The European Commission is consulting on its proposals for a new Vertical Agreements Block Exemption Regulation and Guidelines. The current Block Exemption is due to expire in May 2010. The Commission is proposing revisions to the Block Exemption but not fundamental changes. The revisions are thought to be necessary to take account of the increased buyer power of large retailers and the increase in online sales.

The key proposals are:

  • Market shares - vertical agreements should benefit from the new Block Exemption if the market share held by each of the parties to the agreement (supplier and distributor) does not exceed 30% on any of the relevant markets affected by the agreement (only the supplier’s market share is relevant under the current Block Exemption);
  • Online sales – The Guidelines would be updated to reflect the increase in online sales. Advertising on the Internet by a distributor that reaches customers in other distributors’ exclusive territories would be treated as passive sales and would not be prohibited. A supplier would, however, be able to require a distributor to sell a minimum amount of products offline;
  • Resale price restrictions – resale price restrictions are usually hardcore restrictions but the Commission is proposing that these be permitted if the parties to the agreement can show that the benefits of the resale price stipulations outweigh the anti-competitive effects;
  • Upfront access payments – fees that suppliers pay to distributors to ‘join’ the distribution network would be permitted provided both the supplier’s and buyer’s market share on their respective markets did not exceed 30%.

The consultation closes on 28 September. The New Block Exemption will be published in early 2010.

The draft revised Block Exemption Regulation and Guidelines can be accessed by clicking here