Competitive Edge: Competition & EU law news - October 2020

Welcome to this special edition of Competitive Edge. This month we are diving into the Vertical Agreement Block Exemption Regulation. Our main article summarises the Commission’s Evaluation of the Regulation and looks at what’s in store in the coming years. We have also put together handy snapshots of where the law currently stands on key topics, such as online advertising restrictions and dual pricing.

Grab of cup of coffee and enjoy this special edition. As always, we welcome any comments and feedback on the contents of this newsletter.

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In Focus 

The future of the VBER

The current Vertical Agreement Block Exemption Regulation has been in force since 2010, a mere ten years. Yet it is hard to think of another decade in which the commercial landscape has changed as dramatically. On the back of its final report on e-commerce in 2017, and a public consultation, the Commission published its evaluation of the VBER on 8 September 2020. In this article, we distil the evaluation and look ahead at the changes to come. 

Read more >

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Bird & Bird news

• Speaking engagements & webinars & events

• Our Dutch office wins Diverse Partnership award  

• Head of our Brussels office selected as "Litigation Star" by Benchmark Litigation Europe 

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Updates from our jurisdictions

Territorial Restrictions

Brand owners cannot use intellectual property rights to restrict cross-border sales of goods in the EU

The Commission has recently found that Nike, Sanrio and NBC Universal's non-exclusive distribution agreements of IP protected merchandise included territorial restrictions in breach of Article 101 TFEU. The anti-competitive practices included direct and indirect restrictions of out-of-territory passive, active and online sales within the EU.

These decisions make clear that IP rights cannot serve as a vehicle to introduce unjustified territorial restrictions to the distribution of branded merchandise within the EU.

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For more information contact José Rivas.

Pricing Restrictions

Retail price maintenance - a summary

The European Commission concluded in its 2017 Final Report on the e-commerce sector that pricing restrictions are generally the most widespread contractual restrictions. Manufacturers and retailers have been using pricing restrictions or recommendations in response to increased online price competition and as a result infringing competition law and risking heavy fines. 

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For more information contact Vojtech Chloupek.

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Online Advertising Restrictions

Restrictions on online advertising through Adwords can constitute infringements of competition law

Restrictions between vertical undertakings on online advertising such as Adwords can constitute infringements of TFEU article 101 (1), if the restrictions deprive the restricted undertakings’ ability to sell their products online.

The Commissions’ evaluation and continuing consultation process is expected to lead to more clarity on this issue. This update sets out the recent case law which has touched upon this issue. 

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For more information contact Morten Nissen.     

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Selective Distribution

The issues to be tackled by the new VBER in relation to selective distribution

Selective distribution systems are exempted from the application of Article 101(1) of the TFEU if certain conditions laid down in the Vertical Block Exemption Regulation ("VBER") are met. During the process of reforming the VBER, it has been suggested that developments in European Court of Justice ("ECJ") case law such as Coty (C-230/16) should be reflected and expanded upon in the revised VBER.

In Coty, the ECJ amended its earlier stance and stated that luxury brand owners can use the protection of the luxury image of their products as the sole justification for implementing a selective distribution system. However, the different interpretations of Coty have led to uncertainty regarding the lawfulness of banning sales on third-party platforms with respect to products other than luxury products. The European Court of Justice will have the chance to clarify to issue when it responds to a reference for a preliminary ruling in Visma (C-306/20). 

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For more information contact Päivi Tammilehto.

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Marketplace Bans

Ban of sales through marketplaces: further clarifications would be welcome

At a time when competition authorities are increasingly concerned about the growing importance of platforms in the digital economy, the possibility for suppliers to prevent distributors from reselling goods through marketplaces has revealed a difference of views among the competition authorities of certain Member States and the Commission. In its Coty judgment, the ECJ sided with the Commission and confirmed that a ban on sales via marketplaces does not raise concerns if parties’ market shares do not exceed 30 % and could possibly be acceptable even above this threshold.

In the context of the consultation launched by the Commission on the evaluation of the Vertical Block Exemption Regulation ("VBER"), many stakeholders have called for better guidance on the assessment of marketplace restrictions. In particular, it remains unclear whether marketplaces restrictions are lawful above the 30 % market share threshold outside selective distribution systems and for goods other than luxury goods. It is hoped that the Commission will provide more guidance in the revised version of the VEBR and its accompanying guidelines. 

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For more information contact Thomas Oster.

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Dual pricing and dual distribution 

The German perspective

The EU Commission has confirmed in its recently published Evaluation that it is assessing the competitive effects of dual pricing and dual distribution. Following the significant growth of online sales, these practises have also been a focus of the German Federal Cartel Office (“FCO”).

