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The European Commission eases its position on « dual distribution »

Publications | Barbara Terriere

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Dual distribution refers to the situation whereby a supplier sells goods, not only to its independent distributors, but also (at a downstream-level) directly to end customers (by its own store or online), thereby competing with its independent distributors (who are not active on an upstream-level).

A new “Block Exemption Regulation on Vertical Restraints” will enter into force on 1 June 2022 and will replace the existing one (“BER 330/2010”). On 9 July 2021, the European Commission has issued proposed changes to BER 330/2010 and a draft of revised Guidelines on Vertical Restraints.

This was followed by a public consultation round. During such round, it was clear that the proposed revised rules on « dual distribution » were subject to heavy criticism from the stakeholders. In fact, the proposed revised rules would imply a U-turn: While the exemption is maintained in principle (as under BER 330/2010), it is no longer valid for any exchange of information between parties. The concerned wording and additional conditions (including very low market share thresholds) were drawn up so strictly that dual distribution would become de facto impossible.

On February 4, 2022 the European Commission has issued a draft of a new section (dealing with exchange of information in dual distribution) of the draft of the revised Guidelines on Vertical Restraints. Unfortunately, the European Commission has not given any further information on the proposed wording of this subject in the future Block Exemption Regulation.

However, under this recent statement of the European Commission, dual distribution would be exempted except for the exchange of information between parties that is not “necessary” to improve the production or distribution of the contract goods or services by the parties. Moreover, the European Commission has given more guidance, by making a non-exhaustive list of examples of which information is considered as “necessary” (e.g. technical information) or “not necessary” (e.g. future sales prices) and has acknowledged that such interpretation can vary depending on the applicable distribution model.

Although we don’t yet have a view on the total picture, it seems that “dual distribution” will remain possible in the future. It is clear, however, that the exchange of information will have to be handled with great care.

Where the exchange of information is not exempted, such practices will be subject to the presumptions of the case-law (notably, that parties participating in a concerted practice, that remain active on the market, are presumed to have taken account of the exchanged information in order to determine their market behaviour). In such case, an individual assessment will have to be done based on article 101 EU Treaty and the Horizontal Guidelines. In this regard, the European Commission refers to possible precautions in order to minimise the risk, for example by using aggregated date, by ensuring a proper delay before exchanging data, by technical measures (firewalls), by limited access by the receiving party (only persons active on the upstream market), etc.