The final release of the Commission's new block exemption on vertical restraints and accompanying Guidelines (see ec.europa.eu/competition/antitrust/legislation/vertical.html) confirms that the Commission has made few changes, and in many places has simply updated the law to reflect case law of the European Court since the last version of the exemption was adopted in 2000. Although the Commission retains its enthusiasm for liberalising internet selling, the changes will not satisfy the ambitions of internet sellers for a European free for all on the internet. The Commission's desire to curb buyer power by requiring that both buyer's and seller's market share must now not exceed thirty per cent to obtain the benefit of the exemption in all cases, will create some new compliance issues for firms which either are, or trade with powerful buyers. But no need to panic as the Commission has generously allowed a one year transitional period to get into compliance.
In some more detail:
- Some changes are aimed at curbing the activities of powerful buyers (eg supermarket chains). So exemption may now not be granted automatically for certain restrictions on competition (exclusivity agreements, non-competition undertakings) where the buyer's market share exceeds 30%. In many cases previously, only the supplier's market share was relevant.
- The revised Guidelines also now deal with other retail distribution practices - notably up front payments and category management. However, the Guidelines merely restate existing law in these areas and are likely to result in no change to existing practices.
- The Guidelines also confirm the Commission's enthusiasm for the internet - making it clear • that restrictions on distributors selling outside territory by means of the internet will not be permitted, and that suppliers will not be allowed to prevent selective distributors from selling via the internet. There is an exception permitting restrictions on passive sales during a two year start up period for a new brand, but generally again not much new here. The guidelines restrict the circumstances in which the Commission considers commercial • agency to apply. Agents typically promote the sale of goods on behalf of principals without taking title, as opposed to distributors who will resell in their own name. Because the agents don't resell, competition law has typically allowed the principal control over the prices at which and customers to which agents' sales are made. The Guidelines now promote the (seemingly incorrect) view that the assumption of any material risk or cost (eg transport costs, maintenance of stocks, investment in market specific equipment, premises or training) by the agent will mean that he is treated effectively as a reseller.
- A surprising inclusion tucked away at the end of the guidelines is an acknowledgement that it may be permissible for a supplier to fix the resale price of his product in the context of a temporary special offer or the introduction of a new product. Previously any fixing of resale price would not be sanctioned by the Commission. This limited flexibility looks attractive to consumer goods suppliers and franchisors, but should be relied upon with caution as resale price maintenance still features in the list of hardcore restrictions in the exemption regulation itself.