Vertical Restrictions : New Block Exemption

The Commission has finally adopted its new regulation - Regulation 330/2010 - block exempting under Article 101 §3 TFEU certain distribution arrangements and other vertical restrictions.

The new Regulation provides that manufacturers, in order to benefit from the block exemption, cannot have a market share in excess of 30% and their distribution or supply agreements must not contain any so-called "hardcore restrictions of competition", such as fixing the resale price or re-creating barriers to the EU single market. The new rules introduce the same 30% market share threshold for distributors and retailers to take into account the fact that some buyers may also have market power with potentially negative effects on competition. The Commission claims that that change is beneficial to small and medium-sized enterprises (SME's), whether manufacturers or retailers, which could otherwise be excluded from the distribution market.

Distribution agreements made between companies with a higher market share than 30% are in principle caught by the prohibition contained in Article 101 §3 TFEU and are thus illegal unless they can be exempted individually pursuant to Article 101 §3 TFEU.

The Regulation is supplemented by new Commission Guidelines which sort of explain the Regulation. In fact, the Guidelines are a form of covert legislation without respecting the legislative process. For example, the Guidelines deal with the issue of on-line sales and state that distributors must be free to sell on their websites as they do in their shops and outlets. For selective distribution, this means that manufacturers cannot limit the quantities sold over the Internet or charge higher prices for products to be sold online. The Guidelines deal with the concepts of "active" and "passive" sales for exclusive distribution: Terminating transactions or re-routing consumers after they have entered their credit card details showing a foreign address will not be accepted. In that way, the Commission has pre-empted the Court of Justice's ruling in the pending case C-439/09 Pierre Fabre Dermo-Cosmétique

The new Regulation enters into force on June 1st 2010 and replaces Regulation 2790/1999 which expires on May 31st 2010.

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