Table of contents 1.Introduction4 1.1. Purpose of the VBER evaluation 5 1.2. Scope of the VBER evaluation 5 2.Background to the intervention7 2.1. Overview of the competition policy framework 7 2.1.1. The 1999 block exemption regulations 10 2.1.2. The review of the 1999 VBER 12 2.2. Description of the intervention 13 2.3. Intervention logic 15 2.4. Evaluation baseline 20 3.Evaluation Questions20 3.1. Effectiveness 20 3.2. Efficiency 21 3.3. Relevance 21 3.4. Coherence 21 3.5. EU added value 21 4.Methodology22 4.1. Description and use of the sources 22

4.1.1. Public consultation 22 4.1.2. Targeted consultation of national competition authorities 23 4.1.3. Stakeholder workshop 23 4.1.4. External evaluation support study 23 4.1.5. Spontaneous stakeholder submissions 24 4.1.6. Evidence gathered through other Commission initiatives 24 4.2. Processing and triangulating of the evidence collected 25 4.3. Limitations of the analysis 27 4.3.1. Evidence on VBER related costs and benefits 27 4.3.2. Representativeness of stakeholder feedback 28 4.3.3. Limited evidence about consumer views 29 5.Analysis and answers to the evaluation questions29 5.1. Market developments since the adoption of the VBER 30 5.1.1. The main findings of the e-commerce sector inquiry 31 5.1.2. The main findings of the evaluation study 33 5.1.3. The Commission’s enforcement action regarding vertical restrictions 43 5.1.4. NCA enforcement and policy actions regarding vertical restrictions 47 5.2. Answers to the evaluation questions regarding the VBER, together with the Vertical Guidelines, as a whole 49 5.2.1. Effectiveness 50 5.2.2. Efficiency 62

5.2.3. Relevance 67 5.2.4. Coherence 71 5.2.5. EU added value 74 5.3. Overview of the areas in which the VBER, together with the Vertical Guidelines, is perceived as not functioning well or not functioning as well as it could 75 6.Conclusions88 Annex 1: Procedural information94 Annex 2: Stakeholder consultation99 Annex 3: Methods and analytical models143 Annex 4: Overview of issues identified during the evaluation process144 Glossary Term or acronym Meaning or definition Commission European Commission DG Competition Directorate-General for Competition of the European Commission CJEU European Court of Justice EEA Agreement Agreement on the European Economic Area EFTA European Free Trade Association EU European Union EUR Euro HGL Horizontal Guidelines IA Impact assessment IPR Intellectual property rights ISSG Inter-service steering group MVBER Motor vehicle block exemption regulation MFNs Most Favoured Nation clauses NCAs National competition authorities OEMs Original equipment manufacturers OTAs Online travel agencies RPM Resale price maintenance SMEs Small and medium-sized enterprises TSCs Territorial supply constraints TTBER Block exemption regulation on technology transfer agreements VBER Vertical block exemption regulation VGL Guidelines on Vertical Restraints / Vertical Guidelines RSB Regulatory Scrutiny Board 1.Introduction Article 101(1) of the Treaty on the Functioning of the European Union ("the Treaty") prohibits agreements between undertakings that restrict competition, unless they contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefits, in accordance with Article 101(3) of the Treaty. Agreements which are entered into by two or more undertakings, each operating, for the purposes of the agreement, at a different level of the production or distribution chain, and which relate to the conditions under which the parties may purchase, sell or resell certain goods or services ("vertical agreements") are, among others, susceptible to fall within the scope of the prohibition of Article 101(1) of the Treaty. Vertical agreements are ubiquitous across the EU economy. Under Regulation 19/65/EEC ("Empowerment Regulation of 1965"), the Commission is empowered by the Council to adopt block exemption regulations, which define certain categories of agreements that generally fulfil the conditions of exemption under Article 101(3) of the Treaty. On this basis, the Commission has adopted several block exemptions, some of which concern vertical agreements. As is the case for other block exemption regulations in the antitrust area, the purpose of Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty to categories of vertical agreements and concerted practices ("Vertical Block Exemption Regulation" or "VBER") is to define those categories of agreements for which it can be assumed with sufficient certainty that they fulfil the conditions of Article 101(3) of the Treaty and exempt them from the prohibition contained in Article 101(1) of the Treaty. The VBER entered into force on 1 June 2010 and will expire on 31 May 2022. The Guidelines on Vertical Restraints ("Vertical Guidelines") provide guidance on the assessment of vertical agreements not only under the VBER but also under Article 101(1) and Article 101(3) of the Treaty. Vertical agreements which do not qualify for an exemption under the VBER may nonetheless satisfy the conditions of the exemption provided by Article 101(3) of the Treaty. The Vertical Guidelines are without prejudice to the case law of the Union courts concerning the application of Article 101 of the Treaty to vertical agreements. This Staff Working Document reflects the findings and views of the Commission’s staff and does not reproduce the formal position of the Commission itself. It does not prejudge the final nature or content of any act that may be prepared by the Commission as a follow-up to this evaluation. The following sections set out the purpose of the VBER evaluation (see section 1.1 below), as well as the substantive and geographic scope of the VBER evaluation (see section 1.2 below).

1.1.Purpose of the VBER evaluation The purpose of the evaluation is to gather evidence on the functioning of the VBER, together with the Vertical Guidelines, which will serve as a basis for the Commission to decide whether it should let the VBER lapse, renew or revise it. As required by the Commission’s Better Regulation Guidelines, the evaluation examines whether the objectives of the VBER were met during the period of its application (effectiveness) and continue to be appropriate (relevance) and whether the VBER, taking account of the costs and benefits associated with applying it, was efficient in achieving its objectives (efficiency). It also considers whether the VBER, as legislation at EU level, provided added value (EU added value) and is consistent with other Commission documents providing guidance on the application of Article 101 of the Treaty and related legislation with relevance for vertical agreements (coherence). The impact of the COVID-19 outbreak is not dealt with in this Staff Working Document, given that these developments are very recent and the evidence gathered in the evaluation could not take them into account. Moreover, the duration and impact of the COVID-19 crisis cannot be predicted or accurately quantified at the current stage, and it is therefore not possible to evaluate the effects of the COVID-19 crisis on the rules subject to the evaluation. Nevertheless, the Commission is conscious that there has been a significant increase in e-commerce in the wake of the confinement measures. 1.2.Scope of the VBER evaluation The substantive scope of the evaluation includes the VBER, together with the Vertical Guidelines, in their entirety. Insofar as the Vertical Guidelines refer to the provisions of the VBER and inform their application and interpretation, the assessment of the VBER would not be complete if it did not include them. As explained in more detail in section 2.2 below, the VBER and the Vertical Guidelines adopted in 2010 are to a large extent a continuation of the approach taken in the previous versions of these two documents from 1999, with limited adaptations to address specific issues identified during the last review process. Since the adoption of the current VBER and Vertical Guidelines, there have been a number of market developments, notably the growth of online sales and of new market players such as online platforms. As these developments may affect parts of the VBER and Vertical Guidelines that go beyond the specific provisions changed in 2010, it is appropriate to evaluate the VBER, together with the Vertical Guidelines, in their entirety, rather than focusing on the main changes that were made as a result of the last review. The Motor Vehicle Block Exemption Regulation ("MVBER") was adopted in 2010. It contains a transition clause, which prolonged the application of the previous block exemption regulation for the motor vehicles sector to the purchase, sale or resale of new motor vehicles until 1 June 2013. Since then, the distribution of new motor vehicles has been benefitting from the exemption provided by the VBER, when the conditions set out therein are fulfilled. As regards aftermarkets, the MVBER has been dealing with the conditions for the purchase, sale or resale of spare parts and the provision of repair and maintenance services for motor vehicles since its adoption in 2010. The MVBER is subject to a separate review launched in 2018. The outcome of the evaluation of the MVBER will be taken into account in the context of the impact assessment of the VBER. The geographic scope of the evaluation extends to all EU Member States. Article 101(1) of the Treaty has direct applicability in all EU Member States by virtue of the case law of the Union courts. Council Regulation 1/2003 created a system of parallel competences also for Article 101(3) of the Treaty, by introducing a directly applicable exemption system in which the competition authorities and the courts of the Member States have the power to apply not only Article 101(1) of the Treaty, but also Article 101(3) of the Treaty. When assessing the compatibility of vertical agreements that may affect trade between Member States in the meaning of Article 101 of the Treaty, national competition authorities ("NCAs") and national courts are bound by the directly applicable provisions of the VBER. The Vertical Guidelines, which are binding on the Commission, do not bind NCAs or national courts, but they are typically taken into account when assessing the compatibility of vertical agreements with Article 101 of the Treaty. Against this background, the evaluation of the VBER does not only include the decisional practice of the Commission but also that of the NCAs, as well as the relevant jurisprudence of national courts. The three EFTA States (Iceland, Liechtenstein and Norway) are not part of the evaluation since the VBER is not directly applicable in these countries. Secondary EU law (such as Commission regulations) first has to be included in the Agreement on the European Economic Area ("EEA Agreement") on the basis of Article 60 of the EEA Agreement and must then be incorporated into the national legal orders of the EFTA States to become applicable. Subject to this process, the VBER is applicable in the EFTA States. In view of the Commission’s obligation to informally seek advice from experts of the EFTA States for the elaboration of new legislative proposals, the Commission has informed the EFTA States of the evaluation of the VBER in order to provide them with an early opportunity to share their experience in this regard. 2.Background to the intervention The following sections provide an overview of the EU competition policy framework for vertical agreements (see section 2.1 below), a description of the 2010 VBER and the Vertical Guidelines, which constitute the intervention subject to this evaluation (see section 2.2 below), a presentation of the intervention logic (see section 2.3 below) and a presentation of the evaluation baseline for the 2010 VBER and the Vertical Guidelines (see section 2.4 below). 