The European Commission is seeking comments on a revised Block Exemption Regulation and Guidelines on supply and distribution agreements. Taking into account recent market developments, the main amendments are aimed at the increased buyer power of big retailers and the evolution of online sales. This addresses concerns raised by eBay recently in its campaign to outlaw online trade restraints.
Commission Block Exemption Regulation N° 2790/1999 ensures that supply and distribution agreements that comply with its provisions benefit from an exemption from the EC Treaty's ban on restrictive business practices (Article 81(1)). The current Regulation is due to expire in May 2010. The Commission's preliminary assessment of its application, based on experience and feedback from stakeholders, found that the current rules have worked well in practice.
At the time of its adoption in 1999, the Regulation aimed at reducing the regulatory burden on smaller companies with little or no market power, and at introducing an effects-based approach to the assessment of vertical restraints. These objectives and concerns remain valid today.
Two major developments have marked the ten-year period following the entry into force of the current rules: a further increase in large distributors' market power, and sales on the Internet.
To take account of these developments, the Commission proposes that for a vertical agreement to benefit from the block exemption, not only the supplier's market share (as is currently the case) but also the buyer's market share should not exceed 30%.
Regarding online sales, on the one hand there is a need to protect consumers' possibilities to purchase to their advantage across borders, which is greatly facilitated by the Internet, notes the Commission. On the other hand, the Commission believes that certain sales restrictions that aim at limiting or preventing distributors from taking unfair advantage of marketing and brand promotion undertaken by others (ie free riding) may enable consumers to benefit from better services. The Commission's suggested approach therefore refines, in the online context, the distinction, between sales made as a result of active marketing and sales made as a result of the consumer taking the initiative (ie between active and passive sales), and explains how the revised Regulation would deal with conditions imposed in relation to internet sales, such as a requirement imposed by a supplier that the distributor should have a 'brick and mortar' shop before engaging in online sales.
The Commission has invited interested third parties to comment by September 28, 2009. The consultation covers all issues dealt with by the Regulation and the Guidelines, but the Commission seeks in particular comments on the overall functioning of the current rules, the extent to which recent market developments should impact on the Regulation, and the Commission's suggested approach concerning buyers' market power and restrictions on online sales.
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