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New VBER Regulation

A new block exemption regulation for vertical agreements has been adopted by the EU Commission on 10th of May and is set to enter into force on 1st of June 2022. The new Vertical Block Exemption Regulation ("VBER") will replace the previous regime for such agreements and provides a fresh legal background for a more digitalized commercial environment.

Under the new VBER, protection is granted to both exclusive and selective distribution networks. Exclusive distribution networks are regulated for the first time under this exemption regulation. Thus, under VBER, it is allowed for the supplier in an exclusive distribution network to appoint up to a maximum of 5 distributors in an exclusive territory or in relation to an exclusive group of customers. Also, the new VBER regulation expressly allows the supplier to pass on the restrictions on active selling in a certain territory or to a certain group of customers to the clients of the exclusive distributors. Therefore, a client of the exclusive distributors will have to comply with the territorial or/and customers restrictions imposed by the supplier.

Other limitations in relation to exclusive distribution networks are related to the exchange of sensitive information and to undertakings providing online intermediation services (see below for the meaning of this). Thus, the new VBER regulation excludes the application of the exemptions provided in Article 2 therein (i.e., which state that Article 101(1) of the of the Treaty on the Functioning of the European Union ("TFEU") shall not apply to vertical agreements entered into between an association of undertakings and an individual member, vertical agreements containing provisions which relate to the assignment to the buyer or use by the buyer of intellectual property rights or others agreements containing vertical restraints) in reference to the exchange of information between the supplier and the buyer which is either not directly related to the implementation of the vertical agreement or is not necessary to improve the production or distribution of the contract goods or services. Meaning that any unnecessary exchange of information between the supplier and the buyer could result in a breach of Article 101 para. (1) TFEU. The above-mentioned breach also applies to online intermediation services where the provider of the online intermediation services is a competing undertaking on the relevant market for the sale of the intermediated goods or services. Thus, if an online intermediation services undertaking concludes an agreement with its distributors, where the parties restrict active sales into a territory or to a group of customers, such agreement would be in breach of the Article 101 para. (1) TFEU.

As per Article 2 of the Regulation 2019/1150 on promoting fairness and transparency for business users of online intermediation services, there would fall within the meaning of online intermediation services social media services, e-commerce marketplaces, online general search engines, collaborative economy marketplaces, or online software applications services.

Another novelty in relation to VBER exemptions is related to the fact that if a supplier is not operating either under an exclusive or a selective distribution network, it can still restrict active sales into a certain territory or to a group of customers, if one of the exemption conditions is met (i.e. the restriction of active sales by the buyer and its direct customers into a territory or to a customer group reserved to the supplier or allocated by the supplier exclusively to a maximum of five exclusive distributors).

The new VBER regulation provides a different approach to parity obligations. Thus, the benefits of the regulation will not apply to retail parity obligations. Previously regulated parity obligations provided that the buyers from online intermediation services were not allowed to offer, sell or resell goods or services to end consumers under more favorable conditions than those of the competing online supplier that they originally bought from. However, under the new VBER, the buyer acts as a distributor for an e-commerce platform, which would be considered as a supplier, said buyer further being allowed to sell its products (online) to both other distributors as well as end customers, thus also being in a position of supplier. Practically, the new regulation allows the buyers to actively compete with the original suppliers and undertaking such obligations, as the previously regulated ones, could be considered in breach of the Article 101 para. (1) TFEU. 

The new VBER will enter into force on 1st of July 2022 and provides for a transitional period from 1st of June 2022 to 31st of May 2023. During the transitional period, the parties of vertical agreements concluded before the 1st of July, will have until 31st of May 2023 to comply with the VBER regulation in order to avoid potential fines under the Article 101 para. (1) TFEU.

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