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The Ageing VBER – The Deceiving Simplicity of A Schema

November 8, 2016
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Competition & Anti-trust Law 2016

EXPERT GUIDE

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Expert guide: Competition & Anti-trust Law 2016

The ageing VBER the deceiving simplicity

of a schema

The EU Block Exemption Regulation 330/2010

on Vertical Agreements (VBER) is still valid

until 31 May 2022. However, when applying the

VBER to vertical agreements in practice, experience

shows that the VBER, in (seemingly)

more and more cases, proves to be too schematic

and therefore probably too old to cope

with the challenges nowadays to be faced under

EU and national Competition Law.

It shall not be forgotten that the current VBER

is already based on the experiences made with

its predecessor, the EC Block Exemption Regulation

2790/1999 on Vertical agreements.

The luring promise of the VBER remains unchanged:

Every vertical agreement falling within

its scope (including the satisfaction of the

relevant market share thresholds for the parties

to the vertical agreement) not containing the

hardcore restrictions defined in Art. 4 VBER

and the restrictions contained in Art. 5 VBER

(i.e. essentially excessive non-compete obligations)

shall be exempted from the cartel prohibition

of Art. 101 para. 1 TFEU in its entirety.

tuitive conclusion should be: A per se prohibition

for the buyer to sell the products via third

party platforms (i.e. in the internet) is a restriction

of passive sales, which is always prohibited

under the VBER. However, when studying

para. 54, sentence 6 of the Guidelines on Vertical

Restraints (Vertical Guidelines) in more

detail, it seems that a supplier may prohibit the

buyer from using third party platforms even

per se for reasons of quality. This view would

then be the final result of the application of the

VBER (and the Vertical Guidelines) to such restrictions,

exempting them from the cartel prohibition.

However, the German Federal Cartel Office

(FCO) currently interprets the VBER and the

The conditions for such an exemption from Art.

101 para. 1 TFEU as laid down in the VBER

are very schematic. It goes without saying that

some of those conditions are depending on

the vertical agreement in question difficult to

assess in practice (e.g. the question of whether

provisions concerning intellectual property

rights contain restrictions of competition having

the same object as hardcore restriction laid

down in Art. 4 VBER). Nonetheless, once this

schematic test of the VBER has been satisfied,

the parties of the vertical agreement reach the

safe harbour of a complete exemption from the

cartel prohibition. This might, however, not be

true in all cases. This paper will briefly cover

two examples where the VBER proves to be too

schematic, which of course entails significant

risks for the parties concerned.

LOOKING BEYOND THE WORDING OF

THE VBER

A current example of the VBER proving to be

too schematic is the use of clauses prohibiting

the buyer from selling the contract goods or

services via eBay, Amazon or comparable third

party platforms. When applying Art. 4 (b) (i)

VBER (or Art. 4 (c) VBER in case of a selective

distribution system) to such restrictions, the in-

Vertical Guidelines differently, stating that its

schematic application would be wrong in case

of a per se prohibition of the use of third party

platforms. The main reason for the FCOs more

restrictive view in this regard is that it aims at

protecting buyers who want to use the wellknown

third party platforms to reach more

customers for the sale of the contract products.

Arguably, this aim pursued by the FCO

goes back to the fundamental idea of Art. 4 (b)

VBER, protecting the buyers right to sell the

contract products wherever (territory) and to

whomever (customer) he likes. However, when

taking the Vertical Guidelines, para. 54 into account,

the FCOs view seems to clearly fall outside

of the scope of the VBER.

Dr. Nils Gildhoff

n.gildhoff@mhl.de

www.mhl.de

The Ageing Vber – The Deceiving Simplicity Of A Schema

By Dr. Nils Gildhoff

Germany

20 October 2016 October 2016 21

Expert guide: Competition & Anti-trust Law 2016

The European Commissions ongoing sector

inquiry in the eCommerce sector might shed

more light on this question and the need for a

different application of the VBER with regard

to such per se prohibitions regarding the use of

third party platforms.