2.1.Overview of the competition policy framework The purpose of the EU competition rules enshrined in the Treaty (notably Article 101 and 102 of the Treaty) and related secondary EU law (such as Commission regulations) and soft law (such as Commission notices and guidelines, which are binding on the Commission but not on NCAs or national courts) is to prevent competition from being distorted to the detriment, directly or indirectly, of consumers, thereby contributing to achieving an integrated internal market. More specifically regarding vertical supply and distribution agreements, the Commission's policy aims to ensure undistorted and effective competition in the European supply and distribution chain so that consumers can benefit from lower prices, increased quality and variety of products and services, as well as the results of increased incentives to innovate as delivered by competitive markets. Article 101(1) of the Treaty prohibits agreements (including vertical agreements) between undertakings, decisions by associations of undertakings and concerted practices, which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition. As an exception to this rule, Article 101(3) of the Treaty sets out that the prohibition contained in Article 101(1) of the Treaty may be declared inapplicable to agreements that are on balance efficiency-enhancing, provided that such agreements fulfil four cumulative conditions. They have to (i) contribute to improving the production or distribution of goods or to promoting technical or economic progress, (ii) while allowing consumers a fair share of the resulting benefits. Moreover, they (iii) should not impose restrictions that are not indispensable to the attainment of the aforementioned objectives, and (iv) should not afford the undertakings the possibility of eliminating competition in respect of a substantial part of the products concerned. In light of the above, the assessment of agreements under Article 101 of the Treaty consists of two parts. The first step is to assess (in the context of Article 101(1) of the Treaty) whether an agreement between undertakings, which is capable of affecting trade between Member States, restricts competition. This is the case if it reveals a sufficient degree of harm to competition so that there is no need to examine its actual or potential effects ("restriction by object") or if it results in actual or potential anti-competitive effects ("restriction by effect"). The second step, which only becomes relevant when an agreement is found to restrict competition pursuant to Article 101(1) of the Treaty, is to determine (in the context of Article 101(3) of the Treaty) the pro-competitive benefits produced by the agreement and to assess whether these pro-competitive effects outweigh the anti-competitive effects resulting from the agreement. In view of the initially large number of notifications in relation to vertical agreements submitted by businesses under the first regulation implementing the EU competition rules, the Council adopted the Empowerment Regulation of 1965 to facilitate the enforcement work of the Commission by empowering it to declare by way of regulation that Article 101(1) of the Treaty does not apply to certain categories of vertical agreements and practices. This meant that the Commission no longer had to carry out an individual assessment of compliance with Article 101 of the Treaty for vertical agreements covered by a block exemption regulation adopted on the basis of the Empowerment Regulation of 1965, as agreements that fall within the scope of such a block exemption regulation benefit from a presumption of legality (so-called "safe harbour"). However, businesses still had to self-assess whether their agreements fell within the scope of the block exemption regulation.

The Commission has made repeated use of this empowerment by adopting various block exemption regulations for vertical agreements. More specifically, in line with the Empowerment Regulation of 1965, these block exemption regulations defined categories of vertical agreements that the Commission regarded at the time of adoption as normally satisfying the conditions laid down in Article 101(3) of the Treaty and that therefore did not require an individual assessment by the Commission under Article 101(3) of the Treaty. The scope of the different block exemption regulations was determined on the basis of the Commission’s enforcement experience and, where applicable, the overall experience with the application of previous block exemption regulations. One of the elements determining the scope of the VBER are market shares thresholds. They limit the applicability of the safe harbour to vertical agreements between businesses holding a share in the relevant market(s) that does not exceed the thresholds set out in the VBER. The definition of the relevant market to be carried out for that purpose is not specific to the VBER, but follows the principles established in the case law of the Union courts and reflected in the Commission’s Market Definition Notice. The following sections briefly summarise the main features of the 1999 block exemption regulations (see section 2.1.1 below) as well as of the review of the 1999 VBER (see section 2.1.2 below). 2.1.1.The 1999 block exemption regulations In the 1980s, the Commission adopted block exemption regulations in the field of distribution, relating to exclusive distribution, exclusive purchasingand franchising. Against the background of a growing feeling of unease in the mid-1990s relating to the effectiveness of the Commission's policy towards vertical agreements and notably the approach of the block exemption regulations, the Commission thoroughly reviewed its policy in this field on the basis of a Green Paper issued in 1997. The stakeholder feedback received during the consultation process revealed that the block exemption regulations adopted in the 1980s were perceived as too formalistic and as creating an unnecessary compliance burden, especially for businesses without significant market power such as small and medium-sized enterprises ("SMEs"). It also became clear that stakeholders expected any new policy to follow a more economic approach, which meant analysing vertical agreements in their market context and making the assessment dependent upon their effects on the market. As a follow-up to the Green Paper, the Commission outlined a new policy approach towards vertical agreements. In 1999, the Commission adopted a new block exemption regulation("the 1999 VBER") and, in 2000, accompanying Guidelines on vertical restraints ("the 2000 Vertical Guidelines").Unlike the previous block exemption regulations, the 1999 VBER applied to all types of vertical agreements entered into by two parties or more, except for those falling within the scope of any other block exemption regulation, and covered almost all sectors of the economy. The 1999 VBER and the 2000 Vertical Guidelines formed the first package of a new generation of block exemption regulations and guidelines inspired by a more economic and effects-based approach. In fact, they were based on the principle that for a proper assessment of the likely effects of a vertical agreement, both negative and positive, the conditions on the relevant market have to be taken into account. The main elements of the effects-based approach underlying the 1999 VBER can be summarised as follows: First, the likelihood that efficiency-enhancing effects of vertical agreements will outweigh any anti-competitive effects resulting from restrictions contained therein depends on the degree of market power of the undertakings concerned and, therefore, on the extent to which those undertakings face competition from other suppliers of interchangeable goods or services (so-called inter-brand competition). Where the share of the relevant market accounted for by the supplier does not exceed 30%, it can be presumed that vertical agreements that do not contain certain types of severely

anti-competitive restrictions generally lead to an improvement in production or distribution and allow consumers a fair share of the resulting benefits. Above the market share threshold of 30%, there can be no presumption that vertical agreements falling within the scope of Article 101(1) of the Treaty will usually give rise to objective advantages of such a character and size as to compensate for the disadvantages which they may create for competition. Second, vertical agreements containing restrictions which do not create objective economic benefits or do not benefit consumers or which are not indispensable to the attainment of any efficiency-enhancing effects cannot be exempted from the application of Article 101(1) of the Treaty. This concerns in particular certain types of severely anti-competitive restrictions such as minimum and fixed resale prices, as well as certain types of territorial protection (so-called "hardcore restrictions"). If an agreement contains one or more hardcore restrictions, the agreement falls outside the safe harbour created by the vertical block exemption regulation (irrespective of the market share of the undertakings concerned) and its compatibility with Article 101 of the Treaty has to be assessed on an individual basis. Third, the market share cap and the non-exemption of hardcore restrictions normally ensure that the vertical agreements to which the block exemption applies do not enable the participating undertakings to eliminate competition in respect of a substantial part of the products or services in question. If an agreement benefitting from the block exemption nevertheless has effects incompatible with Article 101(3) of the Treaty, the Commission can withdraw the benefit of the vertical block exemption, notably (i) where the buyer has significant market power in the relevant market in which it resells the goods or provides the services, or (ii) where parallel networks of vertical agreements have similar effects which significantly restrict access to a relevant market or competition therein (so-called "cumulative effects"). The Commission did not use this possibility to withdraw the benefit of the 1999 VBER. Moreover, to strengthen the supervision of parallel networks of vertical agreements which have similar restrictive effects and which cover more than 50% of a given market, the Commission can declare the block exemption inapplicable to vertical agreements containing specific restrictions relating to the market concerned, thereby restoring the full application of Article 101 of the Treaty to such agreements. So far, the Commission has not used this possibility. The 2000 Vertical Guidelines, which accompanied the 1999 VBER, set out principles for assessing vertical agreements under the 1999 VBER and a framework for assessing vertical agreements not benefitting from the safe harbour created by the 1999 VBER under Article 101 of the Treaty. 2.1.2.The review of the 1999 VBER In view of the expiry of the 1999 VBER in May 2010, the Commission launched a review process in 2008. All fact-gathering initiatives carried out during the 2008 review indicated that the new architecture of the "first block exemption with guidelines package" had led to a flexible and comprehensive enforcement policy regarding vertical restrictions. The review also revealed that by providing a clear analytical framework to both businesses and NCAs, the first block exemption with guidelines package had enhanced legal certainty, which was considered increasingly important in the context of the new decentralised system based on self-assessment introduced by Council Regulation 1/2003. Against this backdrop, the review concluded that there was no need for major structural changes of the package and that the review should focus on certain specific aspects of the assessment of vertical restrictions. Among the issues raised during the review process, two were particularly debated. First, it was considered that there is a need to take into account not only the possible market power of the supplier, but also that of the buyer, since both are relevant for assessing the risk that vertical restrictions may lead to consumer harm. Second, in the context of the growth in online sales, there was a demand for more guidance on the circumstances in which restrictions on the use of the internet by distributors should be considered a hardcore restriction. Section 2.2 below explains how these two issues were addressed in the review process. As a result of the 2008 review, the Commission adopted a revised block exemption regulation, together with revised Vertical Guidelines, which are the subject of the current evaluation. 2.2. Description of the intervention The 2010 VBER and Vertical Guidelines are to a large extent a continuation of previous rules in both their structure and substance. They were, however, updated and adapted in order to address the issues identified during the 2008 review process.

