Implications of the New Vertical Block Exemption Regulation for e-commerce operators

Spain European Union
The New Regulation introduces a specific regime for online intermediation services
Implications of the New Vertical Block Exemption Regulation for e-commerce operators
April 11, 2023

On May 10, 2022, the European Commission adopted the new Vertical Block Exemption Regulation (2022/720) (“New VBER”), which entered into force on June 1, 2022, together with the new Guidelines on vertical restraints approved on June 28, 2022.

E-commerce is a key focus of the New VBER due to its significant expansion under the application of previous Regulation (330/2010) and the rise of platforms. In this post we summarize the main developments in this area, and in particular the new features regarding the activity of online platforms and intermediation services.

The specific regime for online intermediation services:

Online intermediation services seek to facilitate the initiating of transactions between undertakings offering goods or services and their customers (either other undertakings or final consumers), irrespective of whether the transactions are ultimately concluded. This includes, among others, e-commerce, app stores, and price comparison tools.

Although the definition of “supplier” under article 1(1)(d) of the New VBER includes undertakings that provide online intermediation services, these are subject to a stricter regime than other suppliers.

For instance, providers of online intermediation services in a dual distribution scenario (where they also compete on the relevant market for the sale of the intermediated goods or services) will not benefit from the exemption. Therefore, distribution agreements concluded by platforms operating in the marketplace that manage their own products are not covered by the New VBER. 

On the other hand, the New VBER also establishes a stricter regime regarding the application of parity clauses—i.e., those requiring suppliers to offer better conditions (i) to a customer than to any other distribution channel; or (ii) in direct sales through the supplier’s own website. In particular, online intermediation service providers may not prevent their customers from selling or reselling goods or services to end users under more favorable conditions via competing online intermediation services.

Restrictions on online sales:

  • Restriction on the use of the internet: under the New VBER, measures aimed at preventing the effective use of the internet by distributors or their customers to (re)sell the goods or services is a hardcore restriction.

Among other examples of these measures we can find the imposition of clauses requiring sales to be made only in physical stores; the obligation for distributors to block access to their website or the obligation to redirect the connection for customers connected from a territory; the obligation to request suppliers’ prior approval for sales; and the obligation to refuse payments made by foreign credit cards.

This also includes any indirect measures with the same effect, such as refusing or reducing discounts, threatening to stop the supply of the products or limiting the volume supplied, charging a higher price, or offering benefits to the distributor to stop online sales.

  • Restriction on the use of online advertising channels: restrictions that prevent distributors from using online advertising channels (e.g., search engines or price comparison services) may also be considered hardcore restrictions.

In this regard, the New Guidelines confirm the possibility for a provider to  restrict the ability of distributors to use certain price comparison services or search engines, provided that they are not the most used services in this channel and that there are other services capable of attracting customers to the distributor’s online store. 

However, the New Guidelines do not cover the restrictions of the ability of distributors to  use suppliers’ trademarks or brand names to position themselves in search engines, or restrictions on providing price-related information to price comparison services.

  • Restrictions on the form of online sales: the New Guidelines confirm that the following practices will be covered by the exemption under the New VBER:

-       Imposing quality or appearance requirements for distributors’ online stores.

-       Imposing requirements regarding the display of the goods in the online store.

-       Prohibiting the use of online marketplaces.

-       Requiring distributors to operate physical stores.

-       Requiring distributors to sell a minimum amount offline (not as a proportion of their total sales).

  • Dual pricing: the New Guidelines expressly allow dual pricing— i.e., setting different prices depending on whether distributors intend to resell the products or services online or in physical stores—provided that suppliers can justify the price difference based on the different levels of investment and costs applicable to each sales channel.

Withdrawal of the exemption benefit:

As usual, article 6 of the New VBER contemplates the withdrawal of the exemption under certain circumstances. Even if an agreement for the provision of online intermediation services complies with the established requirements, the Commission may withdraw the benefit of the exemption if its effects are incompatible with article 101(3) TFEU.

This would be the case, in particular, where the relevant market for the supply of online intermediation services is highly concentrated and competition between the providers of such services is restricted by the cumulative effect of parallel networks of similar agreements that restrict buyers of the online intermediation services from offering, selling or reselling goods or services to end users under more favourable conditions on their direct sales channels.

In summary, the New VBER reflects the evolution of e-commerce, considering that it no longer needs the special protection afforded under the previous Regulation. Indeed, the sector has grown from aprox. €9.2 billion in 2011 to more than €57 billion in 2021 in Spain. This historic figure is expected to be surpassed in 2022, as in the first three quarters of 2022 the sector reached a turnover of around €52.7 billion, with an all-time record of €18.9 billion in the third quarter alone.

The changes introduced by the New VBER have two main drivers, namely (i) the need to ensure that distributors have access to the online sales channel, and (ii) the desire to control the activity of online intermediation service providers.
April 11, 2023