The Commission has presented a number of suggestions for revision of the current Block Exemption Regulation, which expires in May 2010 as well as the Guidelines on supply and distribution agreements (vertical restraints). The amendments suggested by the Commission take into account two major changes in the distribution sector in recent years: the increasing buying power of large retailers and the development of on-line sales . To seek the opinions of stakeholders, Commission launched a public consultation, which will be opened until September 28th 2009.

Taking into account the experience achieved in the application of Commission Block Exemption Regulation N° 2790/1999 as well as stakeholders' comments, the Commission considers that the rules are working well overall and should not be fundamentally modified.

However, some major changes on the distribution sector have come up over the recent year which justify the Commission's review of the competition rules applicable to vertical agreements. The main suggestions for amendments intend to take account of recent market developments, in particular the increased buyer power of big retailers and the evolution of on-line sales on the Internet.

Main elements for revision: vertical agreement evaluation and on-line sales

To take account of these developments, the Commission proposes that for a vertical agreement to benefit from the block exemption, not only the supplier's market share (as is currently the case) but also the buyer's market share should not exceed 30%.

Regarding on-line sales, the Commission recently put forward a report which showed that although on-line shopping is doing well in the EU, some barrier still remain. In this respect, there is on the one hand, a need to protect consumers' possibilities to purchase to their advantage across borders, which is greatly facilitated by the Internet. On the other hand, certain sales restrictions that aim at limiting or preventing distributors from taking unfair advantage of marketing and brand promotion undertaken by others (i.e. free riding) may enable consumers to benefit from better services.

The Commission's suggested approach therefore refines, in the on-line context, the distinction, between sales made as a result of active marketing and sales made as a result of the consumer taking the initiative (i.e. between active and passive sales), and explains how the revised Regulation would deal with conditions imposed in relation to internet sales, such as a requirement imposed by a supplier that the distributor should have a "brick and mortar" shop before engaging in online sales.

The Commission invites interested third parties to comment by 28th September 2009. The consultation covers all issues dealt with by the Regulation and the Guidelines, but the Commission seeks in particular comments on the overall functioning of the current rules, the extent to which recent market developments should impact on the Regulation and the Commission's suggested approach concerning buyers' market power and restrictions on on-line sales.

Competition rules for distribution sector

Commission Block Exemption Regulation N° 2790/1999 ensures that supply and distribution agreements that comply with its provisions benefit from an exemption from the EC Treaty's ban on restrictive business practices (Article 81(1). The current Block Exemption Regulation on vertical restraints expires in May 2010. The Commission's preliminary assessment of its application, based on experience and feedback from stakeholders, found that the current rules have worked well in practice.

At the time of its adoption in 1999, the Regulation aimed at considerably reducing the regulatory burden on companies, in particular companies without the ability to raise prices without a loss of profit (i.e. with no market power), like SMEs, and at introducing an effects-based approach to the assessment of vertical restraints. These objectives and concerns remain valid today.