The two main changes made as a result of the 2008 review process concerned the market share threshold and the treatment of online sales restrictions. First, to take into account potential anti-competitive effects stemming from market power on the buyer side, it was decided that the block exemption should only apply when both the market share of the supplier and also that of the buyer do not exceed the threshold of 30% (Article 3 of the VBER). This double threshold brought the vertical regime in line with the approach taken in other block exemption regulations adopted after 2000 and in the Commission's De Minimis Notice of 2001, which are all based on a market share threshold for both the supplier and the buyer of the respective agreement. Second, the 2008 review revealed that the development of the internet as a distribution channel had considerably affected the functioning of exclusive and selective distribution, which were the two main distribution models at the time. To provide stakeholders with sufficient legal certainty, it was therefore necessary to clarify under which circumstances restrictions imposed by suppliers on the use of the internet by distributors should be considered as hardcore restrictions under the VBER, notably in the context of these two distribution models. Exclusive distribution enables the supplier to reserve for himself or to designate only one distributor in a particular territory and to protect that distributor against other (exclusive) distributors actively approaching customers in the exclusively allocated territory (protection against so-called active sales). This protection provides the exclusive distributor with more incentives to invest in distributing the supplier's products or services in that territory, as the exclusive distributor will be protected to a certain extent against possible free-riding by other distributors on its investments. However, this protection does not allow the supplier to prohibit other distributors from responding to unsolicited requests from individual customers (so-called passive sales). It is considered that a restriction of passive sales would go beyond what is necessary to protect the investments made by the exclusive distributor. The possibility to make passive sales into exclusive territories was also seen as a safety valve for protecting the internal market, which allows consumers, businesses and their agents to purchase products wherever they want within the EU. Restrictions of passive sales therefore qualify as hardcore restrictions under the VBER. The 2008 review revealed that the use of the internet made both active and passive selling to customers located in an area that had been exclusively allocated to another distributor easier and more efficient, thus reducing the protection of the exclusive distributor's investments. Due to the increase in online sales recorded in the context of the 2008 review, a clearer delineation between active and passive sales had to be found in order to strike the right balance between allowing consumers to take advantage of the internet to overcome geographic barriers and allowing suppliers and distributors to prevent free-riding on their investments. To tackle this issue, it was decided to further refine the distinction between passive and active sales in the context of the internet by adding in the Vertical Guidelines examples of practices amounting to active and passive sales restrictions respectively. In a selective distribution system, the supplier can choose its distributors on the basis of qualitative and/or quantitative criteria and prohibit authorised distributors at wholesale and retail level from selling to unauthorised resellers. However, to benefit from the safe harbour created by the VBER, the supplier cannot restrict authorised distributors from making active or passive sales to end users and from making cross-supplies to other authorised distributors at the wholesale or the retail level. Such restrictions are considered hardcore restrictions under the VBER. The 2008 review revealed that the use of the internet could result in free-riding concerns when consumers use the pre-sales services (e.g. showroom services and customer advice) offered in brick-and-mortar shops to inform their purchase decision, but then buy the product for a lower price on the internet from distributors who have not invested in such pre-sales services. It was considered that free-riding could lead to a sub-optimal provision of pre-sales services and a reduction in the performance of selective distribution systems. To address this issue, it was decided to clarify in the Vertical Guidelines that under the VBER, a supplier can require its distributors to have one or more brick-and-mortar shops in order to allow consumers to touch and feel and/or experience the product, thereby excluding internet-only distributors from its distribution network. 2.3.Intervention logic As explained in section 1.2 above, this evaluation looks at the functioning of the VBER, together with the Vertical Guidelines, as a whole. Therefore, the intervention logic (summarised in Figure 1 below) refers to the 2010 VBER in its entirety, together with the Vertical Guidelines (i.e. the intervention), and not only to the specific provisions that were changed in 2010. The VBER exempts specific types of vertical agreements from the prohibition of Article 101(1) of the Treaty and the Vertical Guidelines provide guidance on the application of the VBER and Article 101 of the Treaty to vertical agreements. The general objective of the intervention is twofold. First, it aims to facilitate the enforcement work of the Commission and, in view of the decentralised enforcement system, also the work of the national competition authorities and national courts, which no longer have to carry out an individual assessment under Article 101 of the Treaty for vertical agreements covered by the block exemption. Second, it aims to help businesses conduct the self-assessment of their vertical agreements, thereby reducing costs. Exempting certain vertical agreements from the prohibition of Article 101(1) of the Treaty also contributes in the long-term to the promotion of effective competition and economic efficiency. As recognised in the VBER itself "certain types of vertical agreements can improve economic efficiency within a chain of production or distribution by facilitating better coordination between the participating undertakings. In particular, they can lead to a reduction in the transaction and distribution costs of the parties and to an optimisation of their sales and investment levels". This needs to be seen in light of the objective of Article 101 of the Treaty, which, according to the Vertical Guidelines is "to ensure that undertakings do not use agreements – in this context, vertical agreements – to restrict competition on the market to the detriment of consumers. Assessing vertical restraints is also important in the context of the wider objective of achieving an integrated internal market. Market integration enhances competition in the European Union." The specific objectives of the VBER, together with the Vertical Guidelines, are better understood in the context of the wider legal framework for applying Article 101 of the Treaty that was in place in 2010 (and remains in place today), as further explained below. First, Council Regulation 1/2003 abolished the pre-notification of agreements to the Commission as established by the previous Council Regulation 17/62. Businesses therefore can no longer notify their agreements to the Commission in order to benefit from immunity from fines. They have to self-assess the compliance of their agreements with Article 101 of the Treaty. In order to do this, businesses can rely on the existing case law of the Union courts, as well as on the enforcement practice of the Commission and the NCAs. However, the assessments in such judgments and decisions are case-specific and cannot always be directly applied to other markets and different practices. Consequently, irrespective of their precedent value, they provide a limited degree of legal certainty to businesses. In the absence of broader guidance drafted in more general terms, self-assessing agreements can create a significant burden, especially for SMEs, which may lack the necessary resources and/or legal expertise. There was therefore a need to provide greater legal certainty and more guidance for businesses that enter into vertical agreements to assist them with their self-assessment. This was also in line with Article 103(2)(b) of the Treaty, which provides that the Council, in laying down rules for the application of Article 101(3) of the Treaty, should aim to simplify administration to the greatest possible extent. Second, the Commission is empowered to adopt block exemptions, especially as regards vertical agreements, by the Empowerment Regulation of 1965. This empowerment, however, is necessarily limited to those agreements falling within Article 101(1) of the Treaty for which it can be assumed with sufficient certainty that they satisfy the conditions of Article 101(3) of the Treaty. In providing additional legal certainty and guidance through a block exemption, the Commission therefore has to take a cautious approach when setting out the conditions which must be met for an agreement to be exempted or not, especially in order to avoid exempting agreements for which it cannot be assumed with sufficient certainty that they satisfy the conditions of Article 101(3) of the Treaty. The latter would constitute a "false positive", which would not be in line with the Treaty and the requirements of the Empowerment Regulation of 1965. In particular, the Commission takes account of the market power of the parties to the agreement, since the likelihood that "efficiency-enhancing effects will outweigh any anti-competitive effects due to restrictions contained in vertical agreements depends on the degree of market power of the parties to the agreement". The Commission also defines certain types of severe restrictions of competition (hardcore restrictions), which, if present in an agreement, remove the benefit of the exemption for the entire agreement, since in these cases there cannot be sufficient certainty that the agreement satisfies the conditions of Article 101(3) of the Treaty. In line with that provision, the conditions set by the VBER should normally ensure that the agreements to which it applies "do not enable the participating undertakings to eliminate competition in respect of a substantial part of the products in question". At the same time, the Commission also strives to avoid not exempting an agreement for which it can be assumed with sufficient certainty that it satisfies the conditions of Article 101(3) of the Treaty ("false negatives"), as such a situation would increase the burden for businesses when self-assessing the compliance of their agreements with Article 101(3) of the Treaty. Third, Council Regulation 1/2003 also decentralised the application of Article 101(3) of the Treaty by empowering national competition authorities and national courts to apply both Article 101(1) and Article 101(3) of the Treaty, which in the past was a prerogative of the Commission only. This decentralised enforcement system created a need to provide a common framework of assessment for the national competition authorities and national courts, in order to ensure that businesses operating across the EU could benefit from a level playing field. It follows from the foregoing that the VBER, together with the Vertical Guidelines, has the following three specific objectives: (1)The VBER, together with the Vertical Guidelines, aims to provide legal certainty to stakeholders as to which vertical agreements can be considered compliant with Article 101 of the Treaty on the basis of a simpler set of rules and which agreements require an extended individual assessment, thereby making it easier for stakeholders to perform the self-assessment required by the wider legal framework. (2)In line with the Empowerment Regulation of 1965, the VBER aims to identify the conditions that vertical agreements need to meet in order to benefit from the block exemption (such as market share thresholds or the absence of hardcore restrictions) in a way that reduces the risk of "false positives" (i.e. exempting an agreement for which it cannot be assumed with sufficient certainty that it satisfies the conditions of Article 101(3) of the Treaty). At the same time, in view of the general objective of the intervention, which is to facilitate the enforcement work of the relevant authorities and to help businesses conduct the self-assessment of their vertical agreements, the VBER also aims to reduce the risk of "false negatives" (i.e. not exempting an agreement for which it can be assumed with sufficient certainty that it satisfies the conditions of Article 101(3) of the Treaty). The latter is however of lesser importance than the avoidance of "false positives", since "false negatives" do not result in a situation that would be in breach of the Treaty and the Empowerment Regulation of 1965. (3)The VBER, together with the Vertical Guidelines, also aims to provide a common framework of assessment for national competition authorities and national courts, in order to ensure consistency in the application of Article 101 of the Treaty. NCAs and national courts are bound by the directly applicable provisions of the VBER. The Vertical Guidelines do not bind the NCAs or national courts, but they are – as emerged from the public consultation for the purposes of this evaluation – typically taken into account when assessing the compatibility of vertical agreements with Article 101 of the Treaty.

