On May 10, 2022, the European Commission adopted the new Vertical Block Exemption Regulation (BEREC) for Vertical Agreements. With this reform of the 2010 regulation, the Vertical Guidelines have also been revised, which seek to adapt to the new market reality, in which the internet has been consolidated as a sales channel.
Those agreements already in force on May 31st, 2022, and complied with the requirements of the 2010 regulation will continue to benefit from the automatic exemption until May 31st, 2023, even if they do not comply with the new provisions. Therefore, companies will have one year to adapt pre-existing contracts to the new regulatory regime if they wish to continue to benefit from the automatic exemption.
Commission regulation EU 330/2010
Vertical agreements are agreements between parties at different levels of the supply chain (for example, between a manufacturer and distributor, or distributor and retailer). An example is an exclusive dealing agreement between a supplier and a retailer, whereby the retailer agrees only to sell the supplier’s products. Previous regulation 330/2010 established that vertical agreements were exempted from the prohibition of agreements between undertakings restricting competition contained in Article 101.1 of the Treaty on the Functioning of the European Union (TFEU) provided that they met certain conditions.
Thus, those that met the requirements for exemption were not considered restrictive of competition and, therefore, were not prohibited by Article 101.1 TFEU, insofar as they were presumed to generate economic efficiencies in the chain of production and distribution of the goods and services in question and would, where appropriate, were justified from the perspective of Article 101.3 TFEU. This exemption, therefore, provided a safeguard from applying the general prohibition of collusive agreements contained in Article 101 TFEU to agreements for the distribution of goods and services.
Commission regulation EU 2022/720
The new regulation updates this exemption, in view of the evolution of the markets and, especially, the growth of e-commerce and the increasingly relevant role of online platforms in the distribution of goods and services.
The general exemption is also maintained for those vertical agreements in which the market shares of supplier and distributor do not exceed 30% in their respective markets, with the particularities already provided for in Regulation 330/2010 in relation to vertical agreements between an association of companies and a member or an individual supplier, and vertical agreements containing clauses relating to the assignment or exploitation of intellectual property rights. In contrast, the new regulation reduces the scope of the exemption in relation to dual distribution agreements, i.e. vertical agreements between a supplier and a distributor in cases where the supplier competes with the distributor in the distribution of the products and services in question. In this sense, the general exemption of these agreements is maintained, with two exceptions:
- Exchanges of information between supplier and distributor that are not directly related to the implementation of the agreement or are necessary to improve the distribution of the goods and services that are the subject matter of the agreement are not exempted
- And distribution agreements in which the supplier is an online intermediary service that, in addition, competes with the distributor in the sale of the intermediated products or services shall not be considered exempt.
The new regulation maintains the consideration of hardcore restrictions, which imply the withdrawal of the exemption and the presumption of the existence of a restriction of competition prohibited by Article 101.1 of the TFEU, of those clauses that entail:
- A restriction on the distributor’s freedom to set the resale price of the products or services, allowing the supplier to set maximum or recommended prices;
- A restriction on the territory or customers to which the distributor may actively or passively sell the goods or services, with various exceptions depending on the use of an exclusive, selective, or another distribution system; or
- In an agreement between a component supplier and a buyer that incorporates such components into other products, a restriction on the ability of the component supplier to sell them as spare parts to end-users or to repairers, wholesalers, or other service providers other than those to whom the buyer has entrusted the repair of its products
Recognizing the importance of e-commerce in the distribution of goods and services, the new regulation also considers hardcore restrictions, and therefore prohibited by Article 101.1 TFEU, those clauses that aim to prevent the distributor from using the Internet for the sale of goods or services or to prevent, directly or indirectly, the use of a particular online advertising channel.
In conclusion, the new regulation adapts the treatment of vertical agreements in Competition Law to the current reality of the markets and, in particular, to the rise of e-commerce, resolving various issues that had been raised throughout the validity of the previous Regulation 330/2010, in view of the evolution of the digital economy.