German authorities’ joint position on new EU VBER draft

By Dr. Stephan Waldheim, Maren Steiert

10-2021

As we have previously reported (see our August Competitive Edge edition here), on 9 July 2021 the EU Commission published its long-awaited draft vertical block exemption regulation (“Draft VBER”) and accompanying guidelines (“Draft Guidelines”). Now the German Federal Cartel Office (“FCO”) and the Federal Ministry of Economic Affairs and Energy (“FMEE”) have published a joint position paper (“PP”) commenting on the Draft VBER and proposing some significant changes to the current state of play. Read on for our summary of the most important proposals of the PP.

Online platforms

The current Draft VBER covers restrictions involving "pure" online platforms. “Hybrid” platforms are denied the benefit of block exemption. The PP suggests excluding all vertical agreements involving online platforms, including pure online intermediary services, from block exemption. The PP argues that the effects restrictions involving online platforms (both pure and hybrid) may have on competition are still unclear in many cases so that including them in the safe harbour of the Draft VBER could lead to significant “under-enforcement”. In any event, the PP suggests that online platforms should at least be dedicated a separate chapter with a specific set of rules in the Draft VBER.

Alternative thresholds

Another interesting proposal of the PP is the introduction of a second threshold for the platform economy, in addition to the traditional market share threshold in Art. 3 Draft VBER. According to the PP, the traditional way of calculating market shares, based on turnover, often does not reflect the actual market position of online platforms in the digital world. The PP therefore suggests introducing a second threshold with other quantitative metrics than turnover, such as the number of monthly active users (MAU) or transaction volume to avoid that restrictive agreements would benefit from block exemption despite (allegedly) having negative effects on competition. 

In addition, the PP advocates that in oligopolistic markets with e.g. 2-4 large players, each of which holding (close to) 30%, the current market share thresholds may lead to arbitrary results: although imposing similar restrictions, one market participant may benefit from block exemption whereas the other may not. To ensure a consistent enforcement of competition policy and law, the PP thus proposes that where three or more players have a combined market share of more than 50%, any one player holding 15% or more of the relevant market shall lose the benefit of block exemption.

Parity clauses 

Finally, the PP comments on the introduction of the new Art. 5 (1) lit. d Draft VBER, governing parity clauses. The PP welcomes the fact that it is now clarified that “wide” parity clauses used by online intermediaries (e.g., hotel booking) services are not block exempt. However, the PP criticizes that the Draft VBER block exempts “narrow” parity clauses, although court rulings across the EU had previously found narrow parity clauses anti-competitive and illegal (see for Germany e.g., “booking.com”, summarised here). In the view of the PP, the German booking.com case proves that “narrow” best price clauses do not necessarily generate more efficiencies than “wide” parity clauses, so should not be treated differently by the Draft VBER. 

The PP also criticizes that Art. 5 (1) lit. d Draft VBER removes the benefit of block exemption only with regard to parity clauses used by online platforms, arguing that similar restrictions in the offline channel can have just as negative effects on competition. The PP therefore advocates that parity clauses should always be subject to a case-by-case analysis under Art. 101 (3) TFEU and should not thus benefit from block exemption, regardless of whether applied in the online or offline world. 

These are just some of the (as we believe most important) changes suggested by the PP. Read the full text version of the PP here.

For more information please contact Dr. Stephan Waldheim and Maren Steiert.

 
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