Publication of the European Commission's conclusions on the evaluation of the Vertical Block Exemption Regulation

European Commission report of 8 September 2020, SWD (2020) 172 final

On 3 October 2018, the European Commission launched a review of EU Regulation 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 (the "Block Exemption Regulation") and the Guidelines on Vertical Restraints. It sought to verify how well they are enforced, ahead of the expiry of the current Block Exemption Regulation which will take place on 31 May 2022.

The European Commission has just published the findings of its evaluation on 8 September 2020. Below are the key points.

First, it states that the assessment showed that the Block Exemption Regulation and the Guidelines on Vertical Restraints are still relevant, as they are useful tools that facilitate self-assessment by businesses of the vertical agreements they enter into, thus contributing to reducing the cost of compliance.

The Commission however notes that the Block Exemption Regulation and the Guidelines are no longer fully aligned with the current business environment, in particular the increasing digitalisation of the economy (the online sales boom and the arrival of new players such as the marketplaces since 2010). Some of the current provisions are only adapted to traditional supply and distribution patterns.

The Commission observes that suppliers are increasingly resorting to new vertical contractual restrictions in order to better control the distribution of their products, as the rise of e-commerce has led to increased price transparency. It notes in particular the increase in:

• restrictions on the use of price comparison sites and marketplaces;
• retail price parity clauses;
• restrictions on online advertising.
  
  

The Commission concludes that there is currently a lack of guidance on how to assess these new restrictions and that this needs to be remedied.
In addition, the Commission underlines dysfunctions in the regulation that are not necessarily linked to the evolution of the market, due to a lack of clarity and excessive complexity of applicable rules. This concerns in particular:

• certain hardcore restrictions such as resale price maintenance and parity clauses,
• or certain distribution patterns, mainly commercial agency and franchising.

Companies are therefore placed in a situation of legal uncertainty and face increased costs of compliance with competition law.

The Commission also highlights the risk of diverging interpretations of the rules applicable to vertical agreements by different national competition authorities and courts across the Union. Diverging interpretations would diminish the benefits of the rules (which are supposed to provide legal certainty to the stakeholders).

The Commission has therefore announced that it will launch an impact assessment in the coming weeks to examine the problems identified during the evaluation. A public consultation on the initial impact assessment is planned for the end of this year, before the publication of the draft revised exemption regulation, scheduled for next year.