The CMA’s draft VABEO Guidance Consultation

Response of Euclid Law Ltd. to the Consultation on the CMA’s Draft Guidance on the Vertical Agreements Block Exemption Order 2022 (CMA154)

We welcome publication of the CMA’s draft guidance on the Vertical Agreements Block Exemption Order 2022 (‘VABEO’) (the ‘Draft Guidance’) and the opportunity to comment on it.

Given the shared heritage of the VABEO and the EU Vertical Agreements Block Exemption Regulation (‘VBER’), as well as the extensive precedent in which the VBER and related principles of EU law have been applied in a UK context, we agree with the CMA’s decision to “broadly reflect” the EU’s Vertical Guidelines (the ‘EU Guidelines’) in the Draft Guidance.

While there are some instances where the application of principles developed with the EU’s single market in mind to a UK-specific context can come across as somewhat strained, we agree that prioritising consistency is the right approach at this time.

To read and download the full Response, click here.

Revised EU rules for vertical agreements unveiled

by Becket McGrath & Loukia Kopitsa

On 9 July 2021, the European Commission (the ‘Commission’) published its draft texts for the new Vertical Agreements Block Exemption Regulation (‘VBER’) and Guidelines on Vertical Restraints (‘Guidelines’) for public consultation.  These are the result of an evaluation process, which started in 2018, of the current competition law rules for vertical agreements.  Those rules entered into force in January 2010 and are due to expire at the end of May 2022.

One area that has not changed is the attitude taken to price restrictions.  Despite intense lobbying, the new VBER retains the current approach in classifying resale price maintenance (‘RPM’)as a hardcore restriction of competition that is presumptively unlawful and can be justified only in exceptional circumstances.

The single key theme that emerges most strongly from the new texts is that the Commission agrees with those who have argued that the 2010 regime was unduly favourable to online retailers and marketplaces (principally Amazon).  While the 2010 changes were motivated by a desire to encourage online retail, as a means of developing the single market and improving consumer access to products on a cross-border basis, brands objected that the regime made it too difficult for brands to control online retail.  Should they be retained in the final texts, the proposed changes will make life harder and less certain for online retailers (especially those, such as Amazon, that operate third party marketplaces in parallel) and those doing business with them.  While some of the changes will be welcomed by brands, others introduce additional complexity and uncertainty that are likely to make it harder to apply the VBER in practice.  As a result, it cannot be said that, taken in the round, the new texts mark a distinct improvement on the 2010 regime.

Background

The VBER creates a safe harbour, known as a ‘block exemption’, which protects common forms of distribution agreements from legal challenge under Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’), which prohibits anticompetitive agreements, and national equivalent rules.  In principle, any agreement between parties operating at different levels of the supply chain (for example, a brand and a distributor) can benefit from the block exemption, provided that the parties’ market shares do not exceed 30% of the relevant markets and the agreement does not contain any ‘hardcore’ restrictions of competition. 

Hardcore restrictions (e.g., RPM, absolute territorial protection, customer allocation), which are set out in Article 4 of the VBER, are presumed to be so harmful to competition that they render an entire agreement ineligible for protection and presumptively unlawful.  If an agreement contains a less serious ‘excluded restriction’, the specific restriction will be unenforceable, but the rest of the agreement will be protected.  

The Guidelines set out extensive guidance concerning application of the VBER and for assessing the legality of agreements outside of its protective scope.  Taken together, the VBER and Guidelines effectively create a code for the application of EU competition law (and, by extension, national competition laws) to vertical agreements.

Click here to download the full briefing and dive into the main changes of the revised Regulation.

Signs of Commission’s Verticals Focus Emerge in VBER Evaluation Document

by Becket McGrath, Sarah Long and Aakash Kumbhat

On 8 September 2020, the European Commission (‘the Commission’) published the results of its evaluation of the Vertical Block Exemption Regulation (‘VBER’) and associated guidelines in the form of a Staff Working Document

The 232 page document summarises evidence received by the Commission from businesses, their advisers, consumer bodies and national competition authorities (‘NCAs’) in response to its consultation on the operation of the current vertical agreements regime.  It also takes account of the findings of the Commission’s E-commerce sector inquiry, which ran from 2015 to 2017, and a detailed ‘evaluation support study’ that was conducted by external consultants.  Although the document is primarily concerned with pulling together the wide-ranging views received through this process, which has been running since 2018, it does contain some broad conclusions and an indication of its priorities for updating the verticals regime.

To read the full note, click here.

Euclid Law is delighted to be sponsoring the Junior Competition Conference (JCC) to be held at the Competition Appeal Tribunal today (10 May 2019)

This year’s conference topics will focus on competition litigation and vertical agreements, which are both highly relevant given the recent developments in national courts throughout Europe and the European Commission’s review of the Vertical Block Exemption Regulation. The opening speech will be given by Sir Peter Roth, President of the Competition Appeal Tribunal.