CMA support for Bricks & Mortar


You can be forgiven for not knowing what VBER stands for, and even if you were aware that it stands for Vertical Block Exemption Regulation you can still be forgiven for not having a clue why it was important.

I will therefore have a crack at offering some form of explanation. It is fairly well known that anti-competitive behaviour is considered a big ‘no-no’ within the EU. Under Article 101 of the Treaty of the Functioning of the European Union (and mirrored in Chapter 1 of the UK Competition Act of 1998), anti-competitive agreements are generally prohibited.

The VBER provides a ‘block’ exemption from these clauses specifically for ‘vertical’ agreements between businesses operating at different levels of the supply chain, such as a Manufacturer and a Reseller. For the VBER to be applied the market share of each of the parties to the agreement must not exceed 30%, and the agreement cannot include any so-called ‘hard-core’ restrictions (such as resale price maintenance or an outright ban on the distributor making sales in certain territories or to certain customers).

The current VBER is due to expire on the 31st May, and we now have final confirmation of what will replace it.

Post-Brexit/Post-Pandemic

Whilst the current VBER was maintained in full following the UK’s exit from the EU, come the 1st June the UK will operate within a new VBEO – Vertical Block Exemption Order. Practically speaking it will be very closely aligned to the new VBER being introduced in Europe but it is important to recognise that the UK is now free to deviate from the EU Regulation as it sees fit.

What does seem to be becoming clear is that whilst both the VBEO (UK) and the VBER (EU) are very similar, they both reflect a shift in recognising recent market developments. In essence, what this means is a relaxation of some of the ‘hard-core’ restrictions, making it easier to implement agreements that support the activities of Bricks & Mortar retailers.

This clearly represents a shift from the thinking behind the existing VBER, which allowed for very little differentiation between Online & Offline sales. It would certainly seem to be a recognition of the changes in consumer behaviour both ‘generally’ – as an evolution over time’ and ‘specifically’ – as a result of the unique circumstances brought on by COVID lockdowns.

What to look out for

 We have been working with Marc Shrimping, Partner at Osborne Clark and he outlined some of the key developments in the VBEO;

  • It will be possible for manufacturers to engage in “dual pricing” – i.e. to set different cost prices depending on whether the products are to be sold in-store vs online.
  • There is greater freedom for manufacturers to expressly exclude sales on online marketplaces if they wish to do so, and
  • There is greater freedom also for manufacturers to set more exacting requirements for online sales – e.g. obligation offer live chat function or equivalent if selling specialist products online.

As the VBEO has been drafted on its recommendations, the CMA  seems to have accepted that physical stores are in need of some extra protection, and as such, this is a step in that direction.

Of course, it isn’t as simple as enacting the VBEO, and as if by magic clauses, like these become the norm. Distribution Agreements between Manufacturers and their Resellers will have to be amended for such changes to take effect and of course, Manufacturers will have to determine whether they consider such amendments necessary. But it sets a framework for those things that the CMA will consider to be exempted within vertical block arrangements, and as such will be free from investigation.

Want to know more.

There is no doubt this is fairly complicated to get your head around, particularly for those of us who don’t speak legislation. But there is a lot that can be gained from having knowledge of what the VBEO will mean in practice.

On Tuesday 10th May our partners at Osborne Clarke held a Webinar called ‘Vertically Challenged – Making sense of the new EU/UK distribution rules’. In this session, Rebecca Malone and Marc Shrimpling discussed the new EU and UK distribution rules offering practical guidance, as well as key takeaways and proposed actions to optimise distribution models.

Thanks to our partnership with Osborne Clarke MIA members are invited to watch a recording of this informative webinar. You’ll first need to register here and you can then watch the webinar here. 


Want to Join the Music Industries Association?

Join now

Already a member?

Sign in