Draft Vertical Block Exemption Regulation (VBER) & Guidelines of 09.07.2021 - HOTREC Comments

The Vertical Block Exemption Regulation (VBER) and related guidelines are of high relevance for the European hospitality sector, as they regulate some common type of vertical agreement used in sector in which our members operate (e.g. agency contracts, distribution contracts, tying and exclusive supply, franchising, etc.)

HOTREC welcomes the opportunity to provide open comments on the draft revised Regulation on vertical agreements and vertical guidelines, as published by the European Commission on 9 July 2021.

We regret that the draft put forward partially fails to address certain key market developments which have become increasingly problematic for the hospitality sector over the course of the past decade. In these instances, the VBER enables much larger companies to impose unfair conditions on hospitality businesses, which are in vast majority of cases micro-enterprises and SMEs, and which would not accept these conditions should they have any possibility to oppose them.

Summary:

• While we welcome the fact that the VBER draft now expressly excludes so-called wide Most Favoured Nation clauses of online intermediary service providers from the scope of the vertical block exemption, it fails to adequately address ‘narrow’ MFN clauses imposed by OTAs on hoteliers. We consider that there is no justification for providing an exemption for MFN clauses – whether wide or narrow - imposed by OTAs on hotels. Narrow MFN clauses should remain out-side the scope of a block exemption, in line with the legal prohibitions (France, Italy, Austria, Belgium) established in several Member States and the recent Decision of the German Federal Court.

• The VBER has originally devised for the brick-and-mortar business world and the market phenomenon of online intermediation service providers and the new challenges for competition associated with them were not addressed in detail.  We find that several aspects of the VBER simply cannot be transferred to address specific characteristics of the online hotel accommodation booking market, and to larger extent the digital platform economy. We would welcome further clarifications regarding the qualification of OTAs, the 30% market threshold and online advertising restrictions.

• We wish to highlight certain concerns with ‘brewery contracts’/(exclusive) drink supply contracts proposed by (large) brewery companies and/or drink supply companies to hospitality entrepreneurs, often tied to a premise rented by the brewery or drink supplier. The market consolidation in the brewery and drink supply sector and their importance in some specific national markets create market performance issues, especially as they often bought or rent the best locations for bars/pubs in city centres.

Our concerns, comments and proposals are covered in more detail in the document here below: