Internet Sales Under the New Vertical Agreements Block Exemption

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Internet sales under the new EU Vertical Agreements Block Exemption - What is new and what remains the same?

Table of contents:

1.The Vertical Agreements Block Exemption1

1.1A New Regulation1

1.2Internet sales under the Old Guidelines2
1.2.1Internet sales were passive sales2
1.2.2Certain selection criteria were allowed3
1.2.3Objective justification criteria4
1.2.4Quality Standards4

1.3What is new?5
1.3.1Market threshold5
1.3.2Hardcore restrictions6
1.3.3Changes relevant to online sales6

1.4Observations8

2.Analysis9

2.1Background9

2.2General issues10

2.3The Commissions aim and specific Distribution Networks12 2.3.1Issues for selective distribution networks12
2.3.2A Balance for Pure Internet Resellers?16
2.3.3Exclusive Distribution17

2.4Concluding Remarks19

Bibliography:21
The Vertical Agreements Block Exemption

1. A New Regulation

The European Commission (‘Commission’) adopted on April 20, 2010 Regulation No 330/2010 (‘New Regulation’); this document enumerates a number of conditions that need to be met by vertical agreements to be exempt from the prohibition on anticompetitive agreements set out in Article 101(1) of the Treaty on the Functioning of the European Union (‘TFEU’), (formerly known as Article 81(1) of the EC Treaty). In addition, the Commission also adopted a new set of guidelines created to assist legal practitioners and users in the assessment of compatibility required by Article 101 TFEU regarding vertical agreements (‘New Guidelines’). Both norms will be valid for a period of twelve years, replacing as of June 1, 2010, the previous regulation (‘Old Regulation’) and previous guidelines on vertical restraints (‘Old Guidelines’). Together, these rules provide a safe harbour for those vertical agreements that fall within their framework. In other words it could be said, that the Agreements drafted within the Block Exemption’s framework will not cause (from an antitrust policy point of view) significant competition concerns as they enjoy a rebuttable presumption of not being anticompetitive. However, as it will be explained in this article, this safe harbour applies only below certain market share thresholds provided that the agreement does not include any seriously anti-competitive (‘hardcore’) restrictions. The New Regulation and New Guidelines are therefore key pieces of legislation regulating the distribution of goods and services around the EU. They allow legal practitioners to better understand the balance between commercial concerns and competition law policies. Finally it must be noted that agreements falling outside the New Regulation are not automatically void but require individual examination under the New Guidelines to establish whether they merit a so called individual exemption from Article 101(1).

Article 9 of the New Regulation provides a one year grace period for agreements currently in force which do not meet the conditions for exemption under the Block Exemption but which have already met the conditions for exemption under the Old Regulation. The grace period technically does not apply to any new rules contained in the New Guidelines reflecting innovations in the Commission’s antitrust policy. Specifically relevant to this particular topic might be the clarification of the admissible restrictions to internet sales and advertising that are presumed to constitute hardcore restraints (see below).

2. Internet sales under the Old Guidelines

Considering the Old Regulation was drafted in times when online sales where only a small part of the retail industry, it is understandable that it was silent on the issue. The somewhat ancillary importance of internet trade at the time is however highlighted by three paragraphs of the Old Guidelines. The Commission’s policy on internet sales was basically not to create a separate distribution category and to apply the same block exemption and hardcore...
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