European Commission Adopts Revised Competition Rules for Supply and Distribution Agreements

April 22, 2010

On April 20, 2010, the European Commission adopted a revised Vertical Block Exemption Regulation, which provides a "safe harbour" for certain distribution and supply agreements from the application of European antitrust rules (Article 101(1) of the Treaty on the Functioning of the European Union).  The European Commission also adopted its accompanying Vertical Guidelines. The previous version of the Vertical Block Exemption Regulation and Guidelines has been in effect since 1999 and is set to expire on 31 May 2010.

The revised Regulation and Guidelines will be valid until 2022.  The European Commission has provided for a one-year transitional period for pre-existing agreements, effectively requiring all companies to review their distribution contracts to comply with EC antitrust rules.

Changes in Online Commerce

The newly adopted Regulation and Guidelines take into account developments over the past 10 years which have a material impact on antitrust analysis, particularly the increased significance of the online commerce and the increased market power of large distributors and retailers.  They will therefore be especially relevant for those companies which are active or plan to be more active as regards Internet sales.  The revised Guidelines also provide clarification on which activities constitute "active" and "passive" sales, one of the key distinctions in relation to the application of European antitrust rules to exclusive distribution relationships in Europe. 

Changes in Market Thresholds

Under the previous regime, a supplier’s market share needed to be lower than 30% in order to qualify for the automatic safe harbour and the agreements could not contain any "hardcore" restrictions of competition in order to qualify for safe harbour treatment.  The new rules now require that both supplier and distributor hold a market share of less than 30%. This additional criterion will be relevant to those clients which have agreements with strong buyers/distributors. 

The Brussels team of Gibson Dunn, in coordination with our other antitrust colleagues, has been providing advice regarding the procedural and substantive aspects of the revisions to the Regulation and Guidelines for more than two years, and has been in close contact with the European Commission at every stage of the adoption process.  We will continue to advise our clients as the revised regime is implemented both in order to ensure that their practices in Europe are fully compliant with the new regime and also to help them seize new business opportunities offered by the shake-up in the distribution landscape which is expected to take place in Europe.

Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work, any member of the firm’s Antitrust and Trade Regulation Practice Group, or any of the following:

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