The new Vertical Block Exemption Regulation (VBER) and accompanying Vertical Guidelines came into force on 1 June 2022. The new VBER applies to all agreements concluded on or after 1 June 2022 and is valid until 31 May 2034. Agreements in effect on 31 May 2022 which benefited from an exemption under the old VBER will continue to be covered by the exemption until 31 May 2023. Undertakings should thus bring existing agreements in line with the new VBER before then.
Many elements of the new VBER are recognisable from its predecessor. This includes the 30% market share threshold for the application of the “safe harbour”. There are, however, a number of changes. For example, the new VBER treats certain vertical restraints more strictly, in particular those involving online intermediation platforms. By contrast, the VBER gives more room for restrictions enforcing exclusivity and selectivity in respectively exclusive and selective distribution systems, as these are considered to create efficiencies.
Without attempting to be exhaustive, the following provides a brief overview of some of the most significant changes.
Dual distribution and information exchange
The new VBER, like the old VBER, covers dual distribution. An example of this which has been become more prevalent in recent years is where producers opt to sell their products directly to end consumers through online sales channels as well as through their traditional distributor network. The safe harbour of the new VBER covers dual distribution by importers and wholesalers as well as producers.
In a dual distribution scenario the supplier competes with its downstream buyer. For this reason the new VBER restricts the scope of information that may be exchanged between a buyer and its supplier which operates in a dual distribution scenario. According to the new VBER (Article 2(5)), information exchange in a dual distribution scenario is now only exempted if the information exchange is directly related to the implementation of the vertical agreement and necessary to improve the production or distribution of the contract goods or services. The new Vertical Guidelines provide non-exhaustive lists of the types of information which are likely to fall within and outside the new VBER; a “white-grey” list contains information exchanges that generally are exempted under the VBER and the “black-grey” list contains information exchanges that are unlikely to be exempted.
The safe harbour of the new VBER does not cover vertical agreements relating to the provision of online intermediation services, where the provider of online intermediation services also competes with the undertakings to which it provides these services.
Parity clauses
The old VBER exempted all types of parity (most favoured nation) clause, including both wide and narrow across platform parity agreements (APPAs). Wide APPAs prevent a party from applying better conditions on any other (online) platform. Narrow APPAs prevent parties from applying better conditions on their own website. The new VBER no longer exempts wide APPAs but continues to exempt all other types of parity clause. The new Vertical Guidelines provide additional clarification regarding the assessment of such clauses obligations.
Non-compete obligations
Non-compete clauses for the duration of no more than five years remain exempted under the new VBER. In addition, the new VBER exempts non-compete clauses which are tacitly renewable after five years. This is the case if in practice the buyer can renegotiate or terminate the vertical agreement containing the obligation with a reasonable notice period and at a reasonable cost, thus allowing the buyer effectively to switch its supplier after the expiry of the five-year period. However, this does not mean that a non-compete for an indefinite period is exempted even where there are sufficient possibilities for the buyer to terminate it.
Territorial and customer restrictions
The new VBER contains several important changes in respect of exclusive and selective distribution systems. The new VBER introduces the possibility of shared exclusivity, which allows for the appointment of up to five distributors per exclusive territory or customer group in exclusive distribution systems. The new VBER also introduces the possibility for suppliers using an exclusive distribution system to oblige their distributors to pass on active sales restrictions to their direct customers. This means that distributors can require their customers not actively to sell to customers within other exclusive territories or customer groups. However, a clause requiring the imposition of such restriction further down the distribution chain is not exempted. Furthermore, the new VBER allows suppliers with a selective distribution system to prohibit their distributors and their customers, irrespective of their location, from actively or passively selling to unauthorized distributors within the territory of the selective distribution system.
Online sales restrictions
Dual pricing (charging different prices for sales of products which are to be sold online and offline) is, under the new VBER, no longer considered a hardcore restriction. Also, the new VBER takes a different approach to the equivalence principle: suppliers who maintain a selective distribution system are no longer obliged to apply equivalent criteria for online and offline sales. In both cases, any difference in price or criteria for online and offline sales may not have the object of preventing the effective use of the internet by the buyer to sell contract goods or services to territories or customers.
Conclusion
Overall, the new VBER is a welcome replacement for its predecessor. With changes related to dual distribution, online sales and platforms, the VBER is now more align with market developments including digitalisation and the rise of e-commerce. The VBER and the new Vertical Guidelines also provide more clarity and more possibilities to improve exclusive and selective distribution systems, than the old VBER and accompanying guidelines.
