The European Commission’s long-awaited draft revised Vertical Block Exemption Regulation (VBER) and Vertical Guidelines were published earlier this month. A number of changes to the current regime are envisaged, and we will provide further updates in future but those which may be of particular immediate interest, given the broader competition law focus on platforms and digital issues, relate to online sales and the platform economy.
Since 2018, the Commission has been reviewing the VBER and accompanying Guidelines (see our previous articles here and here) ahead of their expiry in 2022. In its final report on the vertical regime, it identified a number of areas for reform; in particular, it highlighted the need to clarify how the verticals regime applies in the context of digital markets.
The new draft revised VBER and Guidelines propose a new approach to e-commerce and the online platform economy. The Commission has placed an emphasis on the importance of clarifying the rules for online businesses, acknowledging that “Undertakings active in the online platform economy enable new ways of doing business, some of which are not easy to categorise under the concepts traditionally associated with vertical relationships between suppliers and distributors in the brick and mortar environment.”
Online intermediation services
The draft Guidelines consider how best to account for “providers of online intermediation services” in the context of vertical agreements. The draft VBER defines “online intermediation services” as online services “that allow undertakings to offer goods or services to other undertakings or to end users with a view to facilitating direct transactions between such undertakings or between such undertakings and other end users, irrespective of whether and where those transactions are ultimately concluded”. This reflects language previously seen in the Platform to Business Regulation and the Digital Markets Act. Under the new regime for vertical arrangements, providers of online intermediation services will generally qualify as a supplier under the VBER. This is an important distinction, as the VBER applies differently to suppliers and buyers.
The draft VBER does not provide a safe harbour to providers of online intermediation services where they also sell goods or services in competition with undertakings to which they provide online intermediation services. The Commission explains this by reference to its view that the retail activities of “hybrid function” providers of online intermediation services typically affect inter-brand competition and may therefore raise horizontal concerns.
RPM and restrictions on buyers
The draft Guidelines state that while online intermediation service providers may incentivise the users of their intermediation services to sell goods/services at a competitive level or to reduce their prices, a provider of online intermediation services must not impose fixed or minimum sales process for transactions that it facilitates.
Reflecting the concerns expressed in recent years by competition authorities about the imposition of parity obligations by platform providers, Article 5 of the draft VBER states that the block exemption will not apply to any clause in a vertical agreement that prevents a buyer of online intermediation services from offering, selling or reselling goods or services to end users under more favourable conditions using competing online intermediation services.
Agency and online platforms
The question of whether online platforms can qualify as agents is a key topic in current competition investigations, such as the Commission’s investigation into Amazon’s use of data obtained from its marketplace. The draft revised Guidelines seek to clarify the position, stating that that because undertakings providing online intermediation services are categorised as suppliers under the VBER (see above), they do not qualify as agents in the context of Article 101. The Commission also explains its view that providers of online intermediation services will not generally qualify as agents because:
- They usually act as independent economic operators and not as part of the ‘economic undertaking’ of the sellers to which they provide online intermediation services;
- They often serve a large number of sellers in parallel, which prevents them from effectively forming a part of any of the sellers’ undertakings; and
- They typically make significant market-specific investments, for example, in software, advertising and after-sales services, indicating that they bear significant financial or commercial risks associated with the contracts negotiated on behalf of the sellers using their online intermediation services.
Online marketplaces and price comparison tools
Reflecting judgments such as Coty and Asics (German Federal Court of Justice), the draft Guidelines contain an entire section dedicated to online marketplace restrictions. This explains that restrictions on the use of online marketplaces that do not amount to an outright ban on internet sales will usually benefit from the safe harbour of the VBER. However, if the market share thresholds are exceeded, other factors must be considered (e.g. the type and scope of the restrictions and degree of inter-brand competition in the relevant market) to assess whether online marketplace restrictions are likely to give rise to anti-competitive effects.
Similarly, restrictions on the use of price comparison tools(e.g. requirements that a price comparison tool must meet certain quality standards) which fall short of prohibiting their use, will generally benefit from the block exemption as they are unlikely to restrict sales to customers in a specific territory or customer group. However, a restriction that directly or indirectly prevents a buyer from using price comparison tools is likely to dampen competition, and so will generally fall outside the “safe harbour” of the VBER.
What’s next for verticals?
The review process is far from finished; at the same time as publishing the draft revised VBER and Guidelines, the Commission launched a public consultation inviting all interested parties to comment on the proposed changes. It also remains to be seen whether the CMA’s concurrent review of the verticals regime will result in similar changes to those proposed by the Commission, but if the CMA’s previous comments on the VBER are anything to go by, it is likely that any new rules published by the CMA will provide further clarification the position in relation to digital platforms.
This article was also published in Lexis®PSL TMT on 8 September 2021.