The CMA review of Vertical Block Exemption Regulation

The UK Competition and Markets Authority (CMA) is reviewing Vertical Block Exemption Regulation (VBER) legislation. This will enable the UK to determine its future approach when the current legislation expires in May 2022. The review involves a formal consultation with industry stakeholders.

The CMA’s consultation provides the luxury sector with an opportunity to a) ensure that its current protections continue, enabling the sector to maintain the necessary control of our distribution channels to continue to meet customer expectations; and b) to advocate for a UK approach that minimises divergence with EU law in respect of the protections afforded.

The CMA consultation closes on 6 July 2021. Once the review has concluded, the CMA will present its final recommendations to the Secretary of State for Business, Energy and Industrial Strategy in the autumn.

The CMA review of Vertical Block Exemption Regulation

The UK Competition and Markets Authority (CMA) is reviewing the version of the EU Vertical Block Exemption Regulation (VBER) retained in UK law following the end of the Brexit implementation period. The current UK legislation expires in May 2022. This review will enable the UK to determine its future approach and incorporates a formal consultation with industry stakeholders.

European Union (EU) VBER legislation is also currently under review and the associated consultation for this closed on 26 March 2021. Whilst the treatment of vertical agreements under EU and UK competition regimes remains aligned for now, the concurrent EU and UK reviews introduce potential for divergence.

The CMA’s consultation provides the luxury sector with an opportunity to a) ensure that its current protections continue, enabling the sector to maintain the necessary control of our distribution channels to continue to meet customer expectations; and b) to advocate for a UK approach that minimises divergence with EU law in respect of the protections afforded.

The CMA consultation closes on 6 July 2021. Once the review has concluded, the CMA will present its final recommendations to the Secretary of State for Business, Energy and Industrial Strategy in the autumn.

Walpole’s advocacy to date

It is imperative that UK selective distribution policy and legislation continues to support the luxury sector and the consultation affords an opportunity to strengthen them where necessary.

The CMA held a series of roundtables with key stakeholders (trade bodies, economists, business and lawyers) in advance of the opening consultation to raise UK specific points. Walpole secured a dedicated session for Walpole members with the CMA team so that we could explain the unique nature of our business model and the level of customer expectations necessitating VBER safe harbours and exceptions.

This roundtable took place on the 29 April 2021 with representatives from Walpole, external legal counsel and a selection of brands representing the fashion and accessories, beauty, drink, retail, perfume and jewellery vertical sectors and included larger brands and SMEs.

A formal submission will be made by Walpole on behalf of the UK luxury sector and the draft submission will be shared with ECCIA colleagues.

Walpole’s key messages

Evidence, case studies and recommendations were presented under the following headings:

1) The importance and value of the luxury sector to the UK economy, employment and global reputation

2) The luxury customer and the approach to distribution to maintain quality of service and the aura of luxury

3) Areas of priority

– Selective distribution and territorial restrictions
– Dual distribution
– Indirect restrictions on online sales

4) Resale price maintenance

5) Grey market sales

6) Sustainability

7) Agency relationships

Next steps

Please go here to review the CMA timeline. Information on the EU Commission’s consultation process to review the EU legislation surrounding selective distribution, through a review of the Vertical Block Exemption Regulation (VBRE) can be found here.

For further information, please contact Charlotte Keesing or Tania Pearson.