EU Adopts New Vertical Block Exemption Regulation & Vertical Guidelines

The European Commission has adopted the new Vertical Block Exemption Regulation (‘VBER’) accompanied by the new Vertical Guidelines, following a thorough evaluation and review of the bloc’s 2010 rules and regulations. The revised rules are expected to provide businesses with simpler, clearer and up-to-date guidance.

The new rules developed by EU regulators will help assess the compatibility of companies’ 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.

The Commission’s Executive Vice-President Margrethe Vestager, 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.”

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.

Related: VBER Review: Overview of the Evaluation Phase

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 but must instead be assessed individually under Article 101 TFEU.

Furthermore, the new VBER regulations:

• 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 of online 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.

Read More: Antitrust Chronicle – Vertical Restraints

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