2.4.Evaluation baseline The main point of comparison for the evaluation is the hypothetical situation of not having a VBER and Vertical Guidelines in place. The evaluation therefore looks at the functioning of the VBER, together with the Vertical Guidelines, as compared to a situation in which the assessment of whether vertical agreements comply with Article 101 of the Treaty would have to be done only in light of other Commission guidance, relevant case law at EU and national level, as well as the enforcement practice of the Commission and the national competition authorities. The baseline for comparison, however, depends on the evaluation criteria and related evaluation questions to be assessed. The effectiveness analysis looks at whether the objectives of the VBER, together with the Vertical Guidelines, have been met, and hence looks at what has been the impact of the initiative compared to a situation without it. At the same time, the analysis looks at whether there is still room for improvement in meeting the objectives. The efficiency analysis compares the actual situation with the hypothetical situation of not having a VBER and Vertical Guidelines in place, in order to determine what are the costs it entails, whether these are proportionate to the benefits it brings and whether the costs of ensuring compliance of vertical agreements with Article 101 of the Treaty would increase in the absence of the VBER and the Vertical Guidelines. However, the efficiency analysis also compares the current situation with the situation before the intervention (i.e. when the 1999 VBER and the 2000 Vertical Guidelines were in place), in order to determine whether the current rules have increased costs for stakeholders. 3.Evaluation Questions This evaluation assesses the VBER and the Vertical Guidelines against the five Better Regulation criteria, namely effectiveness (see section 3.1 below), efficiency (see section 3.2 below), relevance (see section 3.3 below), coherence (see section 3.4 below) and EU added value (see section 3.5 below), using the specific evaluation questions for each of them. 3.1.Effectiveness 1.What is the level of legal certainty that the VBER, together with the Vertical Guidelines, provides for assessing whether vertical agreements and/or specific clauses/restrictions are exempted from the application of Article 101 of the Treaty and thus compliant with this provision? 2.To what extent do the conditions currently defined in the VBER, as interpreted in the Vertical Guidelines, meet the objective of exempting only those agreements for which it can be assumed with sufficient certainty that they generate efficiencies in line with Article 101(3) of the Treaty? 3.To what extent does the VBER, together with the Vertical Guidelines, provide a common framework for the assessment of the compliance of vertical agreements with Article 101 of the Treaty in order to ensure a consistent application of Article 101 of the Treaty by national competition authorities and national courts to vertical agreements? 3.2.Efficiency 4.Are the costs for assessing whether the VBER, together with the Vertical Guidelines, is applicable to certain vertical agreements proportionate to the benefits that the VBER, together with the Vertical Guidelines, brings for stakeholders? 5.Is there scope for further simplification and cost reduction? 6.Would the costs of ensuring compliance of vertical agreements with Article 101 of the Treaty increase if the VBER were not renewed? 7.Have the costs generated by the application of the VBER, together with the Vertical Guidelines, increased as compared to the 1999 VBER and the 2000 Vertical Guidelines? 3.3.Relevance 8.How well do the objectives of the VBER, together with the Vertical Guidelines (i.e. to provide legal certainty for assessing whether vertical agreements comply with Article 101 of the Treaty, to properly capture under the block exemption those vertical agreements that can be considered with sufficient certainty as efficiency-enhancing and to provide a common framework to ensure a consistent application by national competition authorities and national courts of the vertical rules across the EU) still correspond to the needs? 3.4.Coherence

9.Is the VBER, together with the Vertical Guidelines, coherent with other Commission instruments that provide guidance on the interpretation of Article 101 of the Treaty and with other EU legislation with relevance for vertical supply and distribution agreements? 3.5.EU added value 10.Does the VBER, together with the Vertical Guidelines, as an intervention at EU level, add value in the assessment of the compatibility of vertical agreements with Article 101 of the Treaty? 4.Methodology The evaluation assessed the functioning of the VBER, together with the Vertical Guidelines, both from a general perspective taking into account the intervention as a whole and more specifically with regard to the conditions set out in the VBER, together with the guidance provided thereon in the Vertical Guidelines. This section is structured as follows: Section 4.1 identifies the sources used for evaluating the functioning of the VBER, together with the Vertical Guidelines. Section 4.2 describes how the evidence gathered from various sources was processed. Section 4.3 explains the limitations of the analysis carried out on this basis and the extent to which they could be addressed in the evaluation. 4.1.Description and use of the sources During the evaluation phase, the Commission gathered evidence on the functioning of the VBER, together with the Vertical Guidelines, from various sources. These included a public consultation (see section 4.1.1. below), a targeted NCA consultation (see section 4.1.2 below), a stakeholder workshop (see section 4.1.3 below), an evaluation support study (see section 4.1.4 below), spontaneous stakeholder submissions (see section 4.1.5 below) and evidence gathered through other Commission initiatives (see section 4.1.6 below). 4.1.1.Public consultation Between 4 February 2019 and 27 May 2019, the Commission carried out a public consultation to gather stakeholder views on the functioning of the VBER, together with the Vertical Guidelines. The public consultation aimed to gather qualitative and quantitative evidence on all five evaluation criteria (i.e. effectiveness, efficiency, relevance, coherence and EU added value). The public consultation generated 164 contributions submitted through the online questionnaire and 13 position papers submitted outside the online tool. The contributions came from a variety of stakeholders, in particular business associations and companies/business organisations with international or national reach from several EU Member States, representing different levels of the supply chain (e.g. manufacturers, online distributors and retailers). The summary report of the contributions to the public consultation was published on the Better Regulation Portal and the dedicated VBER review webpage on DG Competition's website on 30 July 2019. The summary report is also part of the synopsis report provided in Annex 2 to the Staff Working Document. 4.1.2.Targeted consultation of national competition authorities During the evaluation phase, the Commission conducted a targeted consultation of NCAs, which was based on the same questionnaire as the one used in the public consultation. The Commission received 20 contributions, including one coming from one of the EFTA States. The information provided by NCAs contributed to the assessment of all five evaluation criteria. A summary report of the targeted NCA consultation was published on the dedicated VBER review webpage on DG Competition's website on 13 December 2019. It is also part of the synopsis report provided in Annex 2 to the Staff Working Document. 4.1.3.Stakeholder workshop On 14 November 2019 (afternoon) and 15 November 2019 (full day), the Commission carried out a stakeholder workshop to gather additional evidence about the functioning of the VBER, together with the Vertical Guidelines. Building on the outcome of the public consultation, the objective of the workshop was to deepen the discussion on the issues that stakeholders considered not to be functioning well in the current framework and that, in their view, would deserve re-thinking to ensure that the rules remain relevant for the coming years. Considering that the enforcement of EU competition law is driven by the consumer welfare objective, defined as including all relevant parameters of competition (e.g. price, output, quality, choice and innovation), the workshop was intended to focus on how consumers are impacted by the identified shortcomings. Participation in the workshop was limited to stakeholders who had contributed to the public consultation and consumer associations. Approximately 150 participants from companies and business associations representing a variety of sectors attended the workshop. The information resulting from these discussions contributed to the assessment of the evaluation criteria of effectiveness and relevance. A summary report of the stakeholder workshop was published on the dedicated VBER review webpage on DG Competition's website on 5 February 2020. It is also part of the synopsis report provided in Annex 2 to the Staff Working Document. 4.1.4.External evaluation support study The Commission commissioned an external evaluation support study ("evaluation study") in order to carry out an independent evaluation of the functioning of the VBER, together with the Vertical Guidelines, with a particular focus on the evaluation criteria of effectiveness, efficiency and relevance. The purpose of the evaluation study was to gather qualitative and quantitative information on the basis of nine tasks. These included (i) four stakeholder surveys aimed to collect evidence on specific restrictions in Germany, France, Italy, Sweden, Poland and Hungary mainly from stakeholders that had not participated in the public consultation and (ii) a consumer survey aimed to collect evidence on the purchasing behaviour of European consumers, notably with regard to the interaction between online and offline channels. The consumer survey was based on the same set of Member States used for the stakeholder surveys and covered 2.500 consumers per Member State, thus resulting in a total of 15.000 consumer interviews. The final study report was submitted to the Commission on 3 April 2020 and published on the dedicated VBER review webpage on DG Competition's website on 25 May 2020. The final consumer survey report was submitted to the Commission on 27 April 2020 and published, together with the final study report, on the dedicated VBER review webpage on DG Competition's website on 25 May 2020.

