EC Adopts Vertical Deal Guidelines for Supply Chains

The European Commission has adopted new Vertical Block Exemption Regulations (‘VBER’) accompanied by new Vertical Guidelines, which will allow, subject to conditions, agreements between companies operating at different levels of various production or distribution chains. “The Vertical Block Exemption Regulations exempt agreements between manufacturers and distributors provided their agreements do not contain price-fixing and other hardcore restrictions and both do not have over a 30% market share,” according to the EC.

Margrethe Vestager, head of the EC’s competition policy, said the change will give companies guidance as they operate in “an even more digitalized decade ahead.” Vestager said the rules will  help all types of businesses, including small and medium enterprises, to assess their vertical agreements. The change will provide safe harbor where certain agreements are block-exempted, she said.

The new rules, according to the EC, will narrow the scope of the safe harbor regarding:

  • Dual distribution, where a supplier sells its goods or services through independent distributors but also directly to end customers.
  • Parity obligations, those which 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.

And they will widen the scope of the safe harbor regarding:

  • Certain restrictions of a buyer’s ability to actively approach individual customers, i.e. active sales.
  • Certain practices relating to online sales, namely 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 Commission says the revised VBER should now be more accessible to those who use them in their day-to-day businesses. They have been updated in the contexts of, as examples, the assessment of online restrictions, vertical agreements in the platform economy, and agreements that pursue sustainability objectives. They also offer guidance on selective and exclusive distribution, agency agreements, and more.

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