Brussels, 10 May 2022
The European Commission has adopted today the newVertical Block Exemption Regulation (‘VBER’) accompanied by the new Vertical Guidelines, following a thorough evaluation and review of the 2010 rules. The revised rules provide businesses with simpler, clearer and up-to-date rules and guidance. The new rules will help them to assess the compatibility of their supply and distribution agreements with EU competition rules in a business environment reshaped by the growth of e-commerce and online sales. The revised VBER and Vertical Guidelines will enter into force on 1 June 2022.
Executive Vice-President MargretheVestager, in charge of competition policy, said:
“The revised Vertical Block Exemption Regulation and Vertical Guidelines are the result of a thorough review process. The new rules will provide companies with up-to-date guidance that is fit for an even more digitalized decade ahead. The rules are important tools that will help all types of businesses, including small and medium enterprises, to assess their vertical agreements in their daily business.”
Main changes in the revised rules
The VBER exempts from the prohibition in Article 101(1) of the Treaty on the Functioning of the European Union (‘TFEU’) agreements between companies that are active at different levels of the production or distribution chain, subject to conditions. The rules thus provide for a safe harbour where certain agreements are block exempted.
The main changes to the previous rules focus on adjusting the safe harbour to ensure that it is neither too generous nor too narrow. In particular, the new rules:
- Narrow the scope of the safe harbour as regards: (i) dual distribution, that is, where a supplier sells its goods or services through independent distributors but also directly to end customers, and (ii) parity obligations, that is, obligations which require a seller to offer the same or better conditions to its counter-party as those offered on third-party sales channels, such as other platforms, and/or on the seller’s direct sales channels, like its website.This means that certain aspects of dual distribution and certain types of parity obligations will no longer be exempted under the new VBER butmust instead be assessed individually under Article 101 TFEU.
- Enlarge the scope of the safe harbour as regards: (i) certain restrictions of a buyer’s ability to actively approach individual customers, i.e. active sales, and (ii) certain practices relating to online sales, namely the ability to charge the same distributor different wholesale prices for products to be sold online and offline and the ability to impose different criteria for online and offline sales in selective distribution systems.These restrictions are now exempted under the new VBER, provided all other conditions for the exemption are met.
The revised VBER rules have also been clarified and simplified, to make them more accessible to those who use them in their day-to-day business. In particular, the VBER rules have been updated as regards the assessment ofonline restrictions, vertical agreements in the platform economy and agreements that pursue sustainability objectives, among other areas. In addition, the guidelines provide detailed guidance on a number of topics, such as selective and exclusive distribution and agency agreements.
Additional detailed information on the main changes can be found in anexplanatory notethat accompanies the revised rules.
Background on the review process
In September 2020, the Commission published aStaff Working Documentsetting out the results of the evaluation of the 2010 VBER and Vertical Guidelines. The evaluation showed that they are both useful tools that significantly facilitate the self-assessment of vertical agreements and help reduce compliance costs for businesses. However, it also provided indications that the rules needed to be adapted to market developments that have occurred since their adoption in 2010.
Following this evaluation, in October 2020 the Commission launched the impact assessment, during which it gathered further evidence on the areas for improvement, including through anopen public consultation, discussions with interested parties and national competition authorities, as well as through targeted expert reports.
In July 2021, the Commission launched apublic consultationinviting comments from stakeholders on a draft revised VBER and Vertical Guidelines. In November 2021, the Commission published the results of the public consultation, including asummary of the contributionsreceived. Anadditional targeted consultationon the draft guidance relating to information exchange in the context of dual distribution was conducted in February 2022. The Impact Assessment Report, which includes more details on the consultation activities as well as the assessment of the proposed changes, is also published today together with the revised rules and the results of the targeted consultation.
Background on the VBER
Vertical agreements are agreements between two or more undertakings operating at different levels of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services.
Article 101(1) TFEU prohibits agreements between undertakings that restrict competition. However, under Article 101(3) TFEU, such agreements are compatible with the Single Market, provided they contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefits and without eliminating competition.
The VBER exempts vertical agreements that meet certain conditions from the prohibition in Article 101(1) TFEU, thus creating a safe harbour for those agreements. A safe harbour that is too generous would not comply with Article 101 TFEU. On the other hand, a safe harbour that is too narrow would increase compliance costs for businesses. The VBER is accompanied by the Guidelines on Vertical Restraints that provide guidance on how to interpret and apply the VBER and how to assess vertical agreements that fall outside the safe harbour of the VBER.
For More Information
See thededicated webpage of DG Competition, which contains all stakeholder contributions submitted in the context of the evaluation and the impact assessment, summaries of the different consultation activities, the Staff Working Document on the evaluation and the expert reports prepared for the impact assessment.
Eurocommerce: Vertical rules – adapted for an omnichannel future, but some uncertainty remains
The European Commission has today adopted new rules on the assessment of vertical agreements in distribution which will come into force from 1 June 2022. These rules provide a safe harbour from anti-trust rules for agreements between sup and their customers, for example, for the sale, purchase or resale of products.
Christel Delberghe Director-General of EuroCommerce, which represents the retail and wholesale sector in Europe, commented:
“The European Commission has taken an important step by adapting the vertical block exemption rules to a digital environment. We welcome the Commission’s efforts to change the framework, but we are concerned that for SMEs the complexity will mean they remain reluctant to explore or pursue online sales. We, therefore, remain cautious about the degree to which the new rules leave room for interpretation and how they will be used in practice in a market where brands hold a very strong position.”
The retail and wholesale sector is going through a significant digital, sustainability and skills transformation. COVID accelerated the move to online sales and consumers who bought online during the pandemic are expected to continue doing so. Businesses need to be able to offer consumers such online sales, alongside or independently from their brick-and-mortar shops, and to do so as easily as possible. Clear rules on retailers’ and wholesalers’ ability to sell on online marketplaces are vital for small businesses to reach consumers, including those in other member states. EuroCommerce remains concerned about fair competition. It is unlikely SMEs will challenge brands that hold a strong position, where the effect of restrictions such as selective distribution, do not enable them to make effective use of the internet.
Mrs Delberghe added: “Effective competition provides choice for consumers. We ask the Commission and national competition authorities to remain vigilant and to act consistently, to address abuse of the rules to the detriment of the Single Market and of EU consumers.”
Retailers and wholesalers welcome the fact that the guidelines make it more explicit that territorial supply constraints, which are used by large manufacturers to restrict parallel imports, fragment the Single Market. The Single Market is key for the recovery of the retail and wholesale sector from the challenges of the pandemic, says EuroCommerce. But it needs strong and consistent enforcement across the Union to create the right competitive environment that can help retailers and wholesalers offer choice and reasonable prices to consumers struggling with rising costs of living.