4.1.5.Spontaneous stakeholder submissions In the course of the evaluation, the Commission received several spontaneous submissions from stakeholders who had either not participated in the public consultation or wanted to supplement their contribution to the public consultation with additional evidence. These included studies carried out by stakeholders to provide the Commission with additional evidence. All such submissions were published on the dedicated VBER review webpage on DG Competition's website, except for a few for which stakeholders had asked the Commission not to publish for confidentiality reasons. The Commission used the latter to enhance its understanding of a particular stakeholder position but did not rely on the information contained therein for any of the conclusions in the Staff Working Document. 4.1.6.Evidence gathered through other Commission initiatives On 6 May 2015, the Commission launched a sector inquiry into the electronic commerce of consumer goods and digital content in the EU ("e-commerce sector inquiry"). The e-commerce sector inquiry allowed the Commission to obtain an overview of the prevailing market trends and gather evidence on barriers to competition in e-commerce. It also allowed the Commission to understand the prevalence of certain business practices and their underlying rationale. The results of the e-commerce sector inquiry were published in the form of a final report and an accompanying Staff Working Document on the website of DG Competition on 10 May 2017. Despite the scope of the VBER being broader than the scope of the e-commerce sector inquiry, the evidence gathered in the context of the latter is relevant for this evaluation and notably for the assessment of the evaluation criteria of effectiveness and relevance. Moreover, in recent years, the Commission has enforced the EU competition rules in relation to vertical restrictions in a number of cases. The Commission's enforcement practice with regard to vertical restrictions is relevant for the assessment of the evaluation criteria of effectiveness, relevance and coherence and is described in more detail in section 5.1.3 below. In addition, in April 2018, following the judgment of the European Court of Justice ("CJEU") in the Coty case, a Competition policy brief on the application of the EU competition rules to marketplace bans ("policy brief") was issued. The case concerned a contractual restriction included in a selective distribution agreement between Coty Germany GmbH ("Coty"), which is one of Germany's leading suppliers of luxury cosmetics, and one of its distributors, Parfümerie Akzente GmbH ("Parfümerie Akzente"). The marketplace ban introduced by Coty aimed to prohibit Parfümerie Akzente from distributing its products on "Amazon.de" through Amazon's marketplace, which enables third-party sellers such as Parfümerie Akzente to sell products alongside Amazon's offerings. Against this background, the policy brief provides a common point of reference to stakeholders in the Member States on how to apply Article 101 of the Treaty to a prohibition by a supplier on the use of third-party marketplaces by its distributors. 4.2.Processing and triangulating of the evidence collected For the purposes of the evaluation of the VBER, together with the Vertical Guidelines, evidence from the various sources had to be analysed and triangulated. The main sources of the evidence used to inform the assessment of each evaluation criterion are listed in the table below. A further breakdown of this table, which includes the evaluation questions for each criterion and a more detailed reference to the sources used, is provided in the evaluation matrix contained in Annex 3 to the Staff Working Document. Sources Criteria Public consultation (including spontaneous submissions) Targeted NCA consultation Stakeholder workshop Study Other Commission initiatives Effectiveness ✔ ✔ ✔ ✔ ✔ Efficiency ✔ ✔ ✔ Relevance ✔ ✔ ✔ ✔ ✔ Coherence ✔ ✔ ✔ EU added value ✔ ✔ In line with the general objective of the VBER, the evidence-gathering carried out by the Commission focused primarily on the views of other agencies enforcing EU competition law (i.e. NCAs) and businesses having to self-assess the compliance of their vertical agreements with Article 101 of the Treaty. Through the targeted consultation and some of the tasks of the evaluation study, the Commission collected the views of NCAs, which were complemented with the Commission’s own experience in this area and additional research performed by the contractor. Through the public consultation, the stakeholder workshop and some of the tasks of the evaluation study, the Commission collected mainly the views of businesses, business associations and law firms advising businesses in this area of law. In this context, the evaluation took due account of the fact that the views of businesses operating at different levels of the supply chain (i.e. supply, wholesale or retail level) and distributors relying on different channels of distribution (i.e. brick-and-mortar or online) may differ with regard to a number of aspects of the rules. For the assessment of each evaluation criterion, the Commission proceeded as follows: The assessment started with the results of the public consultation. An in-depth analysis of the feedback resulted in a preliminary but comprehensive understanding of the main issues faced by stakeholders as regards the functioning of the current rules. It allowed the Commission to establish the issues on which stakeholders held common positions, as well as the issues on which their positions diverged. The assessment of the specific issues raised was done based on (i) the examples and the level of detail provided by stakeholders to support their concerns with concrete evidence, (ii) the variety of different positions and (iii) the extent to which different types or groups of stakeholders shared the same view. The stakeholder workshop provided additional input, which helped, first, to deepen the understanding of the issues raised in response to the public consultation and, second, to preliminarily evaluate not only their impact on stakeholders but also on consumers. During the workshop, stakeholders were able to decide freely on the topics for discussion. In particular, stakeholders were therefore able to elaborate on the views already expressed in the public consultation by, for instance, providing examples of specific issues and explaining how those issues impacted stakeholders and consumers. Despite having the possibility to propose new topics, stakeholders did not raise any new issues. The combined results of the public consultation and the stakeholder workshop provided the stakeholders’ perspective on the effectiveness, efficiency, relevance, coherence and EU added value of the VBER, together with the Vertical Guidelines. The targeted consultation of the national competition authorities aimed to gather their perspective on the five evaluation criteria. It provided a significant amount of evidence on the challenges faced by NCAs in applying the VBER and considering the Vertical Guidelines, as well as their views on a number of specific issues with the current rules.

