WHAT IS THE AIM OF THE REGULATION AND OF ARTICLE 101 TFEU?
Article 101(1) of the Treaty on the Functioning of the European Union (TFEU)
prohibits agreements between companies that may affect trade between European Union (EU) Member States and that prevent, restrict or distort competition. However, Article 101(3) TFEU exempts from
this prohibition agreements that create sufficient benefits to outweigh the
anti-competitive effects.
The regulation gives a block exemption from Article 101(1) for vertical
agreements1, subject to certain
conditions.
KEY POINTS
Conditions for the application of the regulation
The regulation applies to vertical agreements on the condition that:
the supplier and the buyer each have a market share not exceeding 30%; and
the vertical agreement does not contain certain severe restrictions on
competition (hardcore restrictions).
Hardcore restrictions
If a vertical agreement includes any of the following severe restrictions on
competition, the whole agreement is excluded from the block exemption:
restrictions on a buyer’s ability to determine its sale price, although the
supplier may impose a maximum sale price or recommend a sale price;
restrictions on the territory in which, or the customers to whom, the buyer may
sell goods or services covered by the vertical agreement, subject to certain
exceptions that enable the supplier to operate exclusive or selective
distribution systems;
restrictions of cross-supplies between the members of a selective distribution
system;
restrictions that prevent the buyer from making effective use of the internet to
sell goods or services covered by the vertical agreement;
restrictions on the ability of a supplier of components to sell them as spare
parts to end users, repairers, wholesalers or other service providers.
Excluded restrictions
The regulation excludes the following restrictions from the block exemption:
non-compete obligations2 that are indefinite
or that exceed 5 years’ duration;
obligations on the buyer not to manufacture, buy or sell goods or services after
the termination of the agreement;
obligations on the members of a selective distribution system not to sell the
brands of particular competing suppliers;
obligations on buyers of online intermediation services not to offer goods or
services to end users on more favourable terms via competing online
intermediation services.
Although these restrictions are excluded from the block exemption, the rest of the
vertical agreement can continue to benefit from that exemption, provided that it can
operate without the excluded restrictions.
Withdrawal of the benefit of the block exemption
The European Commission and the competition authorities of the
Member States may withdraw the benefit of the block exemption in individual cases
where they find that particular vertical agreements nonetheless have effects that
are incompatible with Article 101(3) TFEU.
Guidance
The Commission has also published guidelines on vertical restraints (see summary). These provide guidance to help companies interpret
the regulation and to assess the compliance with Article 101 TFEU of vertical
agreements that do not benefit from the block exemption.
FROM WHEN DOES THE REGULATION APPLY?
It has applied since and expires
on .
Vertical agreements that do not meet the conditions of the regulation, but which
were already in force on , and
that met the conditions of the previous block exemption regulation for vertical
agreements (Regulation (EU) No 330/2010 – see summary) benefit from a transitional period that expires
on .
BACKGROUND
Certain vertical agreements can improve economic efficiency in a production or
distribution chain, by facilitating coordination between suppliers and buyers.
For example, they can help suppliers and buyers to reduce their costs and
increase their sales and investments.
Vertical agreement. An agreement or arrangement
between two or more undertakings operating at different levels of the production
or distribution chain relating to the conditions under which they buy or sell
goods or services.
Non-compete obligation. An obligation on a buyer
not to manufacture, buy or sell goods or services that compete with goods or
services covered by the vertical agreement, or an obligation to buy more than
80% of the buyer’s total purchases of such goods or services or their
substitutes from the supplier or from a company designated by the supplier.
MAIN DOCUMENTS
Commission Regulation (EU) 2022/720 of on
the application of Article 101(3) of the Treaty on the Functioning of the European
Union to categories of vertical agreements and concerted practices (OJ L 134, , pp.
4–13).
Consolidated version of the Treaty on the Functioning of the European Union – Part
three – Union policies and internal actions – Title VII – Common rules on
competition, taxation and approximation of laws – Chapter 1 – Rules on competition –
Section 1 – Rules applying to undertakings – Article 101 (ex Article 81 TEC) (OJ C 202, , pp. 88–89).
RELATED DOCUMENTS
Guidelines on Vertical Restraints setting out the principles
for the assessment of vertical agreements under Article 101 of the Treaty on the
Functioning of the European Union (OJ C 248, , pp. 1–85).
Communication from the Commission: Approval of the content of
a draft for a Commission Regulation on the application of Article 101(3) of the
Treaty on the Functioning of the European Union to categories of vertical agreements
and concerted practices 2021/C 359/01 (OJ C 359, , pp. 1–11).