EU: new rules for customer-supplier contracts

The European Commission has issued a new regulation stipulating exemptions from the ban on vertical agreements. What to watch out for when concluding distribution and other customer-supplier contracts from 1 June 2022?

Article 101 of the Treaty on the Functioning of the EU (TFEU) prohibits the conclusion of agreements that may affect trade between member states and that have as their object or effect the prevention, restriction, or distortion of competition within the EU internal market. The regulation also applies to vertical agreements (i.e., agreements between undertakings operating at different levels of the market), such as distribution and other similar customer-supplier contracts. Such contracts shall therefore not contain provisions that fix purchase or selling prices or other trading conditions; limit or control production, markets, or investment; share markets or sources of supply; discriminate against certain trading partners; or similar arrangements with an adverse effect on competition.

However, vertical agreements do not pose as great a risk to competition as agreements between competitors. Therefore, in 2010, the Commission established block exemptions which serve as detailed rules or safe harbours under which the contracting parties do not breach competition law when concluding a vertical agreement. However, as the online environment has developed significantly since that date, the Commission has now replaced the existing rules with a new regulation.

The new regulation narrows the rules for dual distribution arrangements whereby suppliers sell goods or services through independent distributors and also directly to end customers. It also narrows the use of the block exemption for parity obligations, i.e., contractual clauses that require the seller to offer the same or better conditions to the buyer as those offered by third parties or by the seller elsewhere (e.g., on their websites). This means that in some cases, dual distribution and parity obligation arrangements so far valid may now be contrary to Article 101 of the TFEU.

On the other hand, the regulation broadens the possibility of applying block exemption for certain restrictions of active sales whereby the seller actively approaches customers. The parties will also have greater freedom when concluding contracts in certain cases of online sales, namely the possibility to set different prices or other criteria for online and offline sales to the same distributor.

The new regulation entered into force on 1 June 2022. Vertical agreements that have so far met the conditions for the use of the block exemption will be subject to a transitional period postponing the effectiveness of the regulation until 31 May 2023. However, we recommend that suppliers and customers find out more about the new rules and consider modifying their contracts as soon as possible.

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