On 23 October 2020, the European Commission (‘Commission’) published an Inception Impact Assessment (‘IIA’) for its proposed update of the Vertical Block Exemption Regulation (‘VBER’) and Vertical Guidelines. It requests feedback on the IIA by 20 November 2020. This is separate to a public consultation on the policy options, which it will launch later this year.

The Commission’s steps to date, and conclusions of its evaluation phase, are set out in our HSF Notes post from 17 September 2020. In essence the evaluation concluded that the current rules are still relevant and useful to businesses, but there are certain areas that could be improved.

Clarifying and Simplifying

The Commission aims to clarify and simplify the rules, including incorporating recent case law and filling in gaps that would otherwise create scope for divergent interpretations.

It specifically refers to restrictions that have emerged or become more prevalent since the current rules were adopted in 2010 (e.g. restrictions on the use of price comparison websites and in relation to online advertising) and the treatment of new market players, such as online platforms, in certain areas of the rules (e.g. agency and dual distribution).

It will also take into account any issues relating to agreements pursuing sustainability objectives, in line with the Commission’s objectives of its European Green Deal (we blogged on competition aspects of the Green Deal here and here).

RPM efficiencies

The Commission proposes to improve clarity in relation to the treatment of possible efficiencies resulting from resale price maintenance (‘RPM’). This includes exploring the possibility of engaging with businesses on concrete instances of RPM efficiencies, to identify the conditions and evidence required to satisfy the Article 101(3) exemption.

Tacitly renewable non-compete obligations

It will also look at reducing costs and administrative burden on businesses by not excluding tacitly renewable non-compete obligations from the benefit of the block exemption, to the extent that the buyer can periodically terminate or renegotiate the agreement.

Dual distribution

In dual distribution, a supplier sells its goods or services to distributors and also directly to end customers. It therefore competes with its distributors at the retail level. The evaluation identified risks that the existing exception in the VBER may be too wide, and exclude certain scenarios comparable to dual distribution. It proposes the following policy options (options 2 and 3 may be introduced cumulatively):

  1. baseline scenario (no policy change)
  2. limiting the exception to scenarios that are unlikely to raise horizontal concerns
  3. extending the exception to dual distribution by wholesalers and/or importers
  4. removing the exception, thus requiring an individual assessment in all dual distribution cases

Active sales restrictions

The evaluation identified various concerns with the complexity and scope of the current rules. The Commission proposes the following policy options (options 2 and 3 may be introduced cumulatively):

  1. baseline scenario (no policy change)
  2. expanding the exceptions for active sales restrictions to give suppliers more flexibility to design their distribution systems according to their needs
  3. allowing restrictions on sales from outside a selective distribution system’s territory to unauthorised distributors inside the territory

Indirect measures restricting online sales

The evaluation identified concerns that sellers were prohibited from ‘dual pricing’, i.e. having a different wholesale price for a product to be sold offline and online. It also identified concerns around the need for criteria imposed for online sales to be equivalent to those in brick-and-mortar shops (the ‘equivalence principle’) in the context of selective distribution. The Commission proposes the following policy options (options 2 and 3 may be introduced cumulatively):

  1. baseline scenario (no policy change)
  2. no longer regarding dual pricing as a hardcore restriction, with safeguards to be defined in line with case law
  3. no longer regarding equivalence requirements as a hardcore restriction, with safeguards to be defined in line with the case law

Parity obligations (most-favoured nation/customer (‘MFN’) clauses)

The evaluation identified the need for clarity around treatment of such clauses, particularly in light of differing approaches by Member States. The Commission proposes the following policy options:

  1. baseline scenario (no policy change);
  2. for MFNs relating to specific types of sales channels (e.g. platforms), removing the benefit of the VBER and thus requiring an individual effects-based assessment of the clause
  3. requiring an individual effects-based assessment in all MFN cases

Next steps

The Commission has requested feedback on the IIA by 20 November 2020.

Towards the end of 2020 it will issue a public consultation to gather feedback on the policy options.

It has also confirmed that it will publish a draft of the revised rules for comments in 2021, with a view of having a finalised updated version of the VBER and Vertical Guidelines in place by 31 May 2022 when the current rules expire.

Contacts

Kyriakos Fountoukakos

Kyriakos Fountoukakos
Managing Partner, Brussels
+32 2 518 1840

Peter Rowland

Peter Rowland
Of Counsel, Brussels
+32 2 518 1847

Daniel Vowden

Daniel Vowden
Partner, Brussels
+32 2 518 1851

Camille Puech

Camille Puech
Senior Associate, Brussels
+32 2 518 1823