What?
As explained in previous Countdowns (see DLC Countdown 12, DLC Countdown 13 and DLC Countdown 14), the notions of “active selling” (actively soliciting individual customers) and “passive selling” (responding to unsolicited requests from individual customers) are central in the world of vertical agreements.
In principle, buyers should have the freedom to sell both actively and passively as they see fit. Therefore, under the Regulation on the Exemption of Vertical Agreements (the “VBER”), restrictions on the territories into which, or the customer groups to which, the buyer may sell are generally considered hardcore restrictions and are prohibited. However, there are limited exceptions to these hardcore restrictions, particularly aimed at protecting exclusive and, to a lesser extent, selective distribution systems.
Now?
Under the current VBER regime, an exclusive distributor is protected against active selling. This means that distributors outside the exclusive territory or customer group may not actively pursue sales into the exclusive territory or to the exclusive customer group assigned to the exclusive distributor.
This also applies to hybrid distribution systems. Although selective distributors may not be restricted as to the customers to whom they sell (Article 4(c) VBER), the Vertical Guidelines (Guidelines) confirm in paragraph 56 that a supplier may prohibit its selective distributors from actively pursuing sales in territories where the supplier has appointed an exclusive distributor.
The future as of 1 June 2022?
Where exclusive or non-exclusive and selective distribution systems exist in parallel, the new VBER framework establishes rules that protect these systems against encroachment by exclusive, non-exclusive or selective distributors respectively (the “reverse protection system”).
In practice?
To illustrate: a supplier of watches may have established an exclusive distribution system in Member State A (in which exclusive distributor A is appointed), while operating a selective distribution system in all other Member States. The supplier can oblige exclusive distributor A (as well as all of A’s customers) not to actively sell to, or respond to unsolicited requests from, unauthorised distributors in the other Member States (new Article 4(b)(ii)). In this way, selective distributors are protected from sales to unauthorised distributors operating in their territories.
Assessment?
Draft Article 4(c)(1) mirrors draft Articles 4(b)(ii) and 4(d)(ii), which allow companies to establish EU-wide hybrid distribution systems that more effectively meet the actual needs of their businesses.
Want to know more? Stay tuned…
Leading up to 1 June 2022, we aim to provide you with regular updates and the necessary legal know-how to prepare your business fully for the future. Also, have a look at the Distribution Law Center platform and our LinkedIn page for much more information on the laws governing vertical agreements, both in the field of competition law and commercial law.
Read the available DLC Countdown newsletters on upcoming changes here.
