The EU Commission has approved new vertical GMOs

The EU Commission has approved new vertical GMOs

The Commission announced the achievement with the following words: "Following a comprehensive review of the 2010 rules, the European Commission today adopted the new Vertical Block Exemption Regulation (Vertical Block Exemption Regulation), complemented by the new Vertical Guidelines. The revised framework provides businesses with simpler, clearer and up-to-date rules and guidelines."

It said the new rules will make it easier for them to assess the compatibility of their supply and distribution agreements with EU competition rules in a business environment that has changed due to the growth of e-commerce and online sales.

The two revised sets of rules will come into force in antitrust law on June 1, 2022 are valid until May 31, 2034. Commission Executive Vice-President Margrethe Vestager, responsible for competition policy, describes the new rules as the result of a comprehensive review process. They would offer companies up-to-date guidance that is designed for even greater digitalization in the coming decade.And then she said: “The two sets of rules are important tools that allow all types of companies, including small and medium-sized enterprises, to evaluate their vertical agreements in their everyday business.”

The main changes to the regulations relate to the adjustment of the protected area to ensure that it is neither too broad nor too narrow. 

A restriction on the protected area in relation to dual distribution (i.e. situations in which a supplier sells its goods or services not only through independent dealers but also directly to end customers) and parity obligations, which oblige the seller to offer its contractual partners conditions that are equivalent to or better than the conditions of third-party distribution channels and/or the conditions of the seller's direct sales channels. Thus, certain aspects of dual distribution and certain types of parity obligations will no longer be exempt under the new VBER, but will instead need to be assessed individually under Article 101 TFEU.

The latter stipulates that agreements between companies that have the purpose or effect of preventing, restricting or distorting competition within the internal market are incompatible and prohibited. In short, Article 101 TFEU prohibits agreements between undertakings that restrict competition. 

The VBER exempts vertical agreements that meet certain conditions from the prohibition of Article 101(1) TFEU, thereby creating a protected area for them. 

OneExpansion of the protected area in relation to certain restrictions on the ability of a buyer to actively target individual customers (active selling) and certain practices relating to online sales, i.e. h. the possibility of charging different wholesale prices to the same retailer for products sold online and offline, as well as the possibility of setting different criteria for online and offline sales in selective distribution systems. Such restrictions will be exempt in the future under the new vertical BER, provided all other exemption requirements are met.

According to Brussels, the new VBER rules have also been clarified and simplified to make them more accessible to those who use them in their everyday business. In addition, the Guidelines provide detailed explanations on a number of topics such as selective and exclusive distribution agreements and commercial agency agreements. The Vertical Guidelines provide detailed guidance on a range of topics, including dual distribution, information sharing, dual pricing and agency contracts. 

The process of redesigning the framework for how car dealers and car manufacturers will be able to compete with each other on the market in the future took four years. In particular, Brussels has now recognized the two-track distribution – via authorized dealers and directly from the manufacturer – as problematic. According to the opinion of industry observers, this is good and also necessary, as has recently been shown by the behavior of individual manufacturers towards their contractual partners.

According to the German specialist media, the Central Association of the German Motor Vehicle Trade (ZDK), which represents the professional interests of 36,580 vehicle master workshops in Germany, reacted positively: According to an initial assessment by ZDK managing director Antje Woltermann, there are no negative surprises for the vehicle trade - on the contrary: some clarifications are even beneficial. With the new vertical GMO and its guidelines, Brussels is putting car manufacturers in their place and strengthening the car trade, according to the first assessment from the ZDK on the new vertical GMO.  

The Association of Brand Dealers (VMH) e.V. in Germany and the European umbrella organization CECRA are watching the new regulations from Brussels like a hawk. They are currently being thoroughly examined and will be commented on shortly, according to reports from Berlin.

The fact that the EU wants the agency model to be linked to strict requirements and wants direct sales to be bound to rules in the future was already apparent from a draft of the new vertical GMO presented last year.