At the end of July, the European Commission published a draft of its proposed new version of the key European regulation regarding the application of antitrust rules to distribution and supply structures and accompanying guidance—the Vertical Restraints Block Exemption and Guidelines.
The Commission has made few changes, and in many parts has simply incorporated updates to reflect case law of the European Court since the last version of the exemption was adopted in 2000. Here are the highlights in our view:
- Some changes are aimed at curbing the activities of powerful buyers (e.g., supermarket chains). So exemption may now not be granted automatically for certain restrictions on competition (exclusivity agreements, noncompetition undertakings) where the buyer’s market share exceeds 30%. Previously, only the supplier’s market share was relevant in many cases.
- 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. Again, no new law here.
- The Guidelines restrict the circumstances in which the Commission now 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 agents do not 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 (e.g., 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 new 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. Previously, any fixing of resale price would have been considered unlawful. This limited flexibility (albeit only the view of the Commission) will be of significant use to consumer goods suppliers and franchisors, and is an interesting counterpoint to current moves in the United States to reverse similar liberalization in this area by the U.S. courts in Leegin Creative Leather Products Inc. v. PSKS Inc.*