On 9 July 2021, the European Commission published for public consultation the draft revised Vertical Block Exemption Regulation (VBER) and draft revised guidelines on vertical restraints (Vertical Guidelines). The VBER deals with vertical agreements, which are agreements entered into between businesses operating at a different level of the supply chain (e.g. suppliers, distributors etc.). It specifies that if such vertical agreements meet certain conditions, the prohibition in Article 101(1)1 of the Treaty on the Functioning of the European Union (TFEU) does not apply to them.
The current VBER – Regulation (EU) No 330/2010 – was last revised more than ten years ago. With the revision, the Commission aims to better reflect the market developments that have occurred since the adoption, such as the growth of online sales and the increased presence of online marketplaces. As Ecommerce Europe’s members act as buyers, sellers, and resellers to end consumers and other businesses through online and omnichannel sales channels, the VBER and its Vertical Guidelines provide an important framework for the vertical agreements between them and the suppliers.
The rise of omnichannel business models
In the last years, and even more so following the outbreak of COVID-19, the retail landscape is increasingly merging online and offline business models, with a steep increase in the emergence of omnichannel businesses. Ecommerce Europe is concerned that the proposed VBER revision makes a strict separation between online and offline sales, and that it seems to insufficiently take into account the convergence of sales channels. Additionally, the proposed changes appear to be skewed in favour of brands and suppliers and give them increased control over the distribution chain and the pricing of products and services. Ecommerce Europe would, therefore, argue that for each of the changes it should be considered whether they serve the two objectives of the VBER:
to exempt vertical agreements that are not harmful to competition but provide efficiency gains;
to provide legal clarity and certainty, allowing undertakings to assess on their own whether the requirements of an exemption are fulfilled.
Key changes
Ecommerce Europe identified several changes in the proposed revision that would strongly impact the ecommerce sector. The first significant modification is the revision of the rules for dual distribution, which refers to the situation in which a supplier uses distributors for the distribution of goods or services, but also uses its own distribution channel to sell directly to the end-user. Dual distribution is currently covered by the VBER safe harbour. In the new draft, vertical agreements in a dual distribution system would still be exempted when the combined market share of the supplier and the distributor in the relevant market at retail level does not exceed 10%. When the joint market share exceeds 10% in the relevant market at retail level, but the market share threshold is below 30%, there would be a limited safe harbour, covering all aspects of the agreement, except for information exchanges between the parties – this would have to be assessed in the context of horizontal exchanges under the Horizontal Guidelines.
Ecommerce Europe has urged the Commission to consider the growth of online direct-to-consumer (D2C) sales by manufacturers and brands – and to ensure that information that is exchanged between a distributor and supplier in a dual distribution context cannot be used by the supplier to boost its own direct sales.
The second relevant change in the VBER rules would affect hybrid platforms, namely those companies that offer not only intermediary services but also sell products and services, which now would no longer be included in the exemption. As a justification for the new provision, the Commission claims that hybrid platforms are not comparable with the model of dual distribution, and their activities affect inter-brand competition. However, Ecommerce Europe believes there is no ground for differential treatment of these platforms compared to other dual distributors. First, vertical agreements with hybrid platforms are just as likely to create efficiencies as other dual distributors. Second, the blanket provision withholding the safe harbour is not justified, because ‘hybrid’ is not a criterion which by itself gives rise to competition concerns. It seems disproportionate to implement a blanket provision without considerations for size, market share, characteristics of the agreements, characteristics of the market etc.
Third, Ecommerce Europe is concerned about the revision in the new Draft Guidelines allowing dual pricing. This means that suppliers would be allowed to set different wholesale prices for online and offline sales by the same distributor, as long as this price difference is related to the differences in the costs incurred in each channel by the distributors at retail level. This provision raises concerns over the possibility that it would promote offline retail only and could lead to higher prices for goods bought online, which would disadvantage consumers as well as online sales channels. Furthermore, the update of the VBER does not seem to take into account the development towards an increasing number of omnichannel businesses – for instance, SMEs that during COVID-19 migrated parts of their business online to survive and reach new consumers.
For more information, Ecommerce Europe’s full consultation reply can be found here.
This editorial was first published in our Cross-Border Payments and Ecommerce Report 2021–2022, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally.
About Maike Jansen
Maike Jansen is Public Affairs Advisor for Ecommerce Europe, where she handles a broad range of regulatory topics that are relevant for the digital commerce industry, including consumer rights, contract law, data protection and (e-)privacy, product safety, platform-related legislation such as the Digital Services Act & Digital Markets Act, competition rules, and other broader issues such as the rise of seamless commerce (omnichannel retail).
About Ecommerce Europe
Ecommerce Europe is the sole voice of the European Digital Commerce sector. As a result of joining forces with EMOTA, Ecommerce Europe now represents, via its 24 national associations, more than 150,000 companies selling goods and services online to consumers in Europe.
1. Article 101(1) TFEU: ‘The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market …’
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