EU | A new era for vertical agreements

New regulation on the application of competition rules to distribution agreements.
EU | A new era for vertical agreements
May 11, 2022

On May 10, the European Commission (“Commission”) made public the new regulation on the application of competition rules to distribution agreements (“New Regulation”). It will come into force on June 1, replacing current Regulation 330/2010 (“2010 Regulation”). However, it provides for a transitional period until May 31, 2023 for pre-existing agreements that meet the conditions of the 2010 Regulation but not those of the New Regulation.

At the time, the Commission made a generally positive assessment regarding the implementation of the 2010 Regulation. However, the 2019 public consultation highlighted the need to review the applicable regime in different areas such as dual distribution, restrictions on active and passive sales, resale pricing and e-commerce. For more information on the conclusions of the evaluation phase of the draft revision of the 2010 Regulation, please see our post, available here.

In July 2021, the Commission released the drafts of the New Regulation and Guidelines and submitted them to public consultation. Given the time elapsed, we may assume that the debate within the Commission was intense. In fact, the Regulation finally approved by the Commission differs in many aspects from the draft published on July 9, 2021.

Below are the main novelties:

  •  The New Regulation reflects the general regulatory trend for online platform activities and online intermediation services

The expansion of e-commerce in the last decade, as well as the specificities of the new online intermediation models and the growing role of platforms, have been the main focus of the revision of the 2010 Regulation.

Remarkably, providers of online intermediation services will not be “suppliers” within the meaning of the New Regulation and will be subject to a specific regime:

 -       The exemption under the New Regulation will not apply to vertical agreements relating to the provision of online intermediation services where the provider of the services competes with its distributors in the sale of the relevant products; and

 -       Providers of online intermediation services may not prohibit their clients from selling or reselling goods or services to end users under more favorable conditions via competing online intermediation services.

  • Information exchanges under dual distribution systems will benefit from the exemption only under certain conditions

Dual distribution refers to situations where suppliers compete with their distribution network. The New Regulation covers information exchanges between suppliers and distributors of a dual distribution system, to the extent that such information is directly related to the implementation of the vertical agreement or necessary to improve the production or distribution of the contract goods or services.

  •  Important novelties in the exclusive distribution system

Although the New Regulation does not modify the definition of exclusive distribution system, it extends the scope of the applicable exemption: from now on, it will cover restrictions on active sales by other distributors in a territory or to a customer group reserved for the supplier or allocated by the supplier exclusively to a maximum of 5 exclusive distributors. 

Also, the New Regulation makes it possible to protect a territory or customer group reserved by the supplier or exclusively allocated to a distributor from active sales by third parties—not only other distributors, as was the case until now, but also their direct customers. 

Finally, the New Regulation clarifies and expands the definition of online active sales with a reference to modern online promotion systems.

The Commission has approved draft Guidelines on vertical restraints and has already published the English version. The Guidelines will be formally approved at a later date. We will keep you informed.

May 11, 2022