New Vertical Block Exemption Regulation enters into force

Companies have had to adapt to the changes to distribution law brought about by the revised rules in the EU’s new Vertical Block Exemption Regulation (VBER), which, together with the new Vertical Guidelines, has been in force since June 1, 2022. The Regulation sets out when restrictions on competition are permitted and when they are prohibited. We at the commercial law firm MTR Rechtsanwälte note that the legislation is particularly relevant to distribution agreements.

Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) prohibits agreements that have an appreciable adverse effect on competition, or which work to prevent it altogether. According to the Vertical Block Exemption Regulation, agreements between companies at different levels of the production and distribution chain are – subject to certain conditions – exempt from this prohibition, including vertical agreements between producers and distributors. This remains essentially unchanged.

To this end, neither the supplier nor the buyer is allowed to exceed the market share threshold of 30 percent, and there must be no serious restrictions on competition. The so-called core restrictions of resale price maintenance as well as territorial and customer restrictions remain in place.

Changes can be seen in dual distribution, where the manufacturer sells its products not only through independent distributors but also directly to the end customer. Here, an exemption is now only possible if the exchange of information is directly relevant to the implementation of the vertical agreement, or if it is necessary to improve production or distribution. In other words, certain aspects of dual distribution are no longer exempt.

Another change concerns parity obligations. This is where the seller undertakes to offer its contractual partners terms and conditions that correspond to the terms and conditions of third-party sales channels, e.g., other platforms, or to the terms and conditions of the seller’s direct sales channels, for example, its own websites. Again, certain aspects are no longer exempted under the new Vertical Block Exemption Regulation. These must now be assessed on a case-by-case basis under Article 101 TFEU.

On the other hand, certain restrictions have been reduced. One only needs to look at the opportunity for buyers to actively approach individual customers, or at certain aspects of online sales.

Other points addressed by the revised Vertical Block Exemption Regulation include aspects such as non-compete clauses, sustainability, and commercial agent privilege.

Manufacturers and distributors must adapt to the new regulations if they are to avoid fines. Lawyers versed in distribution law can provide counsel.