Submission to the public questionnaire for the 2018 Evaluation of the Vertical Block Exemption Regulation

To the European Commission

The European Commission has published a questionnaire to gather information in the evaluation of the Commission Regulation (EU) No 330/2010 (Vertical Block Exemption Regulation, ”VBER”) and the Commission Guidelines on Vertical Restraints (”VGL”). The VBER will expire on 31 May 2022. The collected information will provide part of the evidence base for determining whether the Commission should let the VBER lapse, prolong its duration or revise it, together with the accompanying VGL.

The Federation of Finnish Enterprises considers that the existence of the VBER and the VGL are very important for our member companies consisting of more than 115,000 SMEs in different fields of business. Particularly SMEs do not have enough legal resources to conduct an efficiency analysis when assessing the acceptability of certain contract terms currently exempted in the VBER, if the regulation was no longer applicable after 31 May 2022. The Federation of Finnish Enterprises provides the following answers to the questionnaire.

Effectiveness (Have the objectives been met?)

1. Do you perceive that the VBER and the VGL have contributed to promote good market performance in the EU?

In general, the block exemption system including the VBER and the VGL functions well. The existence of the VBER and the VGL are important for companies.

2. Do you consider that the VBER and the related guidance in the VGL provide a sufficient level of legal certainty for the purpose of assessing whether vertical agreements and/or specific clauses are exempted from the application of Article 101 of the Treaty and thus compliant with this provision (i.e. are the rules clear and comprehensible, and do they allow you to understand and predict the legal consequences)?

The VBER and VGL provide a sufficient level of legal certainty of the most essential rules. However, most examples included in the VGL seem to relate to supply of B2C goods in the brick-and-mortar level. As the given examples in general are very practical and useful for companies, more examples related to B2B goods and services as well as related to e-commerce would provide additional clarifications and enhance the legal certainty.

3. Please explain whether the lack of legal certainty stems from (i) the definition of the particular area in the VBER or the related description in the VGL, (ii) their application in practice or (iii) the overall structure of the VBER and/or VGL.

As the business environment have changed e.g. due to increased importance of e-commerce, the VGL does not give necessary guidance and include the recent developments in the case law, e.g e-commerce, sharing economy, algorithms, platforms and two-sided markets etc. Thus, the certain degree of legal uncertainty relates to ii) the application in practice.

In addition, the rules and guidance related to spare parts are complicated especially if combined with different distribution systems (exclusive, selective) and if related to products where the quality/safety of the product is essential (e.g. repairs of medical devices requiring authorized/trained personnel). The slightly low legal certainty stems from i) the definition (the difference between spare-parts and components have not been defined in detail) ii) the application in practice (as described above) as well as iii) the overall of structure of the VGL (the guidance related to spare parts is scattered in different recitals).

Efficiency (Were the costs involved proportionate to the benefits?)

4. Does the assessment of whether the VBER, together with the VGL, is applicable to certain vertical agreements generate costs for you (or, in the case of a business association, for the members you are representing)?

Unfortunately, in many cases not enough guidance is available from the national authorities related to application of vertical rules. As interpreting and applying competition law is challenging, companies therefore often have to request assistance from external legal counsels specialized in competition law in questions related to vertical agreements. This creates costs for companies.

5. Does the assessment of whether the VBER, together with the VGL, is applicable to certain vertical agreements generate costs proportionate to the benefits they bring for you (or, in the case of a business association, for the members you are representing)?

Although the assessment of VBER and VGL often requires special legal competence, the basic rules are clear. Thus, the existence of the VBER and VGL benefits companies more than generates costs. The VBER is particularly important for SMEs whose market shares are low and do not exceed the market share thresholds included in the block exemption system.

6. Would the costs of ensuring compliance of your vertical agreements (or, in the case of a business association, the vertical agreements of the members you are representing) with Article 101 of the Treaty increase if the VBER were not prolonged?

If the VBER and the VGL did not exist, the legal assessment costs would be much greater. Particularly SMEs do not have the resources or legal competence to conduct in-house efficiency analyses which could be required more often in the absence of the block exemption system. Therefore, more assistance from specialized legal counsels and law firms would be needed.

Relevance (Is EU action still necessary?)

7. Would you expect any effect in case the VBER were to be prolonged and the VGL maintained without any change?

We would expect a neutral effect on our members and on industries. The current level of legal certainty would remain.

8. Would you expect any effect in case the VBER were not to be prolonged and the VGL were to be withdrawn?

We would expect negative effect on our members, industries as well as consumers. Uncertainty would increase especially among SMEs. In addition, the legal costs for companies would increase. Ultimately this may have an overall negative impact on consumers if the increased costs lead to increased consumer prices.

9. Do you see the need for a revision of the VBER in light of major trends and/or changes during the past 5 years (e.g. the increased importance of online sales and the emergence of new market players)?

We would not see the need for a revision of the VBER. Although the trends and changes have complicated the application of competition law in general, the revision should be made in the guidance level affecting the interpretation, not the basic rules included in the regulation. VBER should be applied as it is, if the VGL gives up-to-date guidance on how the VBER will be applied in the changing business environment.

10. Do you see the need for a revision of the VGL (including Section VI) in light of major trends and/or changes during the past 5 years (e.g. the increased importance of online sales and the emergence of new market players)?

We would see the need for a revision of the VGL. The increased importance of online sales, the emergence of sharing economy and platforms and the emergence of AI and algorithms have provided challenges for applying the VBER. Therefore, more guidance in the VGL is needed.

For example, the VGL does not take into account the dual role of manufacturers. Manufacturers who use third-party distributors are nowadays often utilizing their own online sales channels. This means that the vertical relationship is simultaneously a horizontal relation and the application of the block exemption becomes very challenging and unclear.

11. Is there any area for which the VBER and/or the VGL currently do not provide any guidance while it would be desirable?

The VGL does not give any guidance on how to assess different types of so-called most favourite nation/most favourite customer/preferred customer clauses.

In addition, the VGL does not include the most recent EU case law related to online sales restrictions (e.g. Coty). It would be important that the case law related to e-commerce is included in the guidance as different Member States seem to interpret the ECJ decisions in a different manner.

EU added value (Did EU action provide clear added value?)

12. Do the VBER and the VGL add value in the assessment of the compatibility of vertical agreements with Article 101 of the Treaty compared to, in their absence, a self-assessment by undertakings based on other instruments that provide guidance on the interpretation of Article 101 of the Treaty (e.g., the Article 101 (3) Guidelines, the enforcement practice of the Commission and national competition authorities, as well as relevant case-law at EU and national level)?

Although the assessment of the VBER and VGL often requires legal competence and specialized external counsels, the basic rules are clear and they provide legal certainty especially to SMEs whose market share is low. Thus, the VBER and VGL greatly add value for companies assessing the compatibility of vertical agreements with Art. 101 TFEU.

The Federation of Finnish Enterprises

Janne Makkula Marjut Viding
Vice President, Labour Markets and Legal Affairs Advisor