The evidence of the public consultation and the stakeholder workshop were compared to and contrasted with the evidence resulting from the targeted consultation of the NCAs. The combination of these sources resulted in a more complete and balanced understanding of the areas where the VBER, together with the Vertical Guidelines, has not been functioning well, or not functioning as well as it could. On this basis, the evaluation study was designed to (i) enrich the list of issues raised by expanding the number of stakeholders interviewed, (ii) further deepen and/or add a different perspective on issues that were already identified (with the aim of correcting for potential biases that might have been present in the evidence collected previously), as well as (iii) expand and complement the results of the e-commerce sector inquiry on the main market trends since the adoption of the VBER in 2010. 4.3.Limitations of the analysis The analysis of the different evaluation criteria, including the methodology applied and the evidence sources used for that purpose, is subject to the following limitations: the difficulty of gathering evidence on VBER related costs and benefits (see section 4.3.1 below), a certain lack of representativeness of stakeholder feedback (see section 4.3.2 below) and a lack of information about consumer views (see section 4.3.3 below). Each of the sections describes the nature of the limitation and the extent to which it was possible to address it in the evaluation. 4.3.1.Evidence on VBER related costs and benefits As regards the evaluation criterion of efficiency, it proved difficult to collect quantitative evidence on the costs of applying the VBER, together with the Vertical Guidelines. This is mainly due to the fact that businesses appear to assess the costs they incur to ensure compliance of their business operations with EU competition law at a general level. Businesses therefore do not appear to distinguish between the type of agreement concerned or the instrument relied on for the purposes of their self-assessment (e.g. VBER or the Vertical Guidelines). The difficulty of gathering cost related evidence is reflected in the low response rate of stakeholders to the public consultation with regard to the questions aimed at gathering best efforts estimates of VBER related compliance costs. Only two companies out of the total of 164 respondents provided an estimate of their compliance costs, with the two estimates however differing to a significant extent. Nor were the NCAs able to quantify the costs that the application of the VBER, together with the Vertical Guidelines, created for them. In the same way, it proved difficult to obtain quantitative evidence on the balance between the benefits and the costs of applying the VBER, together with the Vertical Guidelines. Businesses only provided qualitative evidence in reply to the question in the public consultation relating to this issue, which reflects the difficulty for businesses to properly estimate this parameter. The same applies to the NCAs. To overcome this limitation, the study aimed to gather additional evidence about VBER related costs and benefits on the basis of ten case studies in the form of interviews conducted by phone, e-mail or in person. The interviewed respondents were law firms advising clients on vertical restrictions, industry associations, a manufacturer of construction equipment who operates globally, and a professor of competition law. As reported in the study, none of the respondents could provide any specific figures concerning the costs in question but all of them provided a qualitative assessment. The lack of quantitative data in relation to both these issues made it difficult to provide a robust quantitative assessment of the efficiency of the VBER, together with the Vertical Guidelines. The conclusions drawn in section 5.2.2 below therefore essentially rely on the qualitative evidence provided by stakeholders in response to the public consultation and in the context of the evaluation study. 4.3.2.Representativeness of stakeholder feedback Evaluation activities subject to voluntary participation, by definition, do not necessarily lead to representative results. In this evaluation, this applies to the public consultation and the stakeholder workshop, which was conceived as a follow-up to the public consultation and therefore mirrored participation in the public consultation. While the Commission received contributions from a large variety of stakeholder groups, some of them accounted for a higher share of responses than others. However, this did not have any meaningful impact on the results of the evaluation since the areas identified by stakeholders as either functioning well or not functioning well did not differ to an appreciable extent within a particular stakeholder group. This means that a more limited participation of some stakeholder groups did not result in a less complete overview of the views of those stakeholder groups on the functioning of the VBER, together with the Vertical Guidelines. Moreover, the study aimed at reducing any potential bias within each stakeholder group to the detriment of micro and small stakeholders who may not have had the resources to participate in the public consultation or the stakeholder workshop. Corrective measures included increasing the sample size, simplifying the questionnaires for the consumer surveys and reaching out specifically to micro and small stakeholders. In the assessment set out in section 5.2 below, reference is made to specific stakeholder groups whenever the views reported were shared primarily by one or more different stakeholder groups. While indicative of a trend, the fact that a view was broadly shared by all or only some of the stakeholder groups, does not however mean that the evaluation disregards diverging views, both within the same or across different stakeholder groups/sectors. This is also reflected in Annex 4 to this Staff Working Document, which presents the different views and issues raised by stakeholders per area of the rules, regardless of whether they were supported by a large or small number of stakeholders. These views will be taken into account in any next steps following the evaluation. 4.3.3.Limited evidence about consumer views Consumers and consumer associations only made a limited contribution to this evaluation, most likely for the following reasons. First, the VBER, together with the Vertical Guidelines, is a technical piece of legislation, which is primarily aimed at providing guidance to businesses self-assessing compliance of their vertical agreements with EU competition law. Consumers and consumer associations may therefore be neither aware of its existence, nor familiar with its functioning. Second, despite having an impact on the prices at which consumers buy products and services and the choice of products and services available to them, consumers are neither a party to the vertical agreements entered into between businesses active in the supply chain of goods and services, nor privy to the conditions stipulated in such agreements. They are therefore not able to link the purchase conditions they are exposed to in retail markets to a particular malfunctioning of the vertical supply chain or even less to the safe harbour created by the VBER. The aforementioned reasons explain the limited participation of consumers and consumer associations, despite the Commission having actively reached out to many of them to solicit their participation notably in the workshop, and why it did not have any meaningful impact on the results of the evaluation. 5.Analysis and answers to the evaluation questions

This section presents the assessment of the VBER, together with the Vertical Guidelines, based on the five evaluation criteria (effectiveness, efficiency, relevance, coherence and EU added value). This section is structured as follows: Section 5.1 describes the main market developments that occurred during the period under evaluation. Section 5.2 answers the evaluation questions set out in section 3 above for the VBER, together with the Vertical Guidelines, as a whole. Section 5.3 sets out the areas for which the evaluation has shown that the VBER, together with the Vertical Guidelines, is not functioning well or not functioning as well as it could, including the underlying reasons. 5.1. Market developments since the adoption of the VBER Since the adoption of the VBER, together with the Vertical Guidelines, in 2010, there have been a number of market developments affecting the supply and distribution of goods and services, which are in particular linked to the increasing digitalisation of the economy. The Digital Single Market strategy adopted in 2015 recognised that the global economy was rapidly becoming more digitalised and outlined several key actions under three pillars, by means of which the Commission envisaged to create a Digital Single Market. One of these pillars related to ensuring better access for consumers and businesses to goods and services via e-commerce across the EU. In addition to a number of legislative initiatives under this pillar, the Commission decided to launch a sector inquiry in May 2015 into e-commerce in consumer goods and digital content in the EU. The e-commerce sector inquiry allowed the Commission to obtain an overview of market trends and gather evidence on barriers to competition in e-commerce. It also allowed the Commission to understand the prevalence of certain business practices and their rationale, and ultimately to identify priorities for enforcing the EU competition rules. The results of the e-commerce sector inquiry, which cover the period from 2005 to 2015, are summarised in section 5.1.1 below. As part of the evaluation of the VBER, together with the Vertical Guidelines, the Commission commissioned an evaluation study in order to, among other things, understand how markets have evolved since the e-commerce sector inquiry, as well as to cover other sectors and offline trade, thus complementing the findings of the e-commerce sector inquiry. The relevant results of the evaluation study are summarised in section 5.1.2 below. In addition, and in part as a follow-up to the e-commerce sector inquiry, the Commission took enforcement action against a number of anti-competitive vertical agreements, with a particular focus on business practices that have evolved or become widespread as a result of increased e-commerce during the last decade. An overview of relevant cases is provided in section 5.1.3 below. Enforcement action against vertical restrictions was also taken at national level. Between 1 June 2010 and 1 January 2020, NCAs reported 391 cases concerning vertical agreements. Moreover, six NCAs also issued guidance related to vertical restrictions. An overview of national cases and policy initiatives is provided in section 5.1.4 below. It should also be noted that during the last years there have been increasing discussions about the compatibility of sustainability agreements with Article 101 of the Treaty. Given that no specific issue in relation to sustainability agreements in the vertical supply chain was identified during the evaluation, this development is not reflected in the Staff Working Document. However, in line with the objectives of the European Green Deal, which is one of the priorities for this Commission mandate and which aims to make the EU's economy sustainable by turning climate and environmental challenges into opportunities across all policy areas, any related issues may be taken into account when considering next steps. 5.1.1.The main findings of the e-commerce sector inquiry The final report of the e-commerce sector inquiry was published in May 2017. The results of the sector inquiry, which cover the period from 2005 to 2015, confirmed that the growth of e-commerce over the preceding decade and in particular the increase in price transparency and thus price competition with regard to consumer goods sold in an online environment had a significant impact on businesses’ distribution strategies and consumer behaviour. First, price transparency increased with online trade, since consumers are able to instantaneously obtain and compare product and price information online and to switch swiftly from one channel to another (i.e. from online to offline and vice versa). While this allows consumers to find the best deal, it may also result in free-riding behaviour, since consumers can use pre-sale services provided by brick-and-mortar shops before purchasing the product online (i.e. free-riding on offline services that are not provided online) or search for and compare products online before purchasing in brick-and-mortar shops (i.e. free-riding on online services that are not provided offline). Second, the ability to compare the prices of goods and services across online retailers leads to increased price competition affecting both online and offline sales. While such increased price competition has beneficial effects for consumers, it may affect competition on parameters other than price, such as quality, brand and innovation. Third, increased price transparency allows businesses to monitor more easily the prices at which their goods or services are distributed and the prices of competitors. Due to the increasing availability of automated pricing software, detecting low-price offers takes a matter of seconds and manufacturers are increasingly able to monitor and influence retailers’ price setting. The availability of real-time pricing information may also lead to automated price coordination. Fourth, alternative online distribution models such as online marketplaces have made it easier for retailers to access customers. By using these third-party platforms, small retailers may, with limited investments and effort, become visible to potential customers and sell products to a large customer base and in multiple Member States. This may however clash with the distribution and brand strategies of manufacturers, in particular where they perceive sales through online marketplaces as potentially harmful for their business (e.g. because they consider that the image of their brand is not protected or the level of service is not sufficient). These market developments have significantly affected the distribution and pricing strategies of both manufacturers and retailers. As a reaction to notably the increased price transparency and price competition, manufacturers have sought greater control over their distribution networks, with a view to better controlling price and quality. To that end, manufacturers have started implementing in particular the following strategies: ·A large proportion of manufacturers have started to sell their products directly to consumers through their own online retail shops, thereby competing increasingly with their distributors. ·Manufacturers have made increasing use of selective distribution systems, under which products and services can only be sold by pre-selected and explicitly authorised resellers, thus allowing manufacturers to better control their distribution networks, in particular in terms of the quality of distribution but also price. ·Manufacturers have made increasing use of contractual restrictions to better control the distribution of goods. Depending on the manufacturer’s business model and strategy, such restrictions may take various forms such as pricing restrictions, marketplace (platform) bans, restrictions on the use of price comparison tools and the exclusion of pure online players from distribution networks. As regards digital content, the results of the e-commerce sector inquiry indicated that online transmission (i.e. the possibility for consumers to access digital content online) has changed the way in which digital content is accessed and consumed. The results also confirmed that the availability of licences from content copyright holders is essential for digital content providers and a key factor determining the level of competition in the market. The results also pointed to certain licensing practices that may make it more difficult for new online business models and services to emerge. One of the key findings of the e-commerce sector inquiry in this regard was that almost 60% of digital content providers who participated in the inquiry contractually agreed with right holders to geo-block access to their content, thus preventing consumers from accessing digital content available online in other EU Member States.

