Vertical agreements: the European Commission adopts its new block exemption regulation
On 10 May 2022, the European Commission published the final version of the new Regulation on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements, as well as new Guidelines on Vertical Restraints.
This new set of rules should facilitate the assessment by undertakings of the compliance of their supply and distribution agreements with competition law.
Context of the review of the Vertical Block Exemption Regulation
A vertical agreement is one that is concluded between two or more undertakings operating at different levels of the production or distribution chain, which provides for obligations to purchase, sell or resell goods or services.Depending on the content of its terms, this type of agreement is likely to infringe the provisions of Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibiting agreements between undertakings which restrict competition.
However, Regulation (EU) No 330/2010 – currently in force – defines a series of conditions which, when met, allow undertakings to assume that the obligations set out in their vertical agreement comply with competition law. This exemption has the advantage of creating an area of legal certainty for undertakings. Conversely, when these conditions are not met, the vertical agreement is not automatically declared anti-competitive. In this case, it rests with the undertakings to themselves assess its possible anti-competitive effects, thereby resulting in legal uncertainty.
Prior to the expiry of Regulation (EU) No 330/2010 on 31 May 2022, the Commission published various studies and conducted public consultations with undertakings, associations, consumers and legal counsels in order to assess its effectiveness.
The findings led the Commission to consider the growth of e-commerce and the emergence of new types of agreements in its revision of the Regulation and to adopt Regulation (EU) No 2022/720 (the “VBER”) on 10 May 2022. Its publication is paired with new Guidelines on Vertical Restraints (the “Guidelines”) which provide useful guidance on the interpretation and application of the VBER.
Like its predecessor, the VBER however provides that the exemption does not apply to vertical agreements involving companies with a market share of more than 30% on their respective markets. Similarly, the majority of hardcore restrictions (where the benefit of the exemption is lost) have been maintained by the VBER.
The objectives of these new texts are to redefine the scope of the block exemption applied to vertical agreements (1), as well as to simplify and clarify the self-assessment criteria for undertakings (2). In addition, the Guidelines introduce considerations relating to the sustainability objectives of the agreements (3).
I. Redefinition of the scope of the exemption applied to vertical agreements
End of the exemption for double distribution and retail parity clauses
Double distribution (also called “dual distribution”) is a system in which a supplier markets its products or services directly to end customers but also through independent distributors. When selling products or services directly to the end customer, the supplier is thus in direct competition with its independent distributors.
Given the particularity of this dual distribution, the VBER (Article 2,(5)) removes the benefit of the exemption for exchanges of information taking place between a supplier and its independent distributors, where they are not (i) either directly related to the implementation of the vertical agreement, (ii) or necessary to improve the production or distribution of the contractual goods or services, (iii) or do not meet either of these conditions.
The Guidelines (§99 and 100) provide examples of the types of information exchanges that may, depending on the circumstances, fall within the block exemption in a dual distribution.
Dual distribution
The VBER (Article 2,(6)) also removes the benefit of the exemption for information exchanges occurring within double distribution systems set up by intermediation platforms, in which the platform is acting both as a provider of intermediation services and as a seller of goods or services that compete in the relevant market for the sale of the goods or services being intermediated.
The purpose of a parity clause The purpose of a parity clause (also known as a “most-favored-nation claus