Sebastian Jungermann Daniel Bunsen June 9 2022 Fulfilment agreements under new Vertical Block Exemption Regulation Arnecke Sibeth Dabelstein | Competition & Antitrust - European Union Sebastian Jungermann, Daniel Bunsen Competition & Antitrust IntroductionBackgroundNew policyComment IntroductionOn 1 June 2022, the EU Vertical Block Exemption Regulation (VBER)(1) entered into force with accompanying guidelines on vertical restraints.As recital 193 of the guidelines sets out, "fulfilment agreements" are such contracts under which:the supplier enters into a vertical agreement with a buyer for the purpose of executing (fulfilling) a supply agreement concluded previously between the supplier and a specific customer.BackgroundThe previous version of the VBER and its corresponding guidelines did not cover fulfilment contracts. This led to legal uncertainty about an already-widespread practice. As the new guidelines deal with fulfilment contracts and provide guidance for the first time, they are expected to be welcomed by any company participating in distribution structures.New policyAccording to article 4 of the VBER, the exemption provided for in article 2 will not apply to hardcore restrictions. Such hardcore restrictions are considered to be harmful to consumers, which consequentially renders the whole agreement – not just the particular provision – as unexempted.(2)Article 4(a) of the VBER relates to the hardcore restriction of:the buyer's ability to determine its sale price, without prejudice to the possibility of the supplier to impose a maximum sale price or recommend a sale price, provided that they do not amount to a fixed or minimum sale price as a result of pressure from, or incentives offered by, any of the parties.Such restrictions have long been known as "resale price maintenance" (RPM).(3)Fulfilment contracts are discussed under the same subsection 6.1.1. of the guidelines as a form of RPM. Recital 193 of the guidelines provides that, where the supplier selects the undertaking that will provide the fulfilment services, the imposition of a resale price by the supplier does not constitute RPM. The rationale behind this exemption is that such price-setting does not restrict competition for the supply of the goods or services to the customer or competition for the supply of the fulfilment services. In the case, however, that the customer selects the fulfilment service, the imposition of a resale price by the supplier on the fulfilment provider may in fact restrict competition for the provision of the fulfilment services.(4)Fulfilment contracts that comply with these requirements are exempted under article 2(1) of the VBER. Non-compliance, on the other hand, does not in itself mean an infringement of article 101 of the TFEU. This leaves open the possibility of such RPM being considered "efficiency enhancing" in an individual case and then being justified under article 101(3) of the Treaty on the Functioning of the European Union (TFEU).(5)Comment As a result of the new VBER and its accompanying guidelines, existing distribution contracts will need to be reviewed and amended in order to comply with the newly published rules and exploit any margins that are potentially beneficial to commerce. There is still some time, however, as any agreements that were already in force on 31 May 2022, and that satisfy the conditions for exemption provided for in the old VBER, will be unaffected until the end of the transition period on 31 May 2023.(6)For further information on this topic please contact Sebastian Jungermann or Daniel Bunsen at Arnecke Sibeth Dabelstein by telephone (+49 69 979885 465) or email ([email protected] or [email protected]). The Arnecke Sibeth Dabelstein website can be accessed at www.asd-law.com.Endnotes(1) Commission Regulation (EU) 2022/720 of 10 May 2022 on the application of article 101(3) of the TFEU to categories of vertical agreements and concerted practices.(2) Recital 177 of the guidelines.(3) Recitals 185 et seq of the guidelines.(4) Recital 193 of the guidelines.(5) Recital 195 of the guidelines.(6) Article 10 of the VBER.