The EC Commission has launched its public consultation on the proposed revised block exemption Regulation and Guidelines for vertical agreements and is inviting comments from interested parties by 28 September 2009.

The current block exemption, Regulation 2790/1999, expires in May 2010. Based on its own experience and on feedback received from stakeholders, the Commission has concluded that the competition regime in place for vertical agreements has worked well in practice. It is therefore proposing to keep the structure of the current Regulation and Guidelines, with a number of amendments which reflect market developments since the system was introduced in 1999. The main developments focused on by the Commission are the increase in the market power of large distributors and retailers and the greater significance of internet sales.

Calculation of market share

Regulation 2790/1999 introduced a 30% market share 'safe harbour', which presumes that an agreement below this threshold benefits from the block exemption on the basis that there is no market power. Above the 30% market share, there is no presumption of illegality but companies lose the automatic benefit of the block exemption and need to make their own assessment of the validity of their agreement under Article 81(3) EC Treaty. Under the current regime, in practice, it is usually the market share of the supplier which is relevant for the purpose of the calculation of this market share, whereas under the new proposals both the market share of the supplier and that of the buyer will have to be taken into account. The proposed change is intended to reflect concerns about increased buyer power of large distributors and retailers, and may potentially have a significant impact for some industries.

On-line sales

The current section in the Guidelines on internet sales and the extent to which emails or advertising on the internet constitute either active or passive sales is also greatly expanded in the new draft. This is likely to be of particular interest to all businesses which regularly trade on-line. For example, sending unsolicited e-mails and online advertisements specifically addressed to certain customers constitute active sales, and a restriction on these may therefore be imposed in the context of an exclusive distribution arrangement. A restriction requiring an exclusive distributor to prevent customers located in another exclusive territory from viewing its website, or requiring the distributor to provide for automatic re-routing, either to the supplier or to other distributors, would on the other hand not be permitted as these would constitute restrictions on passive sales. There is also guidance on the imposition of quality standards for the use of an internet site, for example in the context of a selective distribution network.

The Commission welcomes views on all aspects of its proposals, but is in particular looking for feedback on the overall functioning of the current rules and the new suggested approach on market share and on-line sales. The Commission's proposals can be accessed here.