The VBER[1] provides a safe harbour for so called vertical agreements (i.e. agreements between two or more undertakings operating at a different level of the production or distribution chain and relating to the conditions under which the parties may purchase, sell or resell certain goods or services). Vertical agreements cover a wide range of agreements including exclusive distribution-, selective distribution- and franchise agreements.

The safe harbour means that vertical agreements which satisfy the conditions of the VBER are exempted from the prohibition of article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”).

Article 101 (1) TFEU prohibits agreements and concerted practices between undertakings that restrict competition unless the pro-competitive effects outweigh the anti-competitive effects in accordance with the criteria as contained in article 101 (3) TFEU.

The VBER exemption applies if neither the supplier’s nor the buyer’s market share exceed 30 per cent of the relevant market for the products in question.

If the vertical agreement contains hard-core restraints, the safe harbour created by the VBER will not apply and is highly unlikely to meet with the criteria of article 101 (3) TFEU. Examples of hard core restraints are resale price maintenance (“RPM”), absolute territorial restrictions, restrictions within selective distribution networks to sell to other selective distributors or end-users.

Certain other lesser restraints such as non-compete obligations exceeding five years in duration, post-term non-compete obligations, and restrictions obliging members of a selective distribution system not to stock the products of an identified competitor of the supplier, are excluded from the protection provided by the VBER, although the VBER will continue to apply for the remaining part of the vertical agreement.

The VBER is accompanied by guidelines of the European Commission (“the Guidelines”)[2].

The VBER expires on 31 May 2022. With a view thereto the European Commission is currently in the process of evaluating the VBER and the Guidelines in order to determine future policy (should it let the VBER lapse entirely or should it prolong and/or revise it).

In connection with the evaluation, a public consultation was launched by the European Commission which was open from 4 February until 27 May 2019. A number of 164 contributions were received through the online questionnaire and an additional number of 13 position papers were submitted to the European Commission. The respondents varied from business organisations/associations to academic research institutions, EU citizens, a Trade Union and law firms.

The general outcome is that a majority of the respondents considers the VBER and the Guidelines are useful as guidance, but need to be revised and/or clarified in relation to certain aspects in order to increase legal certainty, in particular in view of new market developments  during the last years. Some respondents also mention that the non-binding nature of the Guidelines has resulted in an inconsistent application of the rules by national competition authorities and national courts, which has overall reduced the level of legal certainty provided by the VBER.

It is widely anticipated that the VBER and the Guidelines will be prolonged after a  revision which will most likely deal with some of the following issues:

• RPM:
• Dual pricing (what if goods are distributed both through online channels/platforms and offline shops):
• Most Favoured Nation clauses;
• Online sales restrictions;
• Use of price comparison websites
• Commercial Agency agreements (additional guidance);
• Franchise agreements (additional guidance);

In general terms, the European Commission will need to consider and adapt to new digital developments which have already taken place during the nearly ten years that the VBER has now been in force and future developments that are to be expected. In relation to those developments, it may also be anticipated that a prolongation of the duration of any revised VBER and accompanying Guidelines may be for shorter terms than has been the case in the past.

The next step in the European Commission’s evaluation will be the hosting of an open stakeholder workshop in the Q4 in Brussels. Adoption by the European Commission of its own staff working document is expected in Q2 2020.

[1] Commission Regulation (EU) No. 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices (Text with EEA relevance)

[2] Guidelines on Vertical restraints https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52010XC0519%2804%29