European Commission Adopts Antitrust Rules for Supply and Distribution Agreements for the Next 12 Years

On 20 April 2010, the European Commission adopted a reviewed Vertical Restraints Block Exemption Regulation (VBER) and attached Guidelines. The VBER automatically exempts certain supply and distribution agreements from the prohibition of anticompetitive agreements under Article 101(1) of the EU Treaty. The current VBER was adopted in 1999 and will expire on 31 May 2010.

Under the old VBER, in order to qualify for an automatic exemption, the supplier’s market share must be lower than 30 percent. In the new VBER, this prerequisite equally applies to the buyer's market share. If both parties fulfill the threshold requirement, and certain criteria are met, the agreement is presumed to be antitrust compliant. The VBER Guidelines set out these criteria in further detail.

In the revised rules, the Commission takes account of market developments in the past decade, most notably the appearance of the Internet as a sales channel and concentration trends in certain distribution markets. Consequently, the main amendments address the new buyer's market share threshold and the issue of online sales and here, in particular, within exclusive and selective distribution systems.

With regard to online sales, the VBER Guidelines introduce language on restrictions that suppliers may or may not impose on retailers. For example, the Commission clarifies that suppliers using a selective or exclusive distribution system may require a physical point of sale from their retailers before these are allowed to sell online. Any requirements that further restrict online sales or risk to discourage retailers from using the Internet are in principle prohibited.

In addition, several other changes and clarifications have been introduced, whose possible impact businesses should consider. The new set of rules will be in force until 2022, however, the Commission reserves its right for an earlier review. There is a one-year transition period to allow businesses to ensure compliance of their agreements with the new rules.