New EU rules for distribution agreements

The European Commission adopted the new Vertical Block Exemption Regulation (VBER), accompanied by new Vertical Guidelines.

What are vertical agreements?

Vertical agreements are agreements between two or more undertakings operating at different levels of the production or distribution chain.  These agreements govern the relationship between the parties, such as the conditions under which the parties may purchase, sell or resell certain goods or services.

What does the VBER do?

Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) prohibits agreements between undertakings that restrict competition.  The VBER creates a safe harbour for vertical agreements, exempting those vertical agreements that meet certain conditions from the prohibition in Article 101(1) TFEU.

What has changed from the previous block exemption regime?

The new VBER introduces a narrower safe harbour in respect of:

  1. Dual distribution – where a supplier sells its goods or services through independent distributors but also directly to end customers
  2. Parity obligations – obligations that 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.

The new VBER means that certain dual distributions and certain parity obligations will no longer benefit from the safe harbour under the VBER.

At the same time, the VBER expands the safe harbour in respect of:

  1. Active sales – certain restrictions of a buyer’s ability to actively approach individual customers
  2. Different charges to offline and online sales – 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.

The revised VBER rules have also been updated on the assessment of online restrictions, vertical agreements in the platform economy and agreements that pursue sustainability objectives.

Contact our competition practice to discuss your precise requirements.