Antitrust: Commission publishes findings of the evaluation of the Vertical Block Exemption Regulation

The European Commission has today published a Staff Working Document that summarises the findings of the evaluation of the Vertical Block Exemption Regulation (“VBER”), together with the Vertical Guidelines.

The aim of the evaluation was to gather evidence on the functioning of the VBER, together with the Vertical Guidelines, in order to decide whether it should lapse, be renewed in its current form, or be revised. Based on the findings of the evaluation, the Commission will launch an impact assessment to look into the policy options for a revision of the rules in order to address the issues identified during the evaluation.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The evaluation has shown that the VBER and the Vertical Guidelines are useful tools that significantly facilitate the self-assessment by businesses of their vertical agreements. At the same time, the market has significantly changed and the evaluation has identified a number of issues that need to be addressed. The Commission will therefore reflect on how to address these issues to ensure that the rules remain fit for a world that is increasingly digital and changing at a fast pace.”

The Commission launched the review of the VBER, which will expire on 31 May 2022, and the accompanying Vertical Guidelines on 3 October 2018. During the evaluation phase of the review, the Commission collected evidence to understand how the rules have functioned since their adoption in 2010. This evidence includes, notably, stakeholder contributions gathered in the context of the public consultation that took place during the first half of 2019 and during a dedicated stakeholder workshop held in November 2019.

The Commission also commissioned an external evaluation support study, in order to analyse more in-depth certain areas and specific vertical restrictions such as resale price maintenance and parity clauses, the competitive effects of which have been the subject of debate over recent years. The final report of the study was published in May 2020.

Further evidence stems from the Commission's recent sector inquiry into e-commerce, as well as its own enforcement experience with regard to vertical restrictions and that of the national competition authorities, which have dealt with more than 90% of vertical cases during the last ten years.

The findings of the evaluation

The evaluation has shown that the VBER and the Vertical Guidelines are still relevant, as they are useful tools that greatly facilitate the self-assessment of vertical agreements, and that help reduce compliance costs for businesses entering into such  agreements.

At the same time, the evaluation has shown that the market has changed significantly since the adoption of the VBER and the Vertical Guidelines, in particular due to the growth of online sales and of new market players such as online platforms. These developments have led to a number of changes in distribution models, such as increased direct sales by suppliers and a greater use of selective distribution systems, which allow suppliers a tighter control over resale conditions. Similarly, new types of vertical restrictions, such as restrictions regarding sales through online marketplaces and restrictions on online advertising, as well as retail parity clauses, have become more widespread.

Against this backdrop, the evaluation has identified a number of issues with regard to the functioning of the rules. These include the following:

• Some provisions lack clarity, such as the rules defining agency agreements.
• Other provisions are difficult to apply or are no longer adapted to the current business environment, notably when it comes to applying the existing rules to new market players that do not fit into traditional supply and distribution concepts and to new online sales restrictions.
• Some gaps are identified in the rules, such as a lack of guidance on how to assess retail parity clauses or restrictions on the use of price comparison websites, and areas that do not refer to case law issued since the adoption of the rules (e.g. the CJEU's Coty judgment C/230/16).
• There remains significant scope for diverging interpretations of the rules by national competition authorities and national courts, which is an important issue of concern for stakeholders, as it reduces the benefit of the rules.
• While the evidence suggests that the lists of hardcore restrictions and excluded restrictions are generally appropriate, there may still be scope to further reduce the burden for businesses associated with self-assessing the compatibility of their agreements with Article 101 of the Treaty on the Functioning of the European Union ("TFEU"). This could be achieved by exempting, in some specific areas of the rules, additional vertical agreements for which stakeholders have indicated that they would normally satisfy the conditions of Article 101(3) TFEU.
• There is also room for simplification and further cost reduction, notably by reducing the complexity of the rules.

The evaluation has concluded that addressing the areas of the rules where there is a lack of clarity or gaps exist, or which have been found to be no longer adapted to recent market developments would improve legal certainty. It would also strengthen the ability of the rules to provide a common framework of assessment for national competition authorities and national courts.

Next steps

During the next weeks, the Commission will launch an impact assessment to look into the issues identified during the evaluation with a view to having revised rules in place by 31 May 2022 when the current rules will expire.

Stakeholders will have the possibility to comment on the inception impact assessment and to provide their views in the context of a public consultation, which is planned for the end of this year. In the course of next year, the Commission will also publish a draft of the revised rules for stakeholder comments.

Background

Vertical agreements are agreements entered into 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 can be declared 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 without eliminating competition.

The VBER (Commission Regulation (EU) No 330/2010) exempts vertical agreements that meet certain conditions from the prohibition in Article 101(1) TFEU, thus creating a safe harbour for those agreements. Together with the VBER, the Commission also adopted the Guidelines on Vertical Restraints. These provide guidance on how to interpret and apply the VBER and how to assess vertical agreements falling outside the safe harbour of the VBER.

For More Information

See the dedicated webpage of DG Competition, which contains all stakeholder contributions submitted in the context of the evaluation, summaries of the different consultation activities and the final report of the evaluation support study.