CMA consultation: Retained Vertical Agreements Block Exemption Regulation

On 17 June 2021, the UK Competition and Markets Authority (CMA) published a consultation document, which sets out its proposed recommendations to the Secretary of State on the amendments to the retained Vertical Block Exemption Regulation (VBER) and VBER guidelines (Guidelines), which are due to expire on 31 May 2022. The responses received during the consultation will inform the CMA’s final recommendation to the Secretary of State. The deadline for the consultation is 22 July 2021.

Key recommendations 

More lenient approach

The CMA has recommended: 

  • Retention of the dual distribution exemption as well as extending the exemption to wholesalers and/or importers. The horizontal issues arising out of dual distribution relating to information exchange will remain a matter for self-assessment, but the CMA is considering providing more guidance in the Guidelines.
  • Removal of dual pricing and the requirement for overall equivalence for online and offline sales in a selective distribution system from the list of hardcore restrictions.
  • Addition of the following exceptions to hardcore restrictions: (i) combination of exclusive and selective distribution in the same or different territories (ii) shared exclusivity by multiple exclusive distributors in a territory or customer group (iii) protections for selective distribution systems against sales from outside the territory to unauthorised distributors within the territory.
Stricter approach 
  • The CMA has recommended adding wide parity obligations (or “most favoured nationclauses) for indirect sales channels to the list of hardcore restrictions, which will include measures that have the same effect.
No change to approach 

The CMA recommended retaining the status quo relating to: 

  • Resale price maintenance, which will remain a hardcore restriction, but the CMA is minded to clarify in the Guidelines that it remains open to carefully and objectively considering any efficiency arguments.
  • Non-compete obligations with duration of more than five years (or automatically renewable), which will continue being “excluded” restrictions, requiring individual assessment.
More guidance 

The CMA plans to provide the following clarifications in the Guidelines: 

  • Territorial and customer restrictions: while territorial restrictions will remain in the hardcore category, the CMA plans to include definitions for “active” and “passive” sales as well as guidance on how these terms should be interpreted in practice, in light of market developments such as the growth of online sales.
  • Agency agreements: the CMA plans to provide guidance on issues relating to online platforms, fulfilment contracts and dual role agents.
  • Environmental sustainability: we can also expect more guidance on relevant sustainability considerations, in particular in relation to the criteria for admission to selective distribution systems.

Other observations 

  • In making its recommendations, the CMA took into account submissions from stakeholders that divergence from the EU regime would increase compliance costs for businesses which do business in the UK and in the EU.
  • The VBER will expire after six years rather than the 10 years that the EU VBER is usually in force for.
  • There will be a transitional period of one year, during which the Chapter I prohibition would not apply, to allow businesses that wish to take advantage of the “safe harbour” to review and (if necessary) revise their vertical agreements.
  • The CMA’s recommendations do not address the call for clarity on extraterritorial restrictions between the EU and the UK, in particular in light of the implications of the Northern Ireland Protocol.