September 28, 2020

The Commission has published a Staff Working Document that summarises the findings of the evaluation of the Vertical Block Exemption Regulation and the Vertical Guidelines. The Commission explains that the aim of the evaluation was to gather evidence on the functioning of the Regulation and Guidelines, in order to decide whether they should lapse, be renewed in their current form, or be revised. Based on the findings of the evaluation, the Commission will launch an impact assessment to look into the policy options for a revision of the rules in order to address the issues identified.

The Commission launched a review of the Regulation and Guidelines, which will expire on 31 May 2022, in October 2018. During the evaluation phase, the Commission collected evidence to understand how the rules have functioned since their adoption in 2010. This evidence included stakeholder contributions gathered in the context of the public consultation that took place during the first half of 2019 and during a dedicated stakeholder workshop held in November 2019.

The Commission also commissioned an external evaluation support study to analyse in more depth certain areas and specific vertical restrictions, such as resale price maintenance and parity clauses, the competitive effects of which have been the subject of debate over recent years. Further evidence came from the Commission’s 2017 sector inquiry into e-commerce, as well as its own enforcement experience with regard to vertical restrictions and that of national competition authorities.

The evaluation has shown that the Regulation and the Guidelines are still relevant as useful tools that greatly facilitate the self-assessment of vertical agreements and help reduce compliance costs for businesses entering into such agreements.

At the same time, the evaluation has shown that the market has changed significantly since the adoption of the Regulation and Guidelines, in particular due to the growth of online sales and of new market players such as online platforms. These developments have led to a number of changes in distribution models, such as increased direct sales by suppliers and a greater use of selective distribution systems, which allow suppliers a tighter control over resale conditions. Similarly, new types of vertical restrictions, such as restrictions regarding sales through online marketplaces and restrictions on online advertising, as well as retail parity clauses, have become more widespread.

The evaluation has identified a number of issues with regard to the functioning of the rules. These include the following:

• some provisions lack clarity, such as the rules defining agency agreements;
• other provisions are difficult to apply or are no longer adapted to the current business environment, notably when it comes to applying the existing rules to new market players that do not fit into traditional supply and distribution concepts and to new online sales restrictions;
• there are gaps in the rules, such as a lack of guidance on how to assess retail parity clauses or restrictions on the use of price comparison websites, and areas that do not refer to case law issued since the adoption of the rules (e.g. the CJEU’s judgment in Case C-230/16 Coty Germany GmbH Parfümerie Akzente GmbH EU:C:2017:941);
• there remains significant scope for diverging interpretations of the rules by national competition authorities and national courts, which is an important issue of concern for stakeholders, as it reduces the benefit of the rules;
• while the evidence suggests that the lists of hardcore restrictions and excluded restrictions are generally appropriate, there may still be scope to further reduce the burden for businesses associated with self-assessing the compatibility of their agreements with Article 101 of the Treaty on the Functioning of the European Union. This could be achieved by exempting, in some specific areas of the rules, additional vertical agreements for which stakeholders have indicated that they would normally satisfy the conditions of Article 101(3) TFEU; and
• there is room for simplification and further cost reduction, notably by reducing the complexity of the rules.

The evaluation has concluded that addressing the areas of the rules where there is a lack of clarity or gaps exist, or which are no longer appropriate due to recent market developments, would improve legal certainty. It would also strengthen the ability of the rules to provide a common framework of assessment for national competition authorities and national courts.

During the coming weeks, the Commission will launch an impact assessment to look into the issues identified during the evaluation with a view to having revised rules in place by 31 May 2022 when the current rules expire. Stakeholders will have the chance to comment on the inception impact assessment and to provide their views in the context of a public consultation, which is planned for the end of 2020. In the course of next year, the Commission will also publish a draft of the revised rules for stakeholder comments. To read the Commission’s press release in full and for links to relevant documents, click here.