The German FCO has looked at the anti-competitive effects of dual pricing systems. In its view, they can constitute an inadmissible hardcore restriction under Article 4 (b) VBER. As far as dual distribution systems are concerned, the FCO has looked at the extent to which online hybrid platforms (Hybridplattformen) are covered by the cartel prohibition exemption pursuant to Article 2 (4) VBER

Read more >

For more information contact Marcio da Silva Lima.

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Data Sharing

Big data in verticals - the next big investigation in Hungary?

Issues around Big Data and access to data as an essential input are rapidly gaining importance in vertical relationships. This was made clear in the Commission’s recently published evaluation of stakeholder input in the context of the review of the VBER.

In the past, the Hungarian Competition Authority ("GVH") focused on the horizontal aspects of data sharing and information exchange, and, naturally, as part of hard-core vertical restrictions by object. It may not take the GVH long, however, before it digs deeper into the issue of data sharing especially in the wake of data-driven markets such as FinTech or advertising. 

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For more information contact László Zlatarov.

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Geo-blocking

The Geo-blocking Regulation: state of play and a closer look at Italy

The central purpose of the European Union is to establish an internal market that ensures undistorted competition. Market fragmentation remains a major hurdle to the achievement of such a purpose. In this context “geo-blocking” – the discriminatory practice that prevents online customers from accessing and purchasing products or services from a website based in another member state – has been a particular concern for the European Commission. To address this concern, it adopted the Geo-Blocking Regulation which prohibits unjustified geo-blocking within the internal market.

The Italian Competition Authority ("ICA") has been designated as the authority responsible for the enforcement of the Geo-blocking Regulation in Italy. In carrying out this new duty, the ICA can make use of its competence and power in the field of consumer protection against unfair commercial practices.

This assignment provides an additional enforcement tool that can be combined with antitrust enforcement action, increasing the level of consumer protection with regards to geographic restrictions/discriminations. It also grants the authority the power to carefully review current company practices to ensure compliance with both sets of rules.

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For more information contact Federico Marini Balestra. 

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Price comparison websites restrictions

The legal issues raised by the increasing use of price comparison websites

In recent years, the application of competition law to price comparison websites has been widely discussed. As the deadline for the expiration of the Vertical Block Exception Regulation ("VBER") is fast approaching, the European Commission is in the process of evaluating the need to amend and update its provisions.

There is no doubt that the appropriateness of the agreements between manufacturers and retailers that restrict the use of this type of comparison websites is one hot topic of the review of the VBER. 

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For more information contact Patricia Liñán.

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Retail Parity Clauses

Retail parity or most favoured nation (‘MFN’) clauses

One of the key gaps in the current competition law framework for vertical agreements is the absence of guidance on how retail parity clauses (also known as MFN’s) should be assessed under Article 101 TFEU. In the e-commerce sector these clauses enable the online platform to require its suppliers not to offer lower prices or better terms on other platforms or on their own websites.

Over the last decade this has proven to be a hot topic, particularly as a result of various investigations by national competition authorities in the EU (“NCAs”) into the use of retail price parity clauses by online hotel booking sites. The European Commission now confirms in its evaluation of the EU Vertical Block Exemption Regulation the need for more guidance on how such clauses should be analysed in order to prevent the current divergent approach in this area by NCAs across Europe.

Read more >

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Franchising

The outlook for franchises

In the last few years, franchising has become an increasingly popular distribution structure across the EU. A franchise is a vertical agreement, and therefore should not contain any of the hard-core restrictions set out in the VBER in order to benefit from the block exemption. Nonetheless, it has specific particularities which justify tailored competition regulation. The Commission’s Evaluation contained some indication that the updated VBER will include more guidance on this unique distribution structure.

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For more information please contact Ariane Le Strat.

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How are vertical agreements regulated in Australia?

Unlike the Vertical Agreements Block Exemption Regulation in the EU, Australia's Competition and Consumer Act 2010 (Cth) ("CCA") does not regulate vertical restraints or vertical conduct through a single legislative provision or exemption.

Rather, the CCA regulates vertical agreements and conduct through a number of prohibitions in the Act, including: i) anti-competitive agreements and concerted practices (section 45); ii) misuse of market power (section 46); iii) exclusive dealing (section 47); and iv) resale price maintenance (section 48).

Read more >

For more information contact Thomas Jones.

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Speaking engagements & Webinars & Events

Dawn Raid Webinar series 

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Join one or both webinars, in which our team of international experts, with extensive experience of investigations in the fields of competition, financial services and data protection, will be sharing their top tips on avoiding the nightmares.