Selective Distribution Consultation | An update

Selective distribution is a central pillar of the luxury goods business model and refers to the carefully selected and managed network of partners and distributors through which brands are able to distribute their products to maintain and enhance the luxury retail experience for the customer and, importantly, preserve the aura of luxury.

There is specific European legislation that ensures that these arrangements (in certain conditions) are exempt from competition law by way of ‘safe harbours’ in recognition of their importance to specific businesses. This legislation is incorporated in a legal instrument known as the Vertical Block Exemption Regulation (VBRE), which is valid until 2022.

In November 2018 the EU Commission’s directorate for competition launched a consultation process to review the legislation surrounding selective distribution, through a review of the Vertical Block Exemption Regulation (VBRE). Reviews such as these are scheduled to ensure that legal instruments remain fit for purpose as the business environment evolves. [N.B. EU Competition Law regulates agreements which have a cross-border impact on trade between EU member states.  The law aims to strike a balance between preventing anti-competitive practices and allowing suppliers to protect their brands and the way in which goods are sold.]

These rules on vertical agreements have a direct impact on the distribution systems Walpole members have in place.  They determine the sorts of clauses which may be included in distribution agreements and the kinds of controls which owners may impose in order to protect their brands.

Walpole, the ECCIA and each of the national associations played an active role in the VBRE consultation process to ensure that the validity of the selective distribution model for the luxury goods sector continues to be recognised and protected.

In July 2019, the Commission published the results of the consultation, which showed a general consensus of the validity of VBER but presented its potential revision as an opportunity to adapt the framework to the digital reality of today and tomorrow.

The EU is continuing its consultation process and has issued a questionnaire which is open for responses from interested parties until 26 March 2021.  Please go here for further information.

The UK competition authorities are currently considering the application of UK competition law to vertical agreements in the UK.  The process is at an early stage.  However, it is anticipated that the consultation will run up to July 2021.  Please go here for further information.

Charles Russell Speechlys LLP has prepared on behalf of Walpole members a guide to the consultation processes and a detailed overview of Walpole’s responses to the Commission. All Walpole members can gain access to this hugely valuable report by asking the membership team for the report. Please contact Charlotte Keesing or Stephanie Robinson for more.