European Commission publishes support studies for the evaluation of the Vertical Block Exemption Regulation (VBER)

Europe

The European Commission has published support studies for the evaluation of the Vertical Block Exemption Regulation. The key findings include that although the VBER and Vertical Guidelines remain relevant they do not sufficiently cover recent developments such as online platforms. Definitions and guidelines need to be specifically tailored to online sales. Changing consumer behaviour require these to be reviewed and updated. A staff working document is planned to be released in the second quarter of 2020.

The support studies are the next step on the road to an updated VBER and the corresponding guidelines. The current VBER will expire by 31 May 2022.

The Commission published two studies:

  1. Support Study;
  2. Study on consumer purchasing behavior in Europe.

They can be accessed on the Commission's website: https://ec.europa.eu/competition/publications/reports/kd0420219enn.pdf

We summarize below the key findings of the two studies and the roadmap to the updated VBER and Vertical Guidelines. In essence, they largely confirm the findings of the Commission's E-commerce Sector Inquiry (COM(2017) 229 final).

Key findings of the Support Study

  • VBER and Vertical Guidelines remain relevant, but do not sufficiently cover latest developments, such as online platforms. Current VBER and Vertical Guidelines lack clear definitions and guidelines specifically tailored to online sales.
  • Distribution models have evolved over the last 10 years significantly laeding to increased price transparency (online) and reduced customer search costs. Companies adapted to those developments by imposing online sales restrictions.
  • Consumer behavior changed significantly. Consumers make parallel and complementary use of various online and offline channels and information sources for a single purchase.
  • The vertical restraints most frequently reported in the last 10 years were:
    • Price restrictions (RPM, maximum and recommended resale prices);
    • Selective distribution (bans on internet sales; platform bans, price comparison tool bans, restrictions on keyword bidding, dual pricing, brick-and-mortar requirement, cross-selling restrictions);
    • Exclusive distribution (territorial restraints, cross-selling restrictions); and
    • Most-favoured nation or parity clauses (wide/narrow, retail/wholesale).
  • Most stakeholders think that (generally) selective distribution agreements should continue to be block exempted.
  • No general conclusions about the effects of narrow as compared to wide MFNs can be drawn from the data basis. Effects depend on the characteristics of the markets concerned. Nonetheless, there is an indication that the ban on narrow MFN clauses decreases hotel prices.
  • Decisions ofnational competition authorities illustrate the complexity of resale price restrictions. Vertical Guidelines should provide more clarity regarding RPM and refer to examples
  • The study includes, amongst other things, the following data which might be worth having a closer look at:
  • Tables showing the statistical frequency of certain vertical restrictions.
  • Tables summarizing the most prominent cases decided by the national competition authorities of the Member States concerning the most frequent vertical restrictions.
  • Tables giving an overview of international studies and literature concerning the most frequent vertical restrictions.

Key findings of the Study on consumer purchasing behavior in Europe

  • Apparent changes in consumer purchasing behavior are an increasing incentive to mix and match various online and offline sales channels during the customer journey.
  • Consumers who exclusively rely on one channel in the pre-purchase phase will rarely switch to another channel for buying the product.
  • Free-riding behavior is most relevant for consumers within the same type of online channel.
  • Suppliers provide new touchpoints with customers via messenger services and social commerce.
  • Increasing relevance of mobile devices for online shopping.
  • While preparing the study, the authors gathered extensive data regarding the customer journey. The data relates to the following areas:
  • Cosmetics and hair care,
  • Clothing and shoes,
  • House and garden equipment,
  • Consumer electronics and large electrical appliances.

The roadmap to the evaluation of the VBER and the corresponding guidelines

  • The current VBER dates back to 20 April 2010, the Vertical Guidelines were published on 19 May 2010. The VBER will expire by 31 May 2022 which is why the Commission has started an evaluation process. The evaluation will check whether the VBER is still effective, efficient, relevant, in line with other EU legislation and adds value.
  • The evaluation process began with a first feedback period on the process in late 2018. 
  • It was followed by a public consultation process in early 2019.
  • A stakeholder workshop was held in November 2019.

Next steps

A staff working document is planned to be released in the second quarter of 2020.