In July we reported that the European Commission had published its proposals for updated distribution rules, consisting of a revamped Vertical Block Exemption Regulation (VBER) and Guidelines on Vertical Restraints (available here). The consultation closed on 17 September, with the new rules due to be finalised in time to enter into force on 1 June 2022. You can find our full response to the consultation here. We have set out below a summary of some of the key points from our response.
The development of modernised guidance on the application of the vertical restraints legal framework to the new business models of the digital economy is an important and welcome aspect of the proposals. We commend in particular the apparent intention of the proposals to exclude the application of resale price maintenance (RPM) rules to suppliers’ setting prices and other terms when selling their products via online platforms.
However, the proposals are unsatisfactory in their current form in the way that they deal with platforms that provide online intermediation services (OIS) in two specific respects, namely that such providers:
- are excluded from classification as “agents” for the purposes of Article 101; and
- to the extent they are “hybrid” in nature, cannot ever benefit from block exemption for their dual distribution arrangements.
Exclusion of OIS providers from classification as “agents”
Such exclusion is contrary to EU Court jurisprudence, and the statement in the draft guidelines that OIS providers do not qualify as agents “for the purpose of applying Article 101(1)” is therefore legally incorrect. EU Court jurisprudence suggests that any undertaking – and there is no reason to exclude OIS providers - can be an agent if it fulfils the relevant criteria. Assessment should therefore be carried out on a case-by-case basis, as indeed a number of NCAs have called for. Other justifications given in the draft guidelines as to why OIS providers can never qualify as agents are unconvincing and in any case they generally refer to issues of fact that should be considered on a case by case basis. The guidelines should therefore instead confirm that OIS providers can in certain circumstances be genuine agents, and set out what the relevant factors are.
Classification of OIS providers as “suppliers”
The draft proposals categorise OIS providers as suppliers; and the draft guidelines assert that this means that they cannot simultaneously be viewed as buyers in relation to the transactions they facilitate. This appears to exclude the application of the RPM hardcore restriction to firms selling their products via online platforms, given that this restriction by definition can only apply to RPM imposed on buyers who are reselling products. We welcome this modification of the vertical restraints legal framework. However, given the importance of this rule, we think it should be expressly spelled out. Acknowledging this interpretation of the draft regulation will go a long way towards providing firms active in the online platform economy with legal certainty, which is the general purpose of the block exemption regulation.
No block exemption for hybrid OIS providers engaging in dual distribution
The absolute exclusion of hybrid OIS providers (those that both provide intermediation services and also sell goods or services in competition with their users) from the benefit of block exemption is unnecessary, not least because it denies the benefit of the safe harbour even to smaller hybrid companies. It may be that this absolute exclusion is inspired by the equation of hybrid platforms with digital gatekeepers, the latter being a concept from the draft Digital Markets Act which has been carried over into the present proposals, but there is no justification for categorically excluding and therefore disadvantaging smaller OIS providers.