On 4 February 2019, the European Commission launched the public consultation on the revision of the Block Exemption Regulation on vertical agreements ("Vertical Block Exemption Regulation"). The consultation is part of the evaluation of the VBER launched in October 2018. The Commission's aim is to gather evidence on the functioning of the the Vertical Block Exemption Regulation and the Guidelines on Vertical Agreements ("Vertical GL"). to gain insights. The main objective is to optimise the Vertical Block Exemption Regulation through through stakeholder feedback and to adapt it to the requirements of the constantly evolving online distribution.
The revision offers new opportunities for the musical instrument and (MI) industry to adapt the Vertical Block Exemption Regulation to the requirements of online to the requirements of online distribution. This initiative represents an opportunity for our industry, which has been confronted with very aggressive aggressive business practices that have undermined the diversity of the music diversity of the music offer in Europe, as well as the competitiveness of the European industry on a global level.
Implementation of a MAP - Minimal
(advertising price maintenance)
For years, products in the musical instrument and equipment music equipment industry have been losing value due to price-destructive competition. Retailers (online and stationary), driven by a transparent and global market transparent and global market, are competing with each other on price, in the battle for the customer's attention. In the meantime, the only thing that counts is is the closing of a sale - no matter what the price, to the detriment of the brand owners and music retailers.
With its small- to medium-sized enterprises (SMEs), the MI sector is profit-oriented. The focus is on production, marketing and sale of cultural and creative goods and services. It is characterised by a multi-layered mutual purpose relationship between its market participants. Producers, wholesalers (distributors), retailers and the associated publishers (specialist media as well as sheet music) are interconnected at various levels in relation to the value-added chain, i.e. all sub-segments of the musical instrument and equipment market as well as ProAudio are directly interdependent to eachother and form in their entirety constitute the MI industry.
These SMEs and brands do not have the possibility, as for example multinationals or other large brands brands, to sell products in their own shops in Europe. They do not have their own "distribution chain" and therefore cannot set prices to the consumer. Manufacturers and distributors in the MI sector usually do not sell their products directly do not sell their products directly to end customers, but distribute them together with dealers (so-called "vertical distribution"). For the companies involved, this is associated with considerable antitrust risks. The most important guidelines for avoiding them are laid down in the Vertical Block Exemption Regulation, which will expire on 31 May 2022. The draft of a successor regulation already contains a number of adjustments that are intended to take better account of modern forms of distribution: Among other things a Minimal Advertised Price (MAP), which we have called for.
Point of View
Soon, this far-reaching amendment and additions will be made and additions will be adopted as part of the revision of the Block Exemption.
Of the numerous amendments proposed by the Commission, we would like to highlight a particularly important addition (novelty) and examine it more closely: the Minimal Advertised Price (MAP; TZ 174), which was already been included in the draft (guidelines), but which - in our opinion - is not not been taken into account to any great extent.
An appropriate assessment of the MAP is urgently required in order to to exclude competition concerns as far as possible and to provide the urgently needed legal certainty with regard to the important topic of of conduct in the context of advertising and pricing. Legislators and businesses need to be given a better understanding of the possible introduction, so that all legal certainty can be provided to all those involved in the situations situations so that a MAP is not seen as potentially unlawful. illegal. In our view, a MAP can even be considered as a diverse and and competition-preserving instrument that acts in a consumer-friendly and customer-oriented way and can prevent undesirable undesirable monopolies.
Minimal advertised prices (MAP) induces retailers to advertise prices above the minimum level set by the manufacturer. As a vertical price restraint, they are often referred to in legislation and economic theory as a form of RPM. We argue that there are key differences between MAP and RPM, as MAP only applies to advertising, but has does not impose restrictions on in-store pricing. Therefore, MAP has different implications than RPM and deserves in our view, its own legal treatment.
As a unilateral measure that only prevents resellers from advertising prices below a certain level, a MAP does not prevent retailers from ultimately selling below a certain price Therefore a MAP cannot rightly be classified as resale price maintenance (RPM).
In addition, allowing a MAP policy would prevent some of the most visible (online) price promotions, thereby reducing the adverse effects of (algorithmic) price adjustments, and to avoid the counteract the most negative consequences of replenishment sales and loss-leader offers, even if only partially.
In this context, the european MI industry - as well as a number of other industries - call on the regulatory framework to ensure that both manufacturers and distributors, as well as dealers, could continue their economic activities in the (international) competition. (international) competition. It is worth mentioning that for more than 10 years manufacturers and distributors in the United States of America, Canada
and Australia have been allowed, with the help of the MAP, to protect their brands from a ruinous sell-out by the retailers
In summary, MAP is a tool to limit the extent to which retailers use low promotional prices for their products to lure customers to their market to sell other people's products. MAP can correct competitive distortions between brands and provide incentives for manufacturers to invest in product quality. Unlike RPM, MAP preserves the incentives for inter-brand competition within the shop. However, MAP allows branded manufacturers to avoid externalities resulting from retailers' efforts to increase sales of unrelated goods that are sold at high profit margins. For these reasons, MAP should not be equated with RPM.