual distribution systems benefits from the block exemption, i.e. information directly related to the implementation of the vertical agreement and necessary to improve the production or distribution of the contracted goods or services. The VGL provides more guidance on what information is considered ancillary in this context.
2. Additional Clarifications: Pricing
- Minimum advertised prices are considered to constitute Taxation of resale price (RPM) and therefore remain prohibited. However, in some cases they may be subject to individual exemption outside the VBER, for example if they are strategically used by loss leaders.
- Implementing contracts are not RPMs, if the selling price has been agreed beforehand between the supplier and the customer, and the executor is selected by the supplier.
- Sustainability criteria in selective distribution as well as longer non-competition obligations to amortize green investments are examples of individual cases that could benefit from VBER in the future.
3. Benefit from greater flexibility: Exclusive and selective distribution systems
- Shared exclusivity: up to 5 distributors can now be designated as exclusive distributors for the same zone or the same group of customers.
- Prohibiting other distributors from actively selling in the area or exclusive group is now allowed has been customers of other distributors. However, this is limited to direct customers, sales restrictions are not allowed to be passed on further down the supply chain.
- Better protection of selective distribution systems: Any sale to buyers who are not approved members of a selective distribution system – whether inside or outside the relevant territory, whether members of a exclusive or selective distribution or free distributors – may be prohibited.
4. More special protection: Online sales
- “Dual price display“, that is, charging different prices for identical products for resale by the offline or online buyer, respectively, is now allowed, as long as the price differences are not intended to prevent online sales. Consequently, the “principle of equivalence” Is it that no longer appliesthat is to say that the price or discount criteria for online sales should no longer be equivalent to those for offline sales (which was the case before to avoid discriminatory prices).
- General guiding principle for online delivery: Any restriction intended to prevent buyers or their customers from effectively using the Internet to sell goods or services or from using online advertising channels is considered a severe restriction of competition.
- Prohibiting buyers from selling the contract goods on online marketplaces is generally permitted. However, restrictions on the use of price comparison tools are not permitted.
5. Are now more specifically defined: online platforms
- On line platforms are now considered Suppliers (Article 1, paragraph 1, point d) of the VBER) and their Activities are now legally defined as online intermediation services (OIS) (Article 1(1)(e) VBER). Therefore:
- an OIS supplier cannot be considered a buyer of the goods offered through the OIS;
- the market share for the provision of IOS is now relevant for the VBER market share threshold (30%);
- IOS providers may only impose sales restrictions in accordance with Art. 4 VBERs;
- cross-platform parity has been dropped (Art. 5 (1) d VBER).
- To note, the VBER does not apply where the OIS provider has a “hybrid functionand is in competition with companies using intermediary services in the sale of intermediated goods or services, (Article 2(6) VBER).
- Extensive rate parity clauses (best price clauses), i.e. no better price elsewhere, including on other Internet platforms, is are no longer block exempt. All other types of parity obligations are permitted, including best price obligations with respect to the customer’s direct sales channels, for example, its own website (tight parity).
- Typically, SIBs do not enjoy the privilege of agency contracts, that is, they are treated as two separate businesses. Regularly, online platforms act for a greater number of principals and the market-specific investments made by the platforms allow them to assume their own risks. This is not a typical situation for agents, who would be commercially an integral part of the principal.
6. Now exempt: non-competition obligations
- Non-competition obligations can now benefit from the block exemption even if they are tacitly renewable beyond a period of five years, provided that the buyer can actually renegotiate or terminate the vertical agreement.