5.1.2.The main findings of the evaluation study The evaluation study aimed, among other things, to complement the findings of the e-commerce sector inquiry and gather relevant information for other sectors, given that the VBER, together with the Vertical Guidelines, applies not only to online sales of consumer goods and digital content, but also to supply and distribution agreements in other areas of the economy, both online and offline. For that purpose, the evaluation study included a survey on the evolution of distribution models for various goods and services over the last ten years, complemented by three case studies about business models of online platforms. In addition, it included a survey of the purchasing behaviour of European consumers to gather information about consumer behaviour across the different stages of the consumer purchasing journey and notably how consumers interact with different sales channels, as well as the relative importance of these sales channels and possible free-riding issues between offline and online channels, different offline channels or different online channels. First, the findings of the evaluation study show that, since the adoption of the VBER and the Vertical Guidelines, the development with the biggest impact on distribution models was the growth of online sales and online marketplaces. In fact, online purchasing is increasingly popular among consumers for a wide range of products. Overall, as depicted in Figure 2 , the share of individuals purchasing online has increased by 100% since 2008. In most of the sectors under analysis, consumers can now purchase the desired products and services through a variety of different channels such as offline and online shops, marketplaces and other online platforms. As reported in the evaluation study, for the four categories of products selected for the survey of consumer purchasing behaviour, search engines, online marketplaces, and price comparison tools are particularly important for consumers who purchase online. At least one of these three channels was used by 35% of all consumers and 59% of the consumers who purchased online for cosmetics and hair care, by 39% of all consumers and 53% of the consumers who purchased online for clothing and shoes, by 60% of all consumers and 84% of the consumers who purchased online for house and garden equipment and by 68% of all consumers and 80% of the consumers who purchased online for consumer electronics and large electrical appliances.

The more complex the purchase, the greater appears to be the importance of these online channels. For purchases of cosmetics and hair care products or clothing items and shoes, the percentage of those who use the services offered by search engines, online marketplaces, and price comparison tools, including to obtain information on the best price, is lower than for purchases of house and garden equipment or consumer electronics and large electrical appliances. The survey also found that while the price still has a strong impact on consumer decisions regardless of the product purchased, consumers also gather other types of information that are incorporated into the decision-making process (e.g. product information, brand and retailer information). The evaluation study also found that today’s consumer journey is a fluid omni-channel process whereby consumers change easily (i) within the online channel (i.e. between online retailers and online platforms), (ii) between online and brick-and-mortar distributors, (iii) within the brick-and-mortar channel (i.e. between offline retailers) and (iv) between mono-brand and multi-brand retailers. Within such a context, consumers expect to have a continuous omni-channel experience. In response to this changing consumer behaviour and in order to meet consumer expectations, businesses seek to create a seamless omni-channel environment for consumers. As regards online marketplaces, the findings of the evaluation study show that platform business models appear to be evolving over time. Overall, businesses pursue different diversification strategies, with the aim of redistributing risks and achieving positive economies of scale and synergies. Today, many platforms take on a dual role, acting as both an intermediary service provider and a retailer. For instance, Amazon and Zalando do not only grant third-party sellers access to their platforms by offering intermediary services in exchange for a commission, but also act as retailers selling products they source from suppliers, manufacturers or brands at wholesale level on the same platform in competition with the third-party sellers that use their platform. The selection of third-party sellers that will be permitted access can vary greatly depending on the way the platform is organised. For instance, in some marketplaces sellers (even those selling competing products) are admitted as long as they satisfy certain general conditions. In other marketplaces, it is more likely that platforms will select sellers whose products complement the existing basket of products available on the platform. Also platforms that only provide services follow the trend of diversifying their business model. For example, Uber is expanding its business model from offering rides for individuals and companies to also offering services such as food delivery or the rental of new means of mobility (such as eBikes). All these business models involve an increase in the number of contractual relationships, including an increased use of vertical agreements. Second, the evaluation study also confirmed the increased use of selective distribution systems during the last ten years, which is in line with the results of the e-commerce sector inquiry. Selective distribution agreements are among the most common vertical agreements that can be found in the Member States analysed in the evaluation study. According to the interviewed manufacturers and retailers, this type of distribution model is quite common in all countries and across a wide range of sectors, but it is most prevalent in the clothing, sporting goods, luxury goods, household appliances and cosmetics industries. The economic literature identifies a number of possible pro-competitive effects of selective distribution systems. In particular, such systems may help addressing possible free-rider problems by encouraging retailers to provide valued sales services, incentivising them to maintain and support the brand image, supporting the launch of new products and protecting them in making relationship-specific investments. However, they may also lead to anti-competitive effects such as facilitating collusion at supplier level and preventing specific retailers from offering certain products (i.e. foreclosure at retailer level). The actual effects of selective distribution systems on consumer welfare depend on the specific market circumstances. According to the companies interviewed in the context of the evaluation study, the most common motivations behind the implementation of selective distribution networks are to protect the brand image and to offer a better customer experience. The features of selective distribution systems (i.e. the selection criteria and requirements imposed on authorised distributors), however, do not seem to have changed much over the last ten years. The only notable change concerns the increasing use of criteria regarding online sales, which are seen by stakeholders as nothing more than the adaptation of the existing brick-and-mortar criteria to an e-commerce context. This is due to the growth of e-commerce in the sectors where selective distribution is more prevalent, which confirms the findings of the e-commerce sector inquiry. According to the companies interviewed in the context of the evaluation study, selective distribution is most often based on qualitative criteria. That said, quantitative criteria, used in combination with qualitative criteria, are also quite prevalent. Among the criteria reported, manufacturers most often require pre-sale and post-sales advice to the customer, product-specific training and the obligation for the retailer to buy a minimum number of units of the contract product(s). The requirement to have at least one brick-and-mortar store is also commonly found, as well as the need to comply with quality requirements for online sales. In contrast, retailers reported that the requirement to have at least one brick-and-mortar store is the most common obligation, followed by the requirement to offer pre-sale and post-sales advice to the customer and the obligation for the retailer to buy a minimum number of units of the contract product(s). As regards the objectivity and transparency of the criteria for joining a selective distribution network, the evaluation study shows that these seem to vary according to the strategy of the individual supplier. The selection criteria can be either displayed on the supplier’s website or shared upon request, or they may not be shared at all. Retailers across industries often have imperfect knowledge of the criteria on the basis of which they are selected or rejected as an authorised distributor. As regards the use of specific vertical restrictions relating to online sales in selective distribution systems, the evaluation study shows that, due to the expectation of consumers to have a seamless omni-channel experience, suppliers usually set criteria that must be used in all (online and offline) distribution channels. Manufacturers often require that all marketing materials used by their retailers have to be either provided or pre-approved by them. Often, qualitative requirements for advertising pursue the same objectives as other requirements relating to the sale of branded products. This includes, according to stakeholders, the need to maintain for instance the luxury and/or quality image of the advertised products and requirements on the environment in which those products are advertised. Nevertheless, the evaluation study found that in the majority of cases, retailers and wholesalers were not subject to any online sales restrictions (such as restrictions on sales through marketplaces or restrictions on the use of price comparison websites). The evaluation study however also found that the VBER, together with the Vertical Guidelines, does not provide sufficient clarity on the assessment of these types of restrictions, which have become more prevalent over time. Third, the findings of the evaluation study show that the e-commerce growth also had an impact on exclusive distribution networks. Whereas previously territorial exclusivity was fairly straightforward in its application, nowadays e-commerce makes it easier for buyers to reach sellers outside their territory (and vice-versa). This development has increased the relevance of the distinction between active and passive sales, with only restrictions on the latter being prohibited in the context of exclusive distribution under the current rules. This is because the competitive pressure resulting from passive sales by distributors and retailers located in other territories increases the need perceived by suppliers to be able to restrict such passive sales, in addition to the currently (and only partially) allowed restriction of active sales. The evaluation study therefore indicated that distribution models which rely on territorial sales restrictions are becoming less viable. As a result, suppliers seem to be moving away from exclusive distribution models, at least at retail level, and shifting towards other distribution models such as selective distribution. Nevertheless, exclusive distribution models remain relevant in certain sectors (like specialised electronics (e.g. medical lab equipment), industrial machinery, or frozen products) and at wholesale level. Fourth, the evaluation study also analysed retail parity clauses. Although the study did not target a specific sector, its findings focus on the hotel industry, as this was the main sector that participated in the relevant interviews. The findings of the evaluation study show that distribution models in the hotel industry have changed radically since 2009, when online travel agencies (“OTAs”) started to play a major role in the market. Stakeholders thus reported that it has become a necessary condition for all hotels to be visible on these OTAs. The findings of the evaluation study also show that retail parity clauses are common in the agreements between OTAs and hotels. Evidence gathered from the stakeholder interviews suggests that these clauses are more frequently applied in the hospitality sector and in mass markets (i.e. goods produced in large quantities that do not have the features of luxury products). According to the evidence gathered in the evaluation study, retail price parity clauses may be requested by retailers to avoid continuous price negotiations with manufacturers and maintain a competitive price for the products concerned. This seems to be the case in the mass market segment. Retail price parity clauses may also be imposed by the platform itself, as is the case in the hotel industry. In this context, the study pointed out that platforms such as OTAs aggregate a large amount of data and provide customers with information, which would be otherwise difficult for these customers to obtain when making purchasing decisions. At the same time, the market power of sellers in such a context is strongly reduced. Fifth, the evaluation study also included a study of the consumer purchasing behaviour in Europe. The study traced customer journeys for four product categories, namely (i) consumer electronics and large electrical appliances, (ii) house and garden equipment, (iii) clothing and shoes, as well as (iv) cosmetics and hair care, in an online survey covering six EU Member States (i.e. France, Germany, Hungary, Italy, Poland, and Sweden). To complement the survey, the study included a literature review, an analysis of Google Trends data for each product category and an analysis of GlobalWebIndex data providing time-series insights into consumer purchasing behaviour. The study confirmed that over the last years, the number of different distribution or sales channels used by suppliers to promote their products to a wide range of consumers has increased, leading to a more prevalent multi-channel sales approach. According to the literature, this multi-channel sales approach has a positive effect since it satisfies consumers’ shopping needs better, as they can choose the channels that are most convenient for them and best fit their needs. Also retailers and manufacturers can benefit from the fragmentation of sales channels. By using several sales channels, retailers can distribute their costs more effectively than by focussing on just one sales channel and at the same time increase sales. Despite the positive effects of such a multi-channel environment, there is however much discussion about free-riding in this context, which can be a negative consequence of today's multi-channel sales environment. Nowadays, consumers tend to make complementary use of several online as well as offline sales and information channels during the entire purchasing process, which can be divided into three main stages: inspiration, information and evaluation, and purchase. In the first and second phase, the consumer will recognise a need, get inspired and eventually narrow down the choice of purchase by searching for information about price, physical attributes and availability. In the purchase phase, the consumer ultimately selects the preferred brand and retailer, and finalises the buying process. How exactly consumers behave in the purchasing process can depend on a variety of factors. These include (but are not limited to) the following factors: product characteristics, frequency of purchase, consumer involvement, order value (price), type of consumer (consumer of brand or retail primacy kind), socio-demographic characteristics, or personal preferences. The findings of the survey did not only show that consumers who bought different types of products behaved differently, but also that the behaviour of individual groups of consumers who bought the same product varied considerably. For instance, the survey found that consumers tended to spend more effort and were more highly involved in the product and purchasing process when they were about to spend more money. The same applies to less frequent purchases. For consumers who bought consumer electronics and large electrical appliances, this included considering a wider range of information in the decision-making process and consulting a greater number of different types of channels to obtain the relevant information. Consumers who bought a clothing item, shoes, cosmetics or hair care products spent less on their products, were particularly less involved, and indicated a lower number of channels used to find information. Even among consumers who bought the same type of product, the study repeatedly found that those consumers who paid the least for their product, or who have been less involved, were more likely to invest less effort in the buying process. Regardless of the type of product purchased, the survey found that most consumers gathered price or product information. A slightly smaller percentage of consumers gathered information about retail outlet services or the brand. The differences in shares of consumers gathering price information, product information, brand information, or information about retail outlet services were only minor, which leads to the assumption that all these types of information were decisive in the purchasing process. This assumption is confirmed by other studies analysed in the literature review. For example, recent studies found that although price has a significant influence on the purchase channel ultimately used, product quality, delivery times, information and support are just as important in the decision-making process. Nevertheless, the results of the survey also show that checking for the best price was particularly common for very expensive products like those purchased from the categories house and garden equipment as well as consumer electronics and large electrical appliances. The survey also analysed the reasons for which consumers chose a specific retail outlet or brand. The brand was chosen mainly for the quality of its products or for the combination of price and quality. In general, a majority of consumers in the individual product groups tended to cite price as the reason for their choice of retailer. However, at the same time, 70-77% of the consumers who bought products in the respective product groups did not consider price to be a decisive criterion for selecting the retail outlet, or at least not the only criterion. The survey found that online channels play a major role in the information and evaluation phase, regardless of the product category. Internet websites and applications were among the most widely used. The usage pattern of specific internet websites and applications varied depending on the products that consumers purchased. The results of the secondary data showed that consumers integrate online marketplaces, price comparison tools and search engines strongly into the purchasing process. The share of individuals using these services has increased steadily over the years. Furthermore, social media, messaging services and voice assistants gradually start to play a role in consumer purchasing journeys as well. Also mobile devices play an important role in the purchasing process nowadays. In recent years, the proportion of consumers making purchases via their mobile devices has increased, while the share of consumers making purchases via personal computers and laptops has decreased. According to data provided by GlobalWebIndex, the most used channel for today’s brands and product discovery (see Figure 7 ) and for gathering information on brands, products and services (see Figure 8 ) are search engines, as shown below.

p The keywords used when searching with search engines also give an indication of which information is important to consumers. According to the study results, consumers predominantly used keywords containing product names, brand names or product-specific keywords. The analysis of Google Trend data yielded similar results. For several years now, consumers have been using more product-specific search queries compared to brand or retail related searches for almost all types of products considered. As regards possible free-riding concerns, the survey results show that a large proportion of consumers use online and offline channels in combination, constantly changing between both types of channels. Furthermore, the study shows that there is a high share of consumers who use the same type of channel (online or offline) for completing the transaction which they used in the pre-purchase phase. The use of different channels across the customer journey could give rise to free-riding behaviour. The study finds in this regard that among all purchases and product categories under consideration, free-riding between online and offline channels is only relevant for about 2-15% of all consumers/purchases, depending on the product. Free-riding between different types of online channels is relevant to an even lesser extent, with 1-9% of all purchases affected, depending on the product. In contrast, there is a slightly higher potential for free-riding within the same type of online channel, with 3-25% of all purchases affected, again depending on the product. These figures suggest that the level of free-riding is modest between online and offline channels, while being slightly more important across and within online channels. It should be noted that these figures are approximations based on the percentage of consumers or purchases that could be affected by free-riding activities of distributors. For this purpose, the consumer survey identified specific behaviour that is consistent with free-riding by calculating the share of purchases for which consumers gathered information via one channel but purchased from a completely different channel, primarily because of the lower price. The consumer survey was, however, not able to determine whether consumers acted in this way intentionally or whether it was a natural result of the purchasing process, and whether the specific services chosen by consumers actually provided different levels of information or service. Finally, it should be highlighted that a consumer survey cannot offer insights about the actual impact of free-riding behaviour on suppliers and the incentives to invest of affected distributors. 5.1.3.The Commission’s enforcement action regarding vertical restrictions In part as a follow-up to the e-commerce sector inquiry, the Commission took enforcement action against a number of anti-competitive vertical agreements, with a particular focus on business practices that have evolved or become widespread as a result of increasing e-commerce during the last decade. The relevant prohibition decisions, which are briefly summarised below, provide examples of vertical restrictions imposed by suppliers with a view to reducing the competitive pressure from online sales (e.g. consumer electronics cases and Guess) and artificially segmenting markets to the detriment of consumers (e.g. Pioneer, Guess, licensed merchandise cases and Meliá). Moreover, the Guess case is illustrative of the increasing trend towards vertical integration on the supply side, which already figured among the findings of the Commission’s e-commerce sector inquiry. The resulting direct competition with their distributors provides suppliers with incentives to limit competition at retail level, notably in the context of a selective distribution, e.g. by restricting authorised distributors from advertising and selling the contract products online in order to provide their own direct online sales channel with a distribution advantage. In addition, the consumer electronics cases show how the growing e-commerce environment allows manufacturers to easily monitor prices and to swiftly intervene to dampen price pressure. They also illustrate how a targeted intervention by the supplier against a few (low-price) benchmark retailers can be sufficient to achieve a re-alignment of the overall online prices for the respective products across the market due to the online retailers’ use of pricing software (based on algorithms). It is also worth noting that the use of resale price maintenance by the manufacturers in these cases did not seem to be driven by concerns about a suboptimal level of service provision, but rather by the desire to correct the price level for the products concerned without any service enhancing considerations. On 24 July 2018, the Commission fined consumer electronics manufacturers Pioneer, Denon & Marantz, Philips and Asus for imposing fixed or minimum resale prices on online retailers for widely used consumer electronics products such as kitchen appliances, notebooks and hi-fi products. The four manufacturers intervened particularly against online retailers who offered their products at low prices. When those retailers did not follow the prices requested by manufacturers, they faced threats or sanctions such as the blocking of supplies. The investigations showed a wide use by retailers of pricing algorithms that automatically adapt their retail prices to those of competitors, due to which the pricing restrictions imposed on low-pricing online retailers typically had a broader impact on overall online prices for the respective consumer electronics products. Moreover, the investigations showed that the use of sophisticated monitoring tools allowed the manufacturers to effectively track the setting of resale prices in their distribution network and to intervene swiftly in case of price decreases. The price interventions limited effective price competition between retailers and led to higher prices with an immediate effect on consumers. On 17 December 2018, the Commission fined the clothing company Guess for restricting retailers in its selective distribution system from certain online selling and advertising activities and from selling cross-border to consumers in other Member States (so-ca