What?
Digitalisation and technological innovation have been at the centre of development in the modern world over the past decade. Online marketing and sales have become an increasingly powerful tool to reach different customers. In line with this, online promotions have received more attention compared with 2010, when the current Vertical Block Exemption Regulation (the “VBER”) was introduced. In the draft VBER and the Vertical Guidelines, the European Commission has reviewed the rules relating to online promotions and added some useful clarifications.
What’s next?
The terms “active sale” and “passive sale” are classic concepts in the world of distribution agreements. According to Article 4 of the current VBER, imposing restrictions on passive sales constitutes a hardcore restriction. Therefore, restrictions on passive sales cannot benefit from the safe harbour of the VBER and are also presumed ineligible for an individual exemption. The same applies to restrictions on active sales, with limited exceptions. In particular, the block exemption regime accepts that distributors must refrain from active sales into the territory or to the customer group assigned to an exclusive distributor or reserved exclusively for the supplier.
The future as of 1 June 2022?
The main principles regarding active and passive selling are expected to remain unchanged under the draft VBER and Vertical Guidelines. However, the proposals include amendments to the definitions of active and passive sales, including with respect to online promotions.
In practice?
The rules on restrictions of active and passive sales remain largely unchanged. However, the definitions of active and passive sales are now set out in the draft VBER and have been clarified, particularly in relation to online promotions. Notably, the definition of active sales has been updated to clarify that active sales are the “catch-all” category (i.e. all sales that are not passive sales are considered active sales) and that this category expressly includes certain online sales which were not previously mentioned but which have gained significance in the past decade.
Assessment?
In the EU, customer and territorial restrictions are generally regarded as hardcore restrictions of competition under Article 101(1) TFEU. Given the objective of the single market, this approach will remain unchanged under the new VBER, which will elevate the definitions of active and passive selling from soft law to hard law, while updating them to include contemporary examples of online promotions. This clarification will be helpful to avoid disputes about whether specific online promotions qualify as active or passive selling.
Want to know more? Stay tuned…
Leading up to 1 June 2022, we aim to provide you with regular updates and the necessary legal knowledge to prepare your business fully for the future. Also, take a look at the Distribution Law Center’s platform and our LinkedIn page for much more information on the laws governing vertical agreements, in both competition and commercial law. Twenty-seven specialised teams from across the EEA are working hard to make this platform your go-to source of guidance and information.
