Block exemption – motor trade and beyond
As of 1 June 2022, post Brexit Britain implemented a new Vertical Block Exemption (VABEO) to replace the EU VABER. VABEO contains interesting new changes to the Hardcore Restrictions. Here’s one that will affect all relevant vertical relationships including those in the motor trade and beyond.
Prior to VABEO a supplier was prohibited from requiring a distributor to pay a different price for products intended to be resold online when compared to the price payable for products to be resold offline (aka “dual pricing”). However, all that has changed.
The cost of operating a physical store requires more investment than operating an online-only presence. Therefore, the CMA has confirmed that dual pricing can be block exempted. However, there are a few conditions. For example:
– The wholesale price difference should take into account the different investments and costs incurred.
– The price difference should not be such that it prevents the use of the internet as an effective sales channel. Therefore, if the price difference makes the use of the internet to sell goods unprofitable or financially unsustainable, that will then fall outside the block exemption.
There are various other devils in the detail. For example, a requirement that a distributor should not to use a supplier trademark or brand name on its website, or restricting the use of online advertising channels or banning the use of a supplier’s trademarks when bidding for online search advertising is not permissible and must therefore be avoided.
This is good news for bricks and mortar traders who may have previously been at a disadvantage when compared to those with an online only presence. It will be interesting to see what, if anything in changes, in negotiations between supplier and distributor in terms of the price to be paid for goods where the trader can show it has greater costs to those who operate online only. Time will tell.
