27 Apr 2010
Lawyers warn new competition rules could impact deals
Rosemary Choueka, partner and Head of Competition and Public Procurement
As you may be aware, the European Commission has unveiled its new rules on vertical agreements and competition law. New Vertical Agreements Block Exemption (VABE) will replace the existing version that expires 31 May 2010. The current rules have been in place for ten years and the new legislation contains some major changes which could impact on key deals going forward.
Head of Competition and Public Procurement Rosemary Choueka at international business law firm Lawrence Graham LLP (LG) commented: "The new rules will result in significant changes. For example, in assessing compliance with competition law, it will no longer be sufficient to consider just the market share of the supplier, but it will also be necessary to look at the market share of the distributor. Distributors with a large share of the market will therefore have to consider their position carefully and this may also require suppliers to review all of their distribution arrangements for compliance with competition law. This may ultimately benefit smaller businesses, who may find themselves in a more attractive light as potential distributors and/or who, as suppliers, may no longer be obliged to accept conditions imposed by their much larger distributors."
"The rules require that distributors must be free to sell on their websites as they do in their traditional shops and physical points of sale," Choueka adds. "This means, in practice, that suppliers cannot try to restrict online sales by their distributors other than in very limited circumstances and so, for example, will have no control over the 'look and feel' of the websites on which their products are being sold. This will have important implications for online business as suppliers will wish to consider even more carefully those companies who they would like to appoint as their distributors."
The new rules will remain in force until 2022. There will be one year transitional period to allow current arrangements to be amended in order to comply with the new rules.