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Distribution Agreements in the EU: Changes After VBER and Accompanying Guidelines are Revised

The EU’s Vertical Block Exemption Regulation (VBER) allows suppliers in certain cases to restrict active sales. The VBER and accompanying Guidelines on Vertical Restraints of the European Commission (Guidelines), dated from 2010, are currently under evaluation, with the EU Commission having published its long-awaited Draft VBER and Draft Guidelines on 9 July 2021. The VBER and Guidelines needed to be revised given the growth of online sales and shifts in consumer behaviour across the EU.

Exclusive and Selective Distribution: Significant Changes for Businesses

With exclusive distribution, a supplier grants a territory or a customer group exclusively to one distributor. The Draft VBER still allows active sales (i.e., use of advertisements and promotions) and prohibits passive sales (i.e., responding to unsolicited requests or orders from individual customers). In addition, the draft introduces a new concept of “shared exclusivity,” which means that exclusivity also can be granted to two or more distributors who in turn will benefit from the same protection under the VBER. Under the Draft VBER, suppliers also are allowed to “pass on” active sales restrictions to the exclusive distributor’s customers. Furthermore, the Draft VBER explicitly allows the restriction of active and passive sales by an exclusive distributor to unauthorized distributors into a territory where the supplier operates a selective distribution system – which restriction can also be passed onto the customers. This shows a more flexible approach towards the co-existence of multiple distribution structures.

With selective distribution, a supplier sells goods or services only to selected distributors (and retailers) based on specified criteria. These distributors in turn do not sell such goods or services to unauthorised distributors (or retailers) within the territory reserved by the supplier. The current VBER prohibits geographic restrictions on all levels in a selective network. The Draft VBER, however, allows active sale restrictions by selective distributors or the exclusive distributor’s customers into an exclusive territory or customer group. Also, under the Draft VBER, the supplier could restrict a selective distributor’s customers from making active or passive sales to unauthorised distributors located in the selective distribution territory, and these restrictions can now be extended (“passed on”) to the selective distributor’s customers. As online distributors and brick-and-mortar distributors have different characteristics, the Draft Guidelines no longer require selective suppliers to impose the same or equivalent criteria to these distributors, as long as these restrictions do not, directly or indirectly, aim to prevent buyers or their customers from selling their goods or services online.

There is no explicit reference contemplated as regards passive sales and public procurement; addressing this would provide more clarity at the EU level as to tendering procedures. A procurement procedure should always be considered as permitted passive sales (see our previous blog post on this issue, Vertical Agreements: Permitted Passive Sales and Public Procurement in the EU) given the intent of the public procurement regulation in Europe. After all, a procurement procedure is a call for competition that should ensure equal treatment and where every bidder should have an equal chance to make an offer.

Parties should consider preparing to adjust their existing distribution agreements in the EU to fully benefit from the new regime once the final version of the new VBER is adopted.

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XI, Number 312
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About this Author

Hans Urlus, Greenberg Traurig Law Firm, Amsterdam, Corporate and Litigation Law Attorney
Shareholder

Hans Urlus coordinates inbound and outbound investments with respect to China and counsels international clients in all aspects of international trade, commercial agency, franchise and distribution, with a focus on EU and national competition law, EU regulatory issues, mergers and acquisitions. He is also involved in litigation and arbitration in relation to these matters. Hans has worked in the regulatory field, including numerous cases involving the introduction of various regulated products into the EU market, and heads the German desk of the firm's Amsterdam office...

3120-301-7324
Ellen de Jong - Van den Bogaard Corporate Attorney Greenberg Traurig Netherlands
Senior Associate

Ellen de Jong - Van den Bogaard represents clients in mergers and acquisitions, and advises on a variety of corporate matters. Ellen has more than 15 years of experience in the legal market and advises on European and Dutch procurement law and contract law. She focuses on the formation of contracts and disputes related to the performance of these contracts.

 

+31 20 301 7412
Chazz Sutherland Corporate Attorney Greenberg Traurig Amsterdam
Associate

Chazz Sutherland is a member of the Corporate Practice in Greenberg Traurig's Amsterdam office. She focuses her practice on virtually all aspects of international trade, commercial agency, franchise and distribution, with a focus on EU and national competition law and EU regulatory issues, corporate transactions, and commercial contracting.

Chazz holds an LL.M. degree in commercial and corporate law from the University of Maastricht. She also studied international taxation and intellectual property law during an exchange program at York...

+31 20 301 7448
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