Almost two years of the Vertical Block Exemption Regulation and other topics from the world of distribution antitrust law

Although it is almost two years old, the Block Exemption Regulation on Vertical Agreements (“Vertical Block Exemption Regulation”), which was updated in May 2022, and the associated guidelines continue to raise issues in distribution antitrust law. Vertical agreements between companies at different stages of the production or distribution chain are exempted from the prohibition of cartels under the conditions of the Vertical Block Exemption Regulation (safe harbour). In particular, innovations in online sales and distribution, online trading platforms and hybrid platforms, as well as the sharing of information in dual distribution, give rise to a particular need for advice in practice, as already described in our Competition Outlook 2023. We expect this to remain the focus in 2024. Although the Vertical Block Exemption Regulation and Vertical Guidelines already contain helpful information clarifying the aforementioned topics compared to the previous versions, which are no longer valid, there are some pitfalls that are not obvious at first glance and that can quickly lead to a breach of antitrust law and should be avoided. However, there is also room for manoeuvre which can or should be used when designing a distribution model.

In addition, the Super Bock Bebidas decision (case C-211/22) given by the European Court of Justice on 29 June 2023 should be highlighted (see our Noerr News). The case concerned the question of whether a supplier setting a minimum price for resale by its customers should always be regarded as a restriction of competition by object. Such price fixing is a “hardcore restriction” within the meaning of the Vertical Block Exemption Regulation, and therefore such an agreement is excluded from the safe harbour of the block exemption. However, it must be examined on a case-by-case basis whether it restricts competition by object or by effect.

The European Court of Justice has clarified that the category of “hardcore restriction” cannot be equated with the category of “restriction of competition by object”. If an agreement is a restriction by object, a competition authority no longer has to review and prove adverse effects on the market in order to establish that there is an infringement of the prohibition of cartels. This significantly reduces the effort required by the competition authorities to investigate the matter. However, according to the European Court of Justice, classifying a restriction as a restriction by object is justified only in exceptional cases. The mere fact that an agreement constitutes a hardcore restriction does not release the competition authority from its duty to prove that there has been an infringement of EU competition law. The competition authority must take into account the specific circumstances of each case in order to be able to presume a restriction by object. It is true that this decision has increased the burden of proof for the authorities. However, it should not be seen as an open invitation to engage in vertical price fixing, the prosecution of which is a priority for many competition authorities and is likely to remain so.

This article is part of the Competition Outlook 2024. You can find all Competition Outlook articles here.