A second example of the VBER proving to be

too schematic is its relation to horizontal aspects

of vertical agreements. Art. 2 para. 4

VBER starts with the simple decision that the

VBER does not apply to (vertical) agreements

entered between competing undertakings and

then continues by defining two exceptions from

this rule. For example, the VBER still applies to

situations of dual distribution, i.e. non-reciprocal

vertical agreements, where the supplier is a

manufacturer and a distributor of goods, while

the buyer is a distributor and not a competing

manufacturer. Provided such a vertical agreement

satisfies all conditions laid down in the

VBER, the simple consequence must be that the

exemption from Art. 101 para. 1 TFEU applies

to the vertical agreement in question as a whole.

The Vertical Guidelines support this view by

stating that any potential impact on the competitive

relationship between the manufacturer

active and passive sales by the supplier in a potential

dual distribution scenario, which seems

to be covered by the VBER, even though this

could arguably amount to a horizontal market

partitioning by territory or customer group under

Art. 101 para. 1 TFEU.

Conclusion

The straight-forward concept of the VBER of

exempting all vertical agreements from the cartel

prohibition generally has to be recognised

as a big achievement, providing a significant

amount of legal certainty in the day-to-day assessment

of vertical agreements. However, even

if all conditions laid down in the VBER are satisfied

and the concrete vertical agreement in

question does not contain any hardcore restrictions,

it might still be necessary to assess the

agreement from a more general competition

law perspective. Such an additional assessment

is not limited to the examples cited above (i.e. a

per se prohibition of sales via third party platforms,

information-exchange mechanisms or

protection from active and passive sales by the

supplier in dual distribution scenarios). Looking

into the future, it would certainly further

and retailer at the retail level is of lesser importance

than the potential impact of the vertical

supply agreement on competition in general at

the manufacturing or retail level (see Vertical

Guidelines, para. 28 emphasis added). This

cannot be correct, as the horizontal dimension

of such vertical agreements would then be ignored.

Vertical agreements might, for example,

include an information-exchange mechanism

amounting to an infringement of Art. 101 para.

1 TFEU. Therefore, if the vertical agreement

that is to be assessed contains a (more or less)

hidden horizontal cartel, the safe harbour of

the VBER has to be left for a more profound

analysis of such restrictions of competition. The

more recent Guidelines on the applicability of

Article 101 of the Treaty on the Functioning of

the European Union to horizontal co-operation

agreements might then be of more help, even

though the Vertical Guidelines do only refer to

the former in case of vertical agreements concluded

between competitors clearly falling outside

of the VBERs scope (see Vertical Guidelines,

para. 27).

Further examples could be provided in this connection,

e.g. the protection of the buyer from

strengthen the reliability of the VBERs safe

harbour promise, if such cases of uncertainty

are explicitly covered (or covered in more detail)

in the successor regime entering into force

after the expiry of the current VBER on 31 May

2022.

Dr. Nils Gildhoff has more than 10 years of experience

in the fields of German and EU competition/

antitrust law. He advises undertakings and

private individuals in the above mentioned fields

on a regular basis. His work includes the competition

law aspects of M&A transactions (notably

merger control law and compliance), cartel proceedings,

distribution agreements, cooperation of

competitors and competition law compliance. He

has experience in several industry sectors, notably

consumer products, oil, pharmaceuticals,

engineering and construction. Nils Gildhoff is

qualified as an Attorney-at-Law. From 2005 until

2011 he was a member of the competition law

team of Allen & Overy. In 2011 he joined Corinius

(since 2012 as a salary partner). In 2014 he

joined Mצhrle Happ Luther as a partner. He is

fluent in English, French and German.

Germany

The straight-forward concept of the VBER of exempting

all vertical agreements from the cartel prohibition

generally has to be recognised as a big achievement,

providing a significant amount of legal certainty in the

day-to-day assessment of vertical agreements.