The European Commission has adopted a Regulation block exempting agreements between manufacturers and distributors for the sale of products and services. The Regulation and accompanying Guidelines take into account the development, in the last 10 years, of the Internet as a force for online sales and for cross-border commerce, something that the Commission wants to promote as it increases consumer choice and price competition.

The Commission has adopted a new Regulation that 'block exempts' distribution and supply agreements at different levels of the production and distribution chain. There are hundreds of thousands of such "vertical" agreements and, therefore, the revision of the rules is important for business and consumers. The existing Vertical Restraints Block Exemption Regulation (VRBER) and accompanying Guidelines are 10 years old.

Manufacturers remain free to decide how to distribute their products. But in order to benefit from the block exemption, they cannot have a market share in excess of 30% and their distribution or supply agreements must not contain any hardcore restrictions of competition, such as fixing the resale price or re-creating barriers to the European Union's 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. This change is beneficial for small and medium-sized enterprises (SME's), whether manufacturers or retailers, which could otherwise be excluded from the distribution market.

The new rules also specifically, address the question of online sales. Once authorised, distributors must be free to sell on their websites as they do in their traditional shops and physical points of sale. Terminating transactions or re-routing consumers after they have entered their credit card details showing a foreign address will not be accepted. This follows the path of other EU initiative in its commitment on improving cross-border shopping orders.

With the new rules in force, dealers will now have a clear basis and incentives to develop online activities to reach, and be reached, by customers throughout the EU and fully take advantage of the internal market.

The new rules will come into force in June and will be valid until 2022, with a one-year transitional phase.

Background

Like the old rules, the new BER aims to reduce the regulatory burden for companies without market power, in particular for SMEs.

A draft of the new rules was published in July 2009 and the overwhelming reaction was that the BER has been a success in reducing compliance costs and bureaucracy while ensuring consumers benefit from choice and price competition. The Commission received more than 150 submissions.