The most hotly debated issue raised by the European Commission’s draft revised EU distribution rules published in July 2021 was probably the competition law treatment of dual distribution, and in particular information exchange between the parties to dual distribution arrangements (see our post here).
“Dual distribution” refers to an arrangement where a supplier sells goods or services not only at the upstream level but also at the downstream level, thereby competing with its independent distributors. In this context the Commission in July proposed to amend its Vertical Block Exemption Regulation (VBER) and Vertical Guidelines (VGL) to:
- exclude all information exchange from the benefit of the block exemption for dual distribution, unless the parties’ aggregate retail market share was below 10%; and
- provide guidance on the legal analysis of such information exchange not in the VGL, but rather to later include such guidance in its horizontal cooperation rules.
Many stakeholders including ourselves asked the Commission to reconsider this approach (see responses and our post), and we therefore warmly welcome the Commission’s constructive response to this feedback, shown by the draft new section of the VGL which it put out for consultation on 4 February 2022.
In particular we welcome the inclusion in the consultation draft of:
- clarification that the new VBER will cover exchange of information between suppliers and buyers that is necessary to improve the production or distribution of the contract goods or services by the parties, and that this will apply to dual distribution;
- a number of helpful concrete examples of legitimate information exchange and also exchanges that may be problematic; and
- recognition that technical or administrative measures such as firewalls can effectively minimise the risk that the information exchange will raise horizontal concerns.
Finally, although this is not completely clear from the consultation document, it appears that the 10% retail market share threshold previously introduced in the draft VBER has been abandoned. This would be very welcome, as the new 10% threshold introduced unnecessary complexity and significant practical difficulties to the distribution rules.
The deadline for responses to this consultation in 18 February, in order for the Commission to be able to have its new distribution rules enter into force on 1 June 2022.