European Commission publishes findings of its evaluation of EU competition rules on vertical agreements
On September 8, the European Commission (EC) published a Staff Working Document summarising the findings of its evaluation of the Vertical Block Exemption Regulation (VBER) and the accompanying Vertical Guidelines (Guidelines). The findings show that the VBER and the Guidelines are useful tools that enable businesses to self-assess the compliance of their vertical agreements with EU competition law. However, the market has significantly changed since the adoption of the VBER and the Guidelines in 2010, notably with the growth of online sales, the expanded role of online platforms and the changes in distribution models. As a result, the EC’s evaluation identified a number of issues with the VBER and the Guidelines that need to be addressed. Below we summarise the main issues identified and the likely priority areas for the EC as it begins the next phase of its review.
Vertical agreements are agreements between businesses operating at different levels of the production or distribution chain, such as an agreement between a manufacturer and a distributor. Under current EU rules, companies must self-assess the compliance of their vertical agreements with EU competition law, which prohibits agreements that restrict competition under Article 101(1) of the Treaty on the Functioning of the European Union. The VBER exempts certain types of agreements from the Article 101(1) prohibition if certain conditions are met, thereby providing businesses with the legal certainty that their agreement is compliant with EU competition law.
The VBER and the accompanying Guidelines are due to expire on May 31, 2022. The EC has undertaken a two-year evaluation to determine whether the VBER and the Guidelines should lapse, be renewed or be revised by collecting evidence from various sources, including a public consultation, a targeted consultation of national competition authorities, a stakeholder workshop and an external evaluation support study. The EC has also gathered evidence through the results of its ecommerce sector inquiry, which was launched in May 2015 and concluded in May 2017. Moreover, the EC has gained insight through its own enforcement experience with regard to vertical restrictions in recent years.
Overall, the evidence gathered confirms that the VBER, together with the Guidelines, are useful instruments and should be retained. However, the evaluation has identified a number of issues with regard to the functioning of the rules, namely:
The Staff Working Document is an important stage in the EC's review of the VBER and the Guidelines; it closes the evaluation phase and launches the impact assessment phase where the EC will look into the issues identified in more detail. A draft of the revised rules is expected to be published in 2021 for public consultation, with the new rules eventually coming into force by the time the existing VBER and Guidelines expire on May 31, 2022.
From a UK perspective, it is the current position that the UK will continue to apply the VBER until it expires. Post May 31, 2022, it will be interesting to see whether the UK will adopt similar rules to the revised VBER